* <<H86.0753>> Insurance
One of the things that drives me crazy about people who argue in 
favor of an entirely private insurance system is the myth that 
consumers' freedom of choice gives them power over insurers. The 
story goes, that because consumers will flock to the insurer that is 
most competitive, insurance costs will go down as insurers bend-over 
backwards to reduce their costs and add value.

Having a competitive insurance marketplace is not doing anything 
about consumers' medical costs. That's a cartload of horse shit. 

Insurance companies compete with each other in two ways: they can 
reduce their operating costs and add value to their services. Cost 
reductions can take the form of automation and reduction of staff, 
streamlining of business practices, the use of fast and efficient 
information technology, the maintenance of low-cost facilities, et 
cetera*.  To add value they can do things like customize their 
product offerings to appeal to a wide range of consumers, provide 
excellent customer service, and advertise to create a brand image 
that makes consumers feel good about the company. 

 * Of course, they can also do things like reduce the pay of their 
staff, outsource customer services, use wasteful but cheap 
facilities, and so-on, but we'll pretend for the sake of argument 
that insurers are all highly ethical and we don't have to worry about 
it.)

However, the key area in which insurers can't compete is in the cost 
of medical care and drugs. Typically, about 80% of all insurance 
company revenue goes back out to pay its clients' medical expenses, 
and they don't control those costs. So if you're paying a $100/mo 
premium and you want to shop around for the same level of coverage 
somewhere else, you're never going to get down to $80. You won't even 
get down to $90. You might be able to find $95, but no insurance 
company is going to operate on 10 cents of every incoming dollar. 

The only meaningful choice that consumers have is between levels of 
coverage.  Consumers have little power over insurers because 
insurers, ultimately, have little power to control medical costs, 
just as airlines have little control over the cost of jet fuel. They 
can (and do) negotiate prices with doctors and hospitals, but 
suppliers raise their prices accordingly, knowing that a haggle with 
insurers is inevitable. Do some insurers haggle better than others? 
Oh, probably, but in the absence of data I'm left wondering whether 
insurer A really gets better rates for care from providers than 
insurer B does. In-network costs for insurer A may be lower, but 
fewer services are covered and vice versa... 

Ultimately, the freedom of choice that people are fighting 
tooth-and-claw for – the freedom of choice that made people vote 
for Trump – is not a consumer empowerment issue, and I'm tired of 
it being characterized in that way. The freedom that people are 
fighting for is simply the freedom to gamble with your family's 
health.

How long can you go without coverage? Or, how long can avoid any 
serious accidents or diseases so that you can get away with only 
having enough coverage to cover routine doctor visits? Those are your 
choices, empowered consumer.

The other angle on this that drives me crazy is that insurance is a 
fundamentally socialist model: everybody pays in a little so that 
where need arises a lot can be paid out. Corporate insurance, of 
course, is slightly different: everybody pays in a little so that 
where need arises a lot can be paid out while setting aside a portion 
for profit (for growth, of course – and for shareholders*). 



http://news.harvard.edu/gazette/story/2009/09/new-study-finds-45000-de
aths-annually-linked-to-lack-of-health-coverage/ --> 
http://ajph.aphapublications.org/doi/full/10.2105/AJPH.2008.157685


Yes, insurers will compete for your dollars, butyou have your choice 
between insurers, who will offer all kinds of different service tiers 
— but there are no radically different insurers. The choice between 
insurer A, B, and C is like the choice between a black Model-T, white 
Model-T, and grey Model-T. They're the same god-damned car. All 
insurance companies offer essentially the same services with the same 
limitations, and they compete by tweaking the details. A few dollars 
off of this premium, a per-period co-pay versus a per-claim co-pay, a 
180-day look-back period for preexisting conditions versus a 160-day 
look-back period, and so-on. These are mostly negligible margins, and 
the real competition is between the consumer and the insurer: can the 
consumer find the service that will actually give them the most 
coverage for their dollars? Or will they eventually just throw a dart 
and pick one after they've become exhausted with shopping around? 
Disease and accidents are unpredictable, so the game of insurance 
shopping (this is your "consumer empowerment" – the right to play) 
is a gambling game: how little coverage can you buy for how long, and 
can you avoid any expensive accidents or illnesses? The only 
consumers that really win the game of insurance shopping are the 
lucky, and the prescient – and they represent a pretty small 
fraction of consumers.



Can Insurers Even BE Competitive?


(* Replace "shareholders" with "bureaucrats" and you have the 
~corrupt~ socialist model.)

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©2017 Adam C. Moore (LÆMEUR) <adam@laemeur.com>