What's the value added in for-profit health care insurance?

[halik]

The purpose of insurance is to diversify risk across many parties (ie people you've insured), so on average you cover your costs.

Now when you think about how a for-profit organization would try to maximize profit, the only real way to do so is knock off people that are cost drivers (prices/premiums are set by the market, and needing health care is basically a random variable beyond control). So the only efficiency of for-profit vs non-profit insurance is that for-profit will dump people that cost them money. Am I missing something here?

And for the record, you can outsource billing to a for-profit org (there are efficiencies to be gained there, billing -caid, -care is a bitch).

 

[PokerGuy]

You are assuming that people using health services is the only cost driver. That is simply not the case.

The actual framework for the discussion should not be "for profit" vs "not for profit". The real discussion is "with competition" and "with no effective competition". Companies that compete with each other will drive their operating costs down, always resulting in better overall service and cost to the consumer. When there is no real competition, there is no real incentive to reduce expenses, be efficient or innovate. Doesn't matter if it's for profit or not, competition is what drives efficiency.

 

[Phokus]

Originally posted by: PokerGuy
You are assuming that people using health services is the only cost driver. That is simply not the case.

The actual framework for the discussion should not be "for profit" vs "not for profit". The real discussion is "with competition" and "with no effective competition". Companies that compete with each other will drive their operating costs down, always resulting in better overall service and cost to the consumer. When there is no real competition, there is no real incentive to reduce expenses, be efficient or innovate. Doesn't matter if it's for profit or not, competition is what drives efficiency.

I completely agree with you! Oh wait, no i don't:

Results In 1999, health administration costs totaled at least $294.3 billion in the United States, or $1,059 per capita, as compared with $307 per capita in Canada. After exclusions, administration accounted for 31.0 percent of health care expenditures in the United States and 16.7 percent of health care expenditures in Canada. Canada's national health insurance program had overhead of 1.3 percent; the overhead among Canada's private insurers was higher than that in the United States (13.2 percent vs. 11.7 percent). Providers' administrative costs were far lower in Canada.

http://content.nejm.org/cgi/content/short/349/8/768

 

[SammyJr]

Originally posted by: PokerGuy
You are assuming that people using health services is the only cost driver. That is simply not the case.

The actual framework for the discussion should not be "for profit" vs "not for profit". The real discussion is "with competition" and "with no effective competition". Companies that compete with each other will drive their operating costs down, always resulting in better overall service and cost to the consumer. When there is no real competition, there is no real incentive to reduce expenses, be efficient or innovate. Doesn't matter if it's for profit or not, competition is what drives efficiency.

To repeat the OP's question, what is the value add from for-profit insurance companies? What do we gain from competition among competing insurance providers who provide no care themselves?

I agree that competition among actual health care providers (Doctors, hospitals, etc) is desirable.

 

[Blackjack200]

Originally posted by: PokerGuy
You are assuming that people using health services is the only cost driver. That is simply not the case.

The actual framework for the discussion should not be "for profit" vs "not for profit". The real discussion is "with competition" and "with no effective competition". Companies that compete with each other will drive their operating costs down, always resulting in better overall service and cost to the consumer. When there is no real competition, there is no real incentive to reduce expenses, be efficient or innovate. Doesn't matter if it's for profit or not, competition is what drives efficiency.

The problem is that a lot of their behavior in competing and maximizing their profits is spent finding justifications to avoid paying claims, and engaging in anti-competitive price negotiations with providers. There is less incentive for insurance companies to be efficient than there is for them to spend money on lawyers, compliance officers, and lobbyists.

If you cover everyone, you remove a lot of these costs. On the other hand, I agree that some individuals overconsume healthcare (they do this already, with the insurance system) and that is a problem that will need to be addressed.

 

[JS80]

Originally posted by: halik
The purpose of insurance is to diversify risk across many parties (ie people you've insured), so on average you cover your costs.

Now when you think about how a for-profit organization would try to maximize profit, the only real way to do so is knock off people that are cost drivers (prices/premiums are set by the market, and needing health care is basically a random variable beyond control). So the only efficiency of for-profit vs non-profit insurance is that for-profit will dump people that cost them money. Am I missing something here?

And for the record, you can outsource billing to a for-profit org (there are efficiencies to be gained there, billing -caid, -care is a bitch).

How can you work for Goldman and ask such a stupid ass question?

 

[eleison]

Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

 

[SirStev0]

Originally posted by: eleison
Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

that is not true at all.

 

[fskimospy]

I've never understood the principle of 'for profit' insurance either. The entire idea was to spread risk around. Insurance is the only business I am aware of in which not only do you pay money out for something you don't necessarily get anything for, but where the person you are contracting with has their profit motive intertwined with denying your claims for what you paid for.

 

[JSt0rm]

Originally posted by: SirStev0

Originally posted by: eleison
Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

that is not true at all.

but it sure does sound good eh?

 

[Ldir]

Originally posted by: JS80

Originally posted by: halik
The purpose of insurance is to diversify risk across many parties (ie people you've insured), so on average you cover your costs.

Now when you think about how a for-profit organization would try to maximize profit, the only real way to do so is knock off people that are cost drivers (prices/premiums are set by the market, and needing health care is basically a random variable beyond control). So the only efficiency of for-profit vs non-profit insurance is that for-profit will dump people that cost them money. Am I missing something here?

And for the record, you can outsource billing to a for-profit org (there are efficiencies to be gained there, billing -caid, -care is a bitch).

How can you work for Goldman and ask such a stupid ass question?

The topic is valid. The stupid ass is you. The value insurance companies add is in providing a means for diversifying risk. They do so in return for profit. If we have a non-profit alternative for diversifying risk like the government, we get the same value without the high cost overhead of insurance company profit.

 

[eleison]

Originally posted by: JSt0rm01

Originally posted by: SirStev0

Originally posted by: eleison
Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

that is not true at all.

but it sure does sound good eh?

Then what do they do then?

 

[halik]

Originally posted by: PokerGuy
You are assuming that people using health services is the only cost driver. That is simply not the case.

The actual framework for the discussion should not be "for profit" vs "not for profit". The real discussion is "with competition" and "with no effective competition". Companies that compete with each other will drive their operating costs down, always resulting in better overall service and cost to the consumer. When there is no real competition, there is no real incentive to reduce expenses, be efficient or innovate. Doesn't matter if it's for profit or not, competition is what drives efficiency.

What do you compete on? Insurance is a business of diversifying risk across many subscribers and the risk is random. The only way to to increase profit is by eliminating the people that draw more than what they paid in on their premiums (which is what we're seeing now - ins. cos denying coverage)

 

[halik]

Originally posted by: Blackjack200

Originally posted by: PokerGuy
You are assuming that people using health services is the only cost driver. That is simply not the case.

The actual framework for the discussion should not be "for profit" vs "not for profit". The real discussion is "with competition" and "with no effective competition". Companies that compete with each other will drive their operating costs down, always resulting in better overall service and cost to the consumer. When there is no real competition, there is no real incentive to reduce expenses, be efficient or innovate. Doesn't matter if it's for profit or not, competition is what drives efficiency.

The problem is that a lot of their behavior in competing and maximizing their profits is spent finding justifications to avoid paying claims, and engaging in anti-competitive price negotiations with providers. There is less incentive for insurance companies to be efficient than there is for them to spend money on lawyers, compliance officers, and lobbyists.

If you cover everyone, you remove a lot of these costs. On the other hand, I agree that some individuals overconsume healthcare (they do this already, with the insurance system) and that is a problem that will need to be addressed.

Exactly my point - the incidence of claims is beyond their control, which means the strategy there is to minimize the amount paid out.

 

[halik]

Originally posted by: JS80

Originally posted by: halik
The purpose of insurance is to diversify risk across many parties (ie people you've insured), so on average you cover your costs.

Now when you think about how a for-profit organization would try to maximize profit, the only real way to do so is knock off people that are cost drivers (prices/premiums are set by the market, and needing health care is basically a random variable beyond control). So the only efficiency of for-profit vs non-profit insurance is that for-profit will dump people that cost them money. Am I missing something here?

And for the record, you can outsource billing to a for-profit org (there are efficiencies to be gained there, billing -caid, -care is a bitch).

How can you work for Goldman and ask such a stupid ass question?

Economist at heart, I don't see the efficiency gained there... where is it?

Competition for health care providers, logistics managers (billing etc.) and all the other service providers leads to efficiency.

There is nothing that you can improve on the incidence of risk - it's a random variable. Assuming competitive marketplace for health insurance (prices are mostly competitive), your only edge is cutting costs drivers.

 

[JSt0rm]

Originally posted by: eleison

Originally posted by: JSt0rm01

Originally posted by: SirStev0

Originally posted by: eleison
Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

that is not true at all.

but it sure does sound good eh?

Then what do they do then?

well 2 posts up from this one people talked about insurance diversifying risk as it's purpose. Costs have gone up not down and lets say your model is true even though it isn't do you really want your doctors being paid less so that some corporation can make more? Thats fuckin stupid.

 

[eleison]

Originally posted by: halik

Originally posted by: Blackjack200

Originally posted by: PokerGuy
You are assuming that people using health services is the only cost driver. That is simply not the case.

The actual framework for the discussion should not be "for profit" vs "not for profit". The real discussion is "with competition" and "with no effective competition". Companies that compete with each other will drive their operating costs down, always resulting in better overall service and cost to the consumer. When there is no real competition, there is no real incentive to reduce expenses, be efficient or innovate. Doesn't matter if it's for profit or not, competition is what drives efficiency.

The problem is that a lot of their behavior in competing and maximizing their profits is spent finding justifications to avoid paying claims, and engaging in anti-competitive price negotiations with providers. There is less incentive for insurance companies to be efficient than there is for them to spend money on lawyers, compliance officers, and lobbyists.

If you cover everyone, you remove a lot of these costs. On the other hand, I agree that some individuals overconsume healthcare (they do this already, with the insurance system) and that is a problem that will need to be addressed.

Exactly my point - the incidence of claims is beyond their control, which means the strategy there is to minimize the amount paid out.

Yes, which means insurance companies have a stake in your health. If they can make you live "healthier" they would. Hence, all the "wellness" programs. The more healthier you are, the less the insurance companies "pay out". Also, claims are heavy regulated -- what can and cannot paid out are strictly dictated by he government. While it is in the best interest of insurance companies to reject all claims, in general, they cannot do this because of regulations. As a matter of fact, the margin that insurance are allowed, IIRC, is dictated by the government. For instance, if Aetna was to write a health insurance policy, Aetna cannot arbitary set the price w/o government input.


Also, it is in the insurance companies best interest to "squeeze" the doctors and hospitals. The less they pay to them, the more profit they get. Hence, insurance companies usually pay less for procedures than the common person off the street w/o insurance.

 

[eleison]

Originally posted by: JSt0rm01

Originally posted by: eleison

Originally posted by: JSt0rm01

Originally posted by: SirStev0

Originally posted by: eleison
Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

that is not true at all.

but it sure does sound good eh?

Then what do they do then?

well 2 posts up from this one people talked about insurance diversifying risk as it's purpose. Costs have gone up not down and lets say your model is true even though it isn't do you really want your doctors being paid less so that some corporation can make more? Thats fuckin stupid.

"Fuckin stupid" is that insurance companies can ask... no demand.. lower prices for medical procedures for their subscribers while people without health insurance are given the shaft. Ever notice how much an operation will cost if you didn't have insurance, and how much it cost with insurance?

 

[fskimospy]

Originally posted by: eleison

Originally posted by: JSt0rm01

Originally posted by: eleison

Originally posted by: JSt0rm01

Originally posted by: SirStev0

Originally posted by: eleison
Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

that is not true at all.

but it sure does sound good eh?

Then what do they do then?

well 2 posts up from this one people talked about insurance diversifying risk as it's purpose. Costs have gone up not down and lets say your model is true even though it isn't do you really want your doctors being paid less so that some corporation can make more? Thats fuckin stupid.

"Fuckin stupid" is that insurance companies can ask... no demand.. lower prices for medical procedures for their subscribers while people without health insurance are given the shaft. Ever notice how much an operation will cost if you didn't have insurance, and how much it cost with insurance?

Not nearly as much as you think. Nobody actually pays the hospital asking price for something, even for individuals without insurance it is frequently discounted 50% or sometimes even more.

The reason why the bills are so high to begin with is ironically because of insurance companies, not in spite of them. Many insurance carriers pay a percentage of the cost of a procedure, so when the hospital jacks up the price it gets more money.

 

[eleison]

Originally posted by: eskimospy

Originally posted by: eleison

Originally posted by: JSt0rm01

Originally posted by: eleison

Originally posted by: JSt0rm01

Originally posted by: SirStev0

Originally posted by: eleison
Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

that is not true at all.

but it sure does sound good eh?

Then what do they do then?

well 2 posts up from this one people talked about insurance diversifying risk as it's purpose. Costs have gone up not down and lets say your model is true even though it isn't do you really want your doctors being paid less so that some corporation can make more? Thats fuckin stupid.

"Fuckin stupid" is that insurance companies can ask... no demand.. lower prices for medical procedures for their subscribers while people without health insurance are given the shaft. Ever notice how much an operation will cost if you didn't have insurance, and how much it cost with insurance?

Not nearly as much as you think. Nobody actually pays the hospital asking price for something, even for individuals without insurance it is frequently discounted 50% or sometimes even more.

The reason why the bills are so high to begin with is ironically because of insurance companies, not in spite of them. Many insurance carriers pay a percentage of the cost of a procedure, so when the hospital jacks up the price it gets more money.

This is wrong. While hospitals can jack their prices up for a medical procedure, if the insurance companies think its too high, the insurance companies will only agree to pay X amount. The hospitals then have to agree or else the insurance companies will put the hospital "out of network" which usually means less revenues for the hospital.. Its a power play. Remember, the insurance companies want to maximize profit. Driving cost down, helps maximize profit.

 

[PokerGuy]

Originally posted by: SammyJr

Originally posted by: PokerGuy
You are assuming that people using health services is the only cost driver. That is simply not the case.

The actual framework for the discussion should not be "for profit" vs "not for profit". The real discussion is "with competition" and "with no effective competition". Companies that compete with each other will drive their operating costs down, always resulting in better overall service and cost to the consumer. When there is no real competition, there is no real incentive to reduce expenses, be efficient or innovate. Doesn't matter if it's for profit or not, competition is what drives efficiency.

To repeat the OP's question, what is the value add from for-profit insurance companies? What do we gain from competition among competing insurance providers who provide no care themselves?

I agree that competition among actual health care providers (Doctors, hospitals, etc) is desirable.

Think about it. What's the value of the grocery store? You could just buy everything from various places and from farm co-ops and the like, correct? After all, grocery stores are just putting the stuff in their store, jacking up the prices and adding no value, right? We need not-for-profit grocery stores! Hey, with the same logic, we should have not-for-profit everything, that will work out great! :roll:

 

[JSt0rm]

Originally posted by: eleison

Originally posted by: eskimospy

Originally posted by: eleison

Originally posted by: JSt0rm01

Originally posted by: eleison

Originally posted by: JSt0rm01

Originally posted by: SirStev0

Originally posted by: eleison
Insurance companies pressure doctors and hospitals to lower their costs. If the doctors/hospitals don't, then the insurance companies "drives" their subscribers to those that do.

that is not true at all.

but it sure does sound good eh?

Then what do they do then?

well 2 posts up from this one people talked about insurance diversifying risk as it's purpose. Costs have gone up not down and lets say your model is true even though it isn't do you really want your doctors being paid less so that some corporation can make more? Thats fuckin stupid.

"Fuckin stupid" is that insurance companies can ask... no demand.. lower prices for medical procedures for their subscribers while people without health insurance are given the shaft. Ever notice how much an operation will cost if you didn't have insurance, and how much it cost with insurance?

Not nearly as much as you think. Nobody actually pays the hospital asking price for something, even for individuals without insurance it is frequently discounted 50% or sometimes even more.

The reason why the bills are so high to begin with is ironically because of insurance companies, not in spite of them. Many insurance carriers pay a percentage of the cost of a procedure, so when the hospital jacks up the price it gets more money.

This is wrong. While hospitals can jack their prices up for a medical procedure, if the insurance companies think its too high, the insurance companies will only agree to pay X amount. The hospitals then have to agree or else the insurance companies will put the hospital "out of network" which usually means less revenues for the hospital.. Its a power play. Remember, the insurance companies want to maximize profit. Driving cost down, helps maximize profit.

numskull you just agreed with him.

 

[PokerGuy]

Phokus: Canada is not the US, and the US is not Canada. You are comparing apples to oranges. Canada does not have the annual influx of immigrants like the US, and it simply doesn't have the same level of care that the US has. When was the last time you heard of people from the US heading to Canada because the waiting list was too long in the US? Not to mention, Canada keeps drug costs down by forcing prices down and letting other consumers (ie, the US consumers) bear the costs of R&D for drugs.

Some of you guys simply don't have a clue how insurance actually works, especially health insurance. You're missing the concept of insurance and service.

 

[ElFenix]

there is a lot of literature out there describing how HMOs and PPOs in particular have driven down costs by squeezing the docs/hospitals.

problem is, those cost reductions are 1-time. not something you can just do over and over again.

Originally posted by: JSt0rm01

numskull you just agreed with him.

umm, no, he said that if the hospital starts jacking things up when % reimbursed the insurance co switches to a dollar figure basis.

 

[SammyJr]

Originally posted by: PokerGuy
Phokus: Canada is not the US, and the US is not Canada. You are comparing apples to oranges. Canada does not have the annual influx of immigrants like the US, and it simply doesn't have the same level of care that the US has. When was the last time you heard of people from the US heading to Canada because the waiting list was too long in the US? Not to mention, Canada keeps drug costs down by forcing prices down and letting other consumers (ie, the US consumers) bear the costs of R&D for drugs.

Some of you guys simply don't have a clue how insurance actually works, especially health insurance. You're missing the concept of insurance and service.

I haven't heard of any middle class Canadians coming down here but the rich ones can do whatever they want. Its part of being rich!