
Why Your Health Insurer Doesn’t Care About Your Big Bills - joveian
https://www.propublica.org/article/why-your-health-insurer-does-not-care-about-your-big-bills
======
taysic
"The Affordable Care Act kept profit margins in check by requiring companies
to use at least 80 percent of the premiums for medical care. That’s good in
theory but it actually contributes to rising health care costs. If the
insurance company has accurately built high costs into the premium, it can
make more money. Here’s how: Let’s say administrative expenses eat up about 17
percent of each premium dollar and around 3 percent is profit. Making a 3
percent profit is better if the company spends more."

Wow. Great example of free market distortions that don't work. Now if there
was true competition in the field, a company would never be able to get away
with this.

~~~
brazzy
A free market does not work for health care. At all.

Or, more technically: health care does not meet the requirements for a "free
market", so cannot exist in principle.

~~~
dorchadas
Exactly. Free market is great for wants but absolutely horrible for
necessities.

~~~
dragonwriter
Wants and necessities are not economically distinct, and that's not why health
care and health insurance don't have the features there make free markets
efficient.

Lack of transparent utilities at the time of transactions is more of an issue.

~~~
hitekker
Transparency works if you have a choice.

Outside of libertarian lala-land, most U.S. citizens are limited to three,
two, or oftentimes, just one healthcare insurer. Also, most U.S. citizens will
pay anything to not die.

~~~
throwaway2016a
> Outside of libertarian lala-land

"la la land" implies people are unaware of reality. Libertarian's by and large
aren't naive. They know what reality is. They realize people don't have choice
and want to change that by opening up competition for pharmaceutical sales and
insurance across state borders and even country borders.

Just because something is far from the reality of current day does not mean it
doesn't have merit or that the people who want it are la la land.

Imagine a world where if a drug is approved in the EU but not our FDA then we
can still buy it. Or a world where if a drug is cheaper in Canada we can buy
it from there. Or if the people on the other side of the border between two
states has lower premiums than I can actually buy that plan without moving to
the other state.

And further more, insurance and drug companies will feel the market pressure
of consumers having real choice.

Doesn't seem that "La La" to me.

~~~
Eridrus
> Imagine a world where ... if a drug is cheaper in Canada we can buy it from
> there.

This assumes that the issue here is a regulatory failure, rather than
intentional price discrimination on the price of drug companies.

Forcing the entire world into a single market with the same prices would raise
drug prices on most of the world, without necessarily reducing prices
meaningfully in the US.

~~~
throwaway2016a
Correct, I am assuming that regulation drives up cost which may or may not be
true. Let's assume that is wrong...

And I agree, taken in isolation you are right. There is no guarantee that
opening up the markets will lower prices. In fact, as you say, the opposite
might happen.

But, I am also assuming that opening free trade between markets (not merging
into one giant market as you say) will produce competition. Not just with
insurers but also with pharmaceutical companies and safety agencies.

On the safety front if there was some reciprocity between safety agencies that
the pharma company doesn't have to have their drug approved in every country
that they want to sell in.

Now, you will say there is no guarantee big pharma will pass along that
savings but...

\- These savings should allow new entrants into the market by lowering the
barrier of entry

\- It allows multiple drugs that treat the same illness (but are not patent
infringing) to compete. As opposed to currently it can be years (if ever) for
a foreign drug to enter the US marker.

Edit: To summarize. The pharma and insurance companies can charge what they
want because they are a monopoly. You are assuming the monopoly will continue
when trade is opened. I am more optimistic if it can be executed well as
opposed to just blind deregulation.

------
rdiddly
_" Those rising costs eat into every employee’s take-home pay."_

 _"...every time health care costs rose by a dollar, an employee’s overall
compensation got cut by 52 cents."_

When you read things like this, you should be remembering all those articles
you saw about "the widening wealth gap." This is one of the mechanisms by
which wealth is extracted from what's left of the middle class and given to
wealthy shareholders.

And when you read...

 _" The hospital and insurance company had agreed on a price and he was
required to help pay it. It’s a three-party transaction in which only two of
the parties know how the totals are tallied."_

...you should be reminded of the now commonplace idea usually mentioned
regarding Facebook et al: If you're not paying (your own medical costs,
directly), you're the product. The analogy isn't quite one-to-one, but the
insurer kind of sells you to the hospital. But then the hospital wants its cut
too. So they work out a deal. Your illness, to either of the two companies,
isn't a misfortune; it's an opportunity. They jack up the price and basically
end up splitting the profit.

It needs to be regulated. But legislators beholden to those rich shareholders
will fight that idea, and they'll tend to hide it behind some deep-sounding
philosophical argument about free markets that they don't actually believe.

------
_bxg1
Healthcare is the most extreme example of Republicans clutching to the fantasy
that the free market fixes everything. The ACA was pretty flawed, but it was
better than nothing.

~~~
aag
Free market? How is it a free market if you can't even find out the price
before you pay? The Republicans are no help, but not because they purport to
believe in free markets.

~~~
_bxg1
They call it that though. My whole family is hardcore Republicans. In their
mind, lack of rules from the government = free market, period. Despite all
evidence to the contrary, they still think the US has the best healthcare
system in the world because it isn't run by the government. Seriously.

~~~
maxerickson
Would they be swayed by a discussion of how Medicare has a choke hold on the
whole hospital system?

They are always a major payer and so hospitals will do what it takes to be
Medicare certified. In high density areas there can be enough rich people for
a hospital to not bother.

------
hippich
If you just apply common sense and think about it - it makes sense :)
Insurance companies are not interested in lowering prices. They are interested
in:

1) Not spending more than they captured in premiums in current year.

2) Increase of cash flow.

Once you combine these two you realize what insurance companies are looking to
get steady increase in medical costs over long time. And medical service
providers are playing along.

~~~
sytelus
No, common sense says people and companies will chose providers with best
coverage at lowest price. Insurance companies does have huge incentive to
lower the premiums. I think the article is simply not well researched. The guy
thinks of insurance company as middlemen who negotiates for him. That’s true
only to an extent because insurance company does have to build a network. If
they miss out on big players like NYU then their lower premiums are pointless.
The most flexibility customers want is to chose any doctor they want.
Hospitals have taken advantage of this since long and negotiatons are not
simple for insurance company to build their network. Medicare is different
beast.

~~~
dorchadas
Yeah, but when you're locked in to only choosing whichever your company
provides you there's not much opportunity to switch, so there's really nothing
you can do.

~~~
HedgeSparrow
Exactly.

> _No, common sense says people and companies will chose providers with best
> coverage at lowest price._

This is basically the argument Comcast uses to justify their de facto
monopoly. In Comcast's case, their "competition" doesn't even exist on the
same scale (which is hardly competition).

If the market were really a "free market" there would be viable options
between insurance companies for the insured. Sure you can pick your doctor,
and to some extent your plan, but does your company offer you multiple choices
for where your health benefits come from?

------
motiw
Many years ago my daughter had the same procedure twice in a the same year in
the same hospital and the price approved by the healthcare was much higher for
the firt time, when our deductible was not yet met. I can think of ways the
"deductible left" may be used to maximize profit for both the hospital and the
healthcare

------
dvfjsdhgfv
> About 1 in 5 is currently being pursued by a collection agency over medical
> debt.

That's actually terrifying! In a situation like this, why can't the
authorities finally admit that the society as a whole has a problem, and adopt
the European model where everyone is given free medical care?

~~~
anoncoward111
sadly, because nearly everyone involved in this system is making excellent
money-- everyone except the consumer.

~~~
maxerickson
Even the consumer is doing nicely (well, most consumers anyway).

It's just that we'd like our health care costs to be closer to the cost of
delivery than to the realized value.

~~~
anoncoward111
Emmm, most insurance policies are $7,000 a year in premiums (the cost is split
between the company and the employee).

And if you actually use it, then you are talking about another $5,000 - $7,000
in yearly out of pocket max spending.

So conceivably, a very sick person is spending $14,000 a year to keep
themselves alive

~~~
maxerickson
_to keep themselves alive_

Your argument is that this somehow isn't worth $14,000 a year?

Like I say, It'd be great if US prices were closer to cost of delivery (cost
assuming reasonable regulation).

~~~
anoncoward111
hehe, ok I see what you mean! Sure, if the consumer is receiving value (not
dying thanks to thyroid medication or etc) then this is certainly a good
thing.

however as you say, we want the cost of the product/service that is keeping
you alive to be near the cost of what it actually costs to deliver that
result.

In the case of nearly all drugs, a $100 brand name pill really only costs $1
per bottle to manufacture, with a lot of profit, legal and lobbying fees, and
salary bloat baked into the margins along the way.

So $14,000 a year really honestly should be around $1,400 a year. Like, if i
get my appendix out, and I pay $1,400, the hospital and surgeon are still
making awesome money. It just so happens that in the US, they've inflated the
price tag of that surgery to $80,000 lol

------
Something1234
> The Affordable Care Act kept profit margins in check by requiring companies
> to use at least 80 percent of the premiums for medical care. That’s good in
> theory but it actually contributes to rising health care costs.

How did this little gem sneak into the ACA? It seems like it was put in by
somebody who doesn't understand game theory.

~~~
lotsofpulp
It wasn’t snuck in. In theory, if you have sufficient # of health insurers,
then the ones with lower costs will be able to offer lower premiums, and win
more business.

~~~
koolba
And in the far more common case in many parts of the US where you have exactly
one insurer, which was already the case in 2010, you get the exasperated
situation we have now.

Either Obama and the Democrat super majority of 2010 were complete idiots when
they wrote the ACA or they fleeced the American people with a false bill of
goods. Note that “or” is meant to be interpreted as the Boolean algebra
definition.

~~~
timr
Oh, stop. There's no way a bill of any substance -- on any matter, let alone
health care -- makes it through congress without unintended consequences. You
could just as easily point at any of a thousand other laws, passed by both
parties, and conclude the same thing. In a functioning system of government,
you go back and _fix_ the things that break, and not just, say, throw an
eight-year political tantrum that gridlocks government and ultimately leaves
the system in a partially broken heap of half-repealed regulations, simply
because you cannot have 100% of your way.

It certainly doesn't help that the GOP systematically blocks any attempt to
reduce the influence of private industry in health care. Medicare manages to
control costs, but a Medicare-for-all proposal never had a chance of making it
through congress because it needed GOP votes to pass.

If one party consists of "complete idiots", the other consists of corporate
lackeys and paid shills.

~~~
masonic

      a Medicare-for-all proposal never had a chance of making it through congress because it needed GOP votes to pass.
    

Incorrect. For awhile, Democrats controlled the Presidency and the House,
_and_ the Senate Democrat caucus had a cloture-capable 60 vote supermajority.
They didn't need a single GOP vote for anything. For ACA, no GOP amendments
were even given the dignity of a simple up/down floor vote.

~~~
perl4ever
What do you make of the following:

"the Democrat-controlled House and Senate committees _adopted nearly 190
Republican amendments_ while writing the legislation, according to data
compiled by The New York Times."

Source: [https://www.nytimes.com/interactive/2017/07/21/us/health-
car...](https://www.nytimes.com/interactive/2017/07/21/us/health-care-
amendments.html)

~~~
masonic
Look at the actual committee and floor votes in congress.gov (and that doesn't
even count attempts that were not _allowed_ a vote). NYT is a _business_ , not
an objective stenographer.

To this day, NYT will not acknowledge how phony their financial assessments
are with respect to the billions of losses via just the Risk Corridors and
community centers. There was more than a $5.3 _billion_ deficit in Risk
Corridor spending for 2015 alone[0]. Enrollment was overestimated by the CBO
by _over 100%_ even while Obama was still in office[1]. And the numbers are
still in flux as insurers who didn't get all the bailouts they were "promised"
successfully sue for hundreds of millions[2].

[0]
[http://www.modernhealthcare.com/article/20161205/NEWS/161129...](http://www.modernhealthcare.com/article/20161205/NEWS/161129937)

[1] [http://thehill.com/blogs/congress-
blog/healthcare/309902-oba...](http://thehill.com/blogs/congress-
blog/healthcare/309902-obamacares-risk-corridor-corruption-never-ends)

[2] [https://ecf.cofc.uscourts.gov/cgi-
bin/show_public_doc?2016cv...](https://ecf.cofc.uscourts.gov/cgi-
bin/show_public_doc?2016cv0649-23-0)

