Private for-profit health insurance is a significant factor in our high medical costs in this country. The reasons are many, but one is externalization of their internal contradiction. In order to enhance and preserve their profits, insurance companies have to go to great lengths to avoid people who are already sick, examine claims in detail to see if they can be legally avoided, and rescind coverage for some people who get sick after taking out a policy.
In addition, insurance companies impose costs on health providers by making them submit precise and detailed paperwork to assist them in the weeding-out, avoidance and rescission processes.
In total, the private insurance system imposes an overhead burden on the entire system of 31% of each premium dollar.
Often these discussions devolve into exchanges involving “evil” insurance companies. They are not evil. They are merely doing what the market demands of them.
Three insurance executives were held in a submissive posture before a House Subcommittee and asked about the policy of rescinding coverage for people who take out policies when healthy and then get sick. (Often these people have lied about preexisting conditions, but that too is a rational response to market forces.) In a powerful act of grandstanding, the executives were lectured on the cruelty of the rescission process, and they agreed that it was indeed distasteful. They were asked if they would stop doing it. They said no. They would not.
They can’t. They can’t stop doing anything they do. The market will not allow it.
Say, for example, Dennis Kucinich leaves office and becomes CEO of Unitedhealth (NYSX: UHS). He immediately announces that Unitedhealth will no longer reject coverage for people with preexisting conditions. There’s a flood of new business for Unitedhealth. Unfortunately, the business is comprised of sick people, and Unitedhealth ends up paying far more in claims than they receive in premiums. Profits are reduced, investors become unhappy and begin unloading the stock, and the market price plunges. Investors who had hedged or borrowed on Unitedhealth stock are at an extreme disadvantage. Margin calls go out.
Kucinich is assassinated fired.
Health insurance companies cannot leave the pack. They must behave as the worst actors behave. Otherwise, they are at a competitive disadvantage. Even supposed “not-for-profit” insurers, like some Blue Crosses and Kaiser Permanente, have to follow the practices of the worst actors. Otherwise they cease to exist.
There’s nothing wrong with the behavior of the people who run and work for the health insurance companies. They have to do what they do. Even if they got together and agreed to behave in more socially conscious way, there would always be one who went for the gold and undercut the others
People who work for large organizations are not free human beings. They are occupants of slots in a machine, and must behave as the machine dictates.
This is why I often say that private for-profit health insurance is incompatible with health care. Provision of care undermines profitability. The market cannot do a good job of providing health insurance. It can’t even though it is loaded with good people.
Every other industrialized country has figured this out. But, as always, the United States is exceptional.
Piece of Mindful 
I agree, predators are not necessarily evil, but they are opportunistic. The market is regulated in such a way that competition has been sacrificed for certainty. Prices can only go up when the game is rigged. Anti-trust exemptions, unlimited tax deductions for endless tv ads, and state-by-state turf arrangements all prevent effective (cost and quality) health care. Their rapaciousness has been encouraged by employers, labor (union and non-union) and corrupt public officials in exchange for campaign contributions and power. If we don’t wise up, we will all keep paying the price. In the end we get the system we deserve.
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