* <<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) <[email protected]>