Absurd Health Insurance Premiums Renew Calls for Public Option

Every state in the nation regulates insurance heavily. In fact, the health care bill in Congress does little more than copy existing state regulations. No insurance company can raise rates without the approval first of the state regulatory agency, usually called the insurance commission. The standard regulation on rates is that the highest rate class cannot be more than twice as high as the lowest rate class.

The problem is that Medicare is currently carrying a $37 trillion unfunded liability and has billions of dollars in fraud. How can Medicare be extended under these conditions?

We address the unfunded liability by adequately funding Medicare. It easily be done.

We need to reinstate the revenue lost from the tax cuts President Bush passed, and also pay for the prescription drug benefit his administration and Republican-majority Congress passed without paying for.

People would transition from paying premiums and co-pays to insurance corporations and medical facilities, and pay a Medicare tax in place of those. I believe most studies have concluded it would cost LESS than it does now. I'll try to find those figures for you.

Businesses would no longer be responsible for providing health insurance, so could devote their funds to research, development, expansion, and hiring.

Funding is not an insurmountable problem.

Fraud can be addressed.

Medicare for everyone - it's the way we need to go :).

I agree that we need to divorce insurance from work. Insurance so often has "hooked" people into staying at a job they no longer enjoy and won't be as productive at.

I work for a healthcare insurance company and supported the public option. The reason I did so is that no state in the nation will allow no-frills insurance. Every state mandates that healthcare insurance cover a huge number of unnecessary things, such as chiropractic care and lap band surgery. That expanded coverage has a lot to do with the high cost of insurance. A no-frills, catastrophic care insurance such as the public option claimed to be, would be a boon for poor people.

As for record profits in the industry, that is misleading. Every report on profits provides nothing but the absolute dollar level of profits. So if an insurer gets new members, it's profits automatically increase. The only honest way to report profits is as a percentage.

You can google for a Price Waterhouse Coopers annual analyses of heathcare insurance companies and find that profit rates on average are just 5%, among the lowest in the nation. 87% of premiums go to pay doctor bills. That leaves 8% for running the business, most of which goes to responding to federal regulations. Each time Congress passes new healthcare regulations, insurance companies have to hire an army of people to comply with them. Sarbanes-Oxley was the worst.

A cautionary tale about the "public option" is in order. If one is created, something needs to be done to make sure it doesn't become the dumping ground for only the sickest people, at which point it gets driven into bankruptcy the way TennCare was. FWIW, subsidized high-risk pools still cost WAY too much for people of modest income to afford (google AccessTN for an example from my state) unless the state somehow can afford to drastically increase the subsidies.

Now, IMHO the issue isn't really public option or no public option; rather, it is bringing the net costs down, combined with increased transparency so people can realistically shop around. If insurer X can sell a similar package for less than insurer Y, people would flock to insurer X if and only if people have a way of finding out! So with genuine competition, profits can rise only with increased efficiency since price hikes will drive customers to the cheaper brand.

Actually, a public option, no frills insurance would attract the most healthy people who don't need insurance. As such it would hurt private companies to some degree, but we figure that many people would want the public option plus some extra coverage so we might have to scale down a little but would survive.

The sickest people don't need insurance, they need grants. That can come from charity, but if the guv wants to do it, that's fine, too. The sickest people drive up the cost of insurance for the healthy. If you want to reduce premiums, take the sickest off insurance and put them on a special program where the state takes care of them.

The growth in premiums is driven primarily by rising doctor and hospital fees. Check out the PWC articles I mentioned above. Doctor and hospital fees rise on average about 10% a year. IF 87% of premiums goes to pay those fees, premiums have to rise or insurance companies will go broke with a slim 5% margin.

I'm not sure that the dumping ground is as serious an issue, although it is a danger. One of the big reasons we need a public option is for self-employed people, the working people who are "part-time" (often deliberately kept that way specifically to avoid providing insurance), the recently graduated, and of course their families. As long as they are part of the pool, the public plan should be viable.

After reading your reply and the other comments, I googled "the real profits behind Insurance Companies" and got this blog titled "Are These "Evil For-Profit Health Insurance Companies" Really So Evil?

Would you share your thoughts on one comment that I found quite interesting:

"Who's the audience for this article? The percentage of people who assess evil on the basis of profit alone has got to be incredibly low in a capitalist country like this. I think most people would say a company that does evil things is evil, independently of how much or how little profit the company makes.

The kidnapper who doesn't make much money is doing evil. The child molester who makes no money is doing evil. The jerk who shakes your kid down for his lunch money is doing evil.

You're talking about profit margins as though they bore some relationship to evil. Is that an evil distraction from the real evil? The answer to that question doesn't depend"

http://www.lockergnome.com/swordofdestiny/2009/...

One problem with interstate competition is that insurers would have every incentive to "hide-out" in the states with the absolute LEAST consumer protections. But yes, interstate competition can work if it's coupled with some sort of straightforward disclosure mandate that gives consumers a good idea on what they're getting.

With the mandate for insurers to take everyone, why would health self employed folks get insurance until they need it? The penalty is only $750 a year in the senate plan.

I would just wait if I were you.

I am elated to know that we can agree on something, i.e., the public option! However, with regards to profits, it's also misleading to look solely at percentages. Gross dollar amounts do give us some idea of the scope of profits we are talking about. Accountants can make numbers say many things...

I include this information from a new report from the US Dept of Health and Human Services:

"Profits for the 10 largest insurance companies rose 250 percent from 2000 to 2009, 10 times faster than inflation, the report said. The top five health insurance firms -- WellPoint, UnitedHealth Group, Cigna, Aetna and Humana -- took combined profits of $12.2 billion, up 56 percent from 2008, it said.

The chief executives of the top five received $24 million on average in 2008, it said.

Administrative costs at insurance companies grew faster than the amount spent on prescription drugs over the past decade, the report said, a trend expected to continue. Three of the top five insurers cut the proportion of premiums they spent on customers' medical care last year, committing more to salaries, administrative expenses and profits, it said."

I have worked for one of the top five and have done contract work for another and internally there is never any question about what their goals are. I've never heard the words "let's make healthcare coverage more affordable" and wouldn't expect to hear them, but it would be heartening to hear some lip service given their access to a very large cookie jar. Regulation is certainly a cost for insurers; without it I believe consumers would be disadvantaged more than they are now. It's hard to feel sympathy for this industry and its challenges when you look at the deferred compensation and unexcercised stock option totals for top execs which in many instances look better than the GDPs for some small countries, literally.

And the "market" will regulate itself and everyone will live happily ever after. Where have we heard that song before....?

And Wellpoint, one of the largest insurers, would author a study that would say something against their interests???

Do you think you can sign up for insurance after your emergency heart procedure and get it covered? Perhaps the penalty isn't high enough!

If we have more doctors prices will come down as demand for their services do. But there is no discussion of that, just discussion of reducing the number of specialist.

They DO want Medicare for everyone, though :)!

The way the public option now sits. It will ONLY be a catching a percentage of the sickest. Maybe 6 million people. It will draw it's funding by cutting other gap programs. Do not be seduced.

"Gross dollar amounts do give us some idea of the scope of profits ..."

Actually, they don't. A number in isolation doesn't mean anything, or can mean whatever the interpreter wants it to mean. What does $12.2 billion mean? It's nothing compared to the federal budget deficit, but it's a lot compared to my salary. Numbers mean something only in relation to other numbers. That's why financial experts compare profits to revenue. Another example: A doctor's clinic may take in just $1 million in profits annually. Does it matter that the profit margin if 50%, the average profit margin for such clinics? Of course it does. The $1 million doesn't mean anything compared to the percentage. As for the increase in profits for healthcare insurance, did that come from higher premiums or from mergers? My guess is merger.

"Administrative costs at insurance companies grew faster than the amount spent on prescription drugs over the past decade..."

And what has been the driver of administrative expenses? Federal regulations.

If people don't want insurance companies to make profits, fine. Make it illegal for them to do so. But don't expect any private companies to provide it. It will have to be strictly charity based, which is fine with me if that is what people want. Private, profit-making companies exist so that shareholders can make a decent return on their investments. And no one measures return on investment using absolute dollars; they do it as a percentage of what they have invested. A 5% return is not too much to ask.

If profits in healthcare disgusts people, then fine, outlaw profits in all healthcare, but include pharmaceuticals, hospitals and doctor's clinics. All I want to point out is that no one will invest in businesses that make no profits at all. However, they will give to charities, just not as much as they invest for a return.

In spite the odds, health care is very important. It's one consolation for life's hard work especially to the lowly workers.

Before we jumpt to adopt European style health coverage, we need to be sure that we understand European health coverage. Yes, they spend half as much as a percent of gdp than we do on healthcare, but they accomplish that through price controls, not through any kind of efficiency. Because of the price controls on drugs, almost all of the pharma companies that began in Europe moved to the US.

Because healthcare is so cheap, and the supply is limited, the state denies a great deal of care to people, and waits can be very long. If you don't allow prices to ration scarce resources, then the state has to ration it, which Eurpean states do to a large degree.

But even with rationing, all European countries face huge bugdet deficits (without any spending on military) because of the generous health care benefits. In other words, Eurpeans borrow from the rest of the world in order to pay for healthcare. But the deft and deficits threaten to banrupt European countries. That's why the "right" has been winning elections in Europe lately. The people understand that they have to rein in state spending, much of which is healthcare, or go bankrupt.

I doubt the US can do any better than Europeans with a state takeover of the healthcare industry. So let's be clear about where we're heading.

I'm sure it will come as a huge shock that I support Medicare for everyone :).

Regarding the Public Option, however, I have a question: WHICH Public Option are we speaking of, here?

The Public Option that is open to every individual and business as an alternative to private insurance corporations,

OR

The Public Option currently contained in health care legislation that would restrict enrollment to individuals who do not have, and cannot afford, even with government subsidy, private insurance?

THAT "public option" would be open to less than 2% of our population, and would be much to small to have any effect whatsoever on the insurance premiums for private corporations?

THAT "public option" would comprise a pool of the poorest, sickest Americans, who private corporations would gladly not have to deal with in the first place.

Absent a phased-in Medicare for everyone option, I believe a REAL, OPEN, INCLUSIVE Public Option would be the next best available solution. The one currently contained in health care reform legislation? Smoke, mirrors, bait-and-switch.

I think we need to be made clearly aware of WHICH public option we're being asked to urge our senators to support, in order to make an informed decision.

I'll just keep writing and phoning and nagging about Medicare for everyone, thanks :).

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A cautionary tale about the "public option" is in order. If one is created, something needs to be done to make sure it doesn't become the dumping ground for only the sickest people, at which point it gets driven into bankruptcy the way TennCare was. FWIW, subsidized high-risk pools still cost WAY too much for people of modest income to afford (google AccessTN for an example from my state) unless the state somehow can afford to drastically increase the subsidies.

Now, IMHO the issue isn't really public option or no public option; rather, it is bringing the net costs down, combined with increased transparency so people can realistically shop around. If insurer X can sell a similar package for less than insurer Y, people would flock to insurer X if and only if people have a way of finding out! So with genuine competition, profits can rise only with increased efficiency since price hikes will drive customers to the cheaper brand.