When I read its title, “Bust the Health Care Trusts”, I had hopes for Robert Reich’s op-ed in the New York Times. Alas, those hopes were dashed on reading it. The only trusts that Dr. Reich sees in healthcare are large insurance companies:
Astonishingly, the health insurance industry is exempt from federal antitrust laws, which is why a handful of insurers have become so dominant in their markets that their customers simply have nowhere else to go. But that protection could soon end: President Obama on Tuesday announced his support of a House bill that would repeal health insurers’ antitrust exemption, and Speaker Nancy Pelosi signaled that she would put it toward an immediate vote.
This is promising news. Forcing insurers to compete for our business would do at least as much good as the president’s proposal to give the federal government, working with the states, the power to deny or roll back excessive premiums. The fact is that half of the states already have the power to approve rates and they don’t seem to be holding insurers back much.
That last is a point that I made the other day on reading about President Obama’s healthcare plan. If the insurance companies are able to make their cases for their rate increases, won’t the federal government’s oversight board approve them?
I also found this puzzling:
This can’t be the whole story, because big health insurers are making boatloads of money. America’s five largest health insurers made a total profit of $12.2 billion last year; that was 56 percent higher than in 2008, according to a report from Health Care for America Now.
On payouts of what size? Total privately insured healthcare payouts amounted to something like $500 billion last year. $12.2 billion sounds like a lot until you start comparing it to the size of the task. 2% as I calculate it. Will wringing 2% out of 40% of the healthcare system really cure the system’s problems?
I carry no water for large insurance companies. I have a possibly irrational dislike of large companies, generally. However, isn’t a large insurance company more likely to be able to negotiate lower prices with healthcare providers (particularly large healthcare providers) than a smaller one would be? In that case I wouldn’t think you’d oppose the consolidation that’s taken place in the healthcare insurance market.
Unless your objective is to eliminate private insurance altogether.
The answer to yesterday’s question: The benefit of regulating price at the healthcare insurance stage is that the government can hope that the insurance companies will put downward price pressure on healthcare providers without getting blamed for loss of healthcare coverage. IOW if it would appear unseemly to kick your kid, kick the pitbull sitting next to him.
The pitbull, being smart and tenacious, of course will turn around and bite the government. Any price controls forced by the government will be announced/treated as loss of healthcare coverage, which will make the regulators back-off. I would expect the price controls we are likely to get would be “cost plus” controls. So long as the insurance company can account for payment of healthcare costs; the government will only care about the (“plus”) percentage of overhead being spent over costs.
You assume the insurance companies are honest actors. I suspect they often price manipulate to get people to drop, especially with the way that they group people.
Most states have just one or two large insurance companies. That has not pushed prices down. I would suggest you remember the difference between profit and executive salaries.
Steve
As someone who works for a regulated utility the answer is undoubtedly yes. If the evidence is solid, then they will allow rate hikes, even large ones.
Well…since you are using the government as a human….no. Make it a rottweiler instead.
steve,
Getting the healthy to drop is brain dead stupid, not dishonest. If an insurance company is only left with the sickly, they will go bankrupt. They are not that stupid, far from it. If anything they’d rather dump the sickly and retain just the healthy (cream skimming). Of course, if they are too blatant with this, then the healthy wont buy because once they get sick they wont be covered, so no point in buying when you are healthy. Finally, health insurance companies are already regulated at the state levels. While they may push some regulations, and work right on the fringes, I don’t think there is much money to be saved from tightening down on these practices. We are looking at much larger scale issues.
No, that would push prices up. But don’t forget that allowing for more competition would be bad, see your link to Ezra Klein and Dave’ recent post/link to Paul Krugman. Kinda stuck aren’t ya?
Locally, I believe that health care insurance is an oligopsony with 2 or 3 competitive companies, who bargain reimbursement rates with the 2 or 3 main provider networks. I recall a fight several years ago between one hospital network and Blue Cross. I think they both hurt each other, but ultimately the hospital capitulated rather than have Blue Cross prefer competitors in its insurance policies.
PD,
That was my thought as well. An oligopoly. Not as bad as a monopoly in terms of inefficiency and prices, but not as good as a competitive market either (with regards to those two variabl.es). I’ll also add that oligopolies, like monopolies, tend to reduce output (that is how they bump up the price). So, theoretically speaking greater competition could increase insurance enrollement.
But according to Krguman, Klein, et. al. that would be bad.
Y’all keep throwing all those % this and that figures around.
What I’d like you to research and publish is this:
What percent of the insurance premium dollar is paid out to providers for a person’s health care?
Flood insurance payout: 60% of premiums
Title insurance payout: 2% of premiums
I think the figure for health insurance is less than 50%. Please prove me wrong!!!
It’s hard to come up with up-to-the-minute info on this. My latest notes are from a Sun-Times article in 2006 on the subject.
Here’s what was in it. For the largest insurers:
76.9% – Aetna
82.3% – Cigna
83.9% – Health Net
83.2% – Humana
78.6% – UnitedHealth Group
80.6% – WellPoint
The term that the insurance industry uses to describe this is the “loss ratio” and, as you can see, it varies from 76.9% to 83.9%. Not a great deal of variance among insurers, really. Out of the remaining 16-23% are paid the administration costs, overhead costs, taxes, and returns to investors, usually stated by the industry as in the vicinity of 2%.
It’s not a state secret. The figures can be ferreted out of the SEC filings that the companies make on a quarterly basis.
Dave Schuler,
I do not believe what you say regarding loss ratios is correct. The person contemplating insurance needs to know what multiple of healthcare value received he would have to pay out in premiums. That is not yet evident because you do not consider many costs paid by insurance companies that do NOT benefit the patient directly.
I rely on:
http://www.state.mn.us/mn/externalDocs/Commerce/Current_Loss_Ratio_Report_052104013421_LossRatioReport.pdf
to point out that the claims figure in the “loss ratio†includes many expenses that do NOT represent payments to providers for a patient’s health care–payments that the patient would NOT have to make were he paying directly and not insured, as explained in the cited document:
“Incurred Claims for Insurance Co
Service Plan Corporations
Incurred claims include the paid-on-incurred claims for the year, plus a reserve for claims incurred but not yet paid, plus the change in any other reserves held, plus the expenses incurred during the year for the following items, where expenses for a functional area should include allocated costs such as electronic data processing
equipment, office space, management, overhead, and so on:
x Any accrued expected value of withholds, bonuses, or other amounts to be
paid to providers under contracts with the health plan company
x Any accrued prescription drug rebates or refunds from pharmaceutical
companies (a reduction to the claims)
x Case management activities
x Capitations paid or accrued to providers for claims incurred during 2008
x Clinical quality assurance and other types of medical care quality
improvement efforts
x Concurrent or prospective utilization review as defined in Minnesota Statutes,
section 62M.02, subdivision 20
x Consumer education solely for health improvement
x Detection and prevention of payment for fraudulent requests for
reimbursement
x Net reinsurance cost (premiums less claims) for the MHCRA and private
reinsurance, and assessments by MHCRA
x Network access fees to Preferred Provider Organizations and other network-based health plans
x Provider contracting and credentialing costs
x Provider tax required by Minnesota Statutes, section 295.52â€
Malthus,
A quick skim throught that document has the typical loss ratio of being 92%. Granted not all of the companies are that high, but many are above 70%. I don’t get your point if you even have one.
After reading the document at your link, malthus, I see that it substantiates my claim rather than yours. Since you can’t be convinced even by your own sources, it doesn’t make much sense for me to continue trying, does it?
You don’t get my point. The figure that is important to me is this: What part of my healthcare premium dollar actually goes to the healthcare provider who treats me?
The only claim I’m making, pending more information, is that the loss ratio or claims ratio is not that figure. If Pm=annual premium, T=money spent on treatment, E=expenses and Pt=profit:
Pt=Pm-(T+E) [assume Pt figures are available]
Loss Ratio=(T+E)/Pm [assume Loss Ratio figures are available]
T/Pm=??? [unknown, since there are 4 equations, 2 unknowns]
I know that, in roulette, the T (winnings)/Pm (bets) = 96% or so. I know that buying insurance, on the average, is stupider than roulette, but the question is: How stupid? Am I missing something?
The proportion of premiums that go to your healthcare provider is the loss ratio, between 70 and 85%.
I hate to belabor the point Dave, but you are wrong. From the Minnesota document I cite above:
“Definition of Loss Ratio:
The loss ratio is the ratio of incurred claims to earned premiums.”
and incurred claims includes a boatload of expenses (see my post above) that have NOTHING to do with payments to the provider. And where do lawsuit expenses fit in, besides?
malthus,
I look at your list and I keep seeing “paid to provider” in many of them. I just don’t get your point, and I suspect Dave doesn’t either.
You mean like these,
x Any accrued expected value of withholds, bonuses, or other amounts to be
paid to providers under contracts with the health plan company
x Capitations paid or accrued to providers for claims incurred during 2008
x Provider contracting and credentialing costs
x Provider tax required by Minnesota Statutes, section 295.52
Yet you list this with this comment,
Why don’t you do this, look over your list and pick the ones you don’t think should be paid for anymore.
That’s pretty easy, Steve:
When I, without insurance, privately contract with a provider for medical or dental care (particularly in Mexico, Brazil, India, Costa Rica and Thailand), I don’t pay for services related to insurance, which include:
x allocated costs such as electronic data processing
equipment, office space, management, overhead, and so on.
x Any accrued expected value of withholds, bonuses, or other amounts to bepaid to providers under contracts with the health plan company
x Case management activities
x Capitations paid or accrued to providers for claims incurred during 2008
x Clinical quality assurance and other types of medical care quality
improvement efforts
x Concurrent or prospective utilization review as defined in Minnesota Statutes, section 62M.02, subdivision 20
x Consumer education solely for health improvement
x Detection and prevention of payment for fraudulent requests for
reimbursement
x Net reinsurance cost (premiums less claims) for the MHCRA and private reinsurance, and assessments by MHCRA
x Network access fees to Preferred Provider Organizations and other network-based health plans
x Provider contracting and credentialing costs
x Provider tax required by Minnesota Statutes, section 295.52â€