When Private Insurers Claim They Can't Compete Against a Public Health Insurance Option, They Just Make Themselves Look Silly
You've got to give the private insurance companies credit for chutzpa. The argument that they have been making to Congress -- with straight faces -- that they "can't compete" against a public health insurance plan is preposterous. That's because it is internally inconsistent.
If it were true, then private health insurance firms must be inherently unable to provide health insurance as efficiently as the public sector. And if that were true, why would our nation allow itself to be held hostage by private insurance companies that unnecessarily siphon billions of dollars of wasted health care dollars from our collective pockets?
Every time the private insurance companies -- or their Republican apologists in Congress -- make the argument that "private insurance companies can't compete", they might as well dress up in clown suits and put on big red noses: they just look silly.
President Obama pointed out the absurdity of the argument in his news conference yesterday:
Just conceptually, the notion that all these insurance companies who say they're giving consumers the best possible deal, if they can't compete against a public plan as one option, with consumers making the decision what's the best deal, that defies logic.
The insurance executives are the first to tell us all about how much more efficient the private sector is at doing anything than the "government." Do they mean to tell us that the "best and the brightest" from private industry can't compete with a "bunch of government bureaucrats"?
There is, of course, considerable evidence that private insurance companies are generally more inefficient than public insurance plans. For instance, only 3% of every Medicare dollar goes to administrative costs, while from 13% to 17% -- and sometimes more -- goes to administering and marketing private plans.
Or there's the fact that "MedicareAdvantage" plans -- where private insurers are paid by Medicare to provide insurance for Medicare beneficiaries -- have required about a 20% subsidy above the cost of providing insurance through the regular Medicare system.
But the image of the poor little private insurance companies arrayed against the public colossus is ridiculous. One Republican went so far yesterday as to argue that the way a private insurance company would compete against a public plan was the way a rabbit competes with an alligator. The private insurance companies are not cuddly cute little bunnies. Many of them are giant multi-billion dollar companies that have massive provider networks, longstanding client bases and pay their CEOs tens of millions of dollars.
The real problem for private insurance companies is not that they can't compete with a public plan. It is that they can't compete and continue to do business they way they want to do business. And that, of course, is the point of a public option -- to change the behavior of the players in the health care market to assure that everyone has access to quality health care, and to stop the skyrocketing increase in health care costs.
The whole idea of insurance is to spread risk. Everyone pays into a common insurance pool, so when anyone gets sick they can count on getting the health care they need even if it costs far more than they could afford individually.
But left to their own devices, private insurance companies have an ever-present incentive to minimize their own risk of paying out for health care to their policyholders. That's why they try to select only customers who are well and get rid of those who are sick. That's why it's in their interest to spend millions on armies of people whose only job is to deny claims -- a task that has no value in the broader scheme of the health care system, but makes perfect sense from the standpoint of a private insurance company. That's why they don't want to take people with pre-existing conditions -- because they are more likely to get sick.
And, private insurers are not in business to provide health care coverage for every American, or to slow the growth of health care costs. They are in business to maximize return for their investors and the pay of their top management. So when left to their own devices, private insurers generate huge profits and pay their CEO's tens of millions of dollars.
The entry of a public insurance option into the health insurance marketplace would change the rules of the game. If consumers had a public option, who in their right mind would sign up with a company that would discontinue your policy if you got cancer or had a heart attack? Who would join a plan where they had to pay for bloated executive salaries -- or had to regularly do battle with an insurance bureaucrat in order to get a claim paid? Why do seniors like Medicare? They don't have to contend with these kinds of problems. They have secure, reliable health insurance.
So to compete, private insurance companies would be forced to change the way they do business. They would have to end all of those practices that American consumers have grown to hate, cut administrative costs -- maybe even cut CEO pay. Of course since the CEO of Cigna makes $26 million -- 65 times the salary of the President of the United States -- he could afford several million dollars in belt-tightening.
They could compete - but they would have to change the way they compete. That's what they are fighting tooth and nail to avoid - and that's also the whole point of health care reform: to change the incentives that determine how the players in the health insurance market do business day to day.
Of course there is another reason why all the concern about the competitiveness of private insurers is so absurd. The point of health insurance reform is not to benefit the private insurance companies. It is to provide everyone access to quality, affordable health care -- and to control exploding health care costs.
It's up to every one who cares about health care -- and the future of our economy -- to make sure Members of Congress remember what is really at stake in the health care debate. And it's not the health of the private health insurance industry.
Robert Creamer is a longtime political organizer and strategis,t and author of the recent book: Stand Up Straight: How Progressives Can Win, available on Amazon.com.
Loading comments…
Want to reply to a comment? Hint: Click "Reply" at the bottom of the comment; after being approved your comment will appear directly underneath the comment you replied to
Sadly all those who are backing the big insurance companies don't realize exactly what they are backing. The status quo, big insurance, etc. have lead us to where we are today. Those who are afraid of losing their employer subsidized healoth care benefits - do yoy realize more nd more employers are dropping those benefits right now? Currently there is no public option for those who are newly uninsured so they show up at emergency rooms, they are unable to pay hospital and doctor bills, thus causing health insurance premiums to go higher.
The CEO's continue to make their big bucks while you and your employer subsidize the uninsured. Does this make sense to you? The public will pay for this one way or the other without the public "watchdog".
There has been a lot of complaining in here about executive fat-cats' bloated salaries, and insanely high administrative costs, lavish offices - even hints at anti-trust law violation. It is all just angry fist-shaking at the insurance industry based on ignorance. It is a complete waste of time.
Use your time productively:
I would like to encourage you to create a business plan for a health insurance company. Don't ever deny a claim. Keep premiums low. Have reasonable executive compensation (you can be the CEO making $500K, probably more than you make now and much less than the fat cats - so you undercut competition there). Clearly this will be a popular company! You will save employers millions with your low premiums so they will flock to you. The volume will be so tremendous that you will take advantage of economies of scale like no other. Venture capitalists will be throwing money at you because this business plan is brilliant and will be wildly successful. Your takeover of market-share will be meteoric. You will be doing the public an incredible service. You'll be a national hero and a shoe-in for the "Medal of Freedom". You will be rich, famous, and honored, and millions of people will have better health care. Everyone wins!
Unless the financiers don't think you can pull this off, or the idea is fundamentally flawed, or something. . .
.These executives are compassionate, caring and want only to look out for us?
Dream on. Take your sarcasm and cynacism to a bloog who believes your story.
They not only make themselves look silly, they show themselves for the greedy profiteers they are. They don't care about our health and well-being; they don't care about providing great service and satisfying customers-they don't have to, because the consumer doesn't have any real choice.
Someone recently told me they're afraid of a public option, because they don't want the government making decisions about their health care. Right - it's so much better to have your health care decisions made by a corporation that only cares about profits, staggering CEO salaries and how much your needed care will cost. My mom would likely be alive today if her insurance hadn't balked at covering the test that would have resulted in early diagnosis. It was cheaper to send in a shrink who told her "it was all in her head." It wasn't. My dad's hands wouldn't be crippled from carpal tunnel if the insurance company hadn't pulled their approval for the surgery. (And in true efficient corporate fashion, they never even told him that they'd reversed their approval; he didn't find out until the day he was at the hospital being prepped for the surgery.) What the status quo offers is fewer options, fewer benefits and higher premiums. What a deal.
As long as health care coverage is a for-profit endeavor, our health will never be as important to the insurers as our premiums are. There will not be any real reform without a public option.
I am sorry for the difficulties that your family faced. But I am afraid you are raising your hopes too high if you believe a public option or a single payer plan would really make a difference. All health care is rationed care. I have heard many similar tragic stories about "elective" treatments in single-payer systems. Agencies controlling how limited funds are spent will always look for cheaper ways to treat. When the system is flooded with poor people not carrying their financial weight, it is possible that ONLY those poor people will be better off.
Well medicare is a public option and quite frankly it works very well at a fraction of the cost.
Medicare is not a real public option. If you think it is optional, try to opt out of paying in. It is only optional in the sense that you can opt out of receiving benefits. But why would you? At benefit-receipt-time it is free money to you.
I'd be interested to read evidence about the amazing efficiencies of medicare. Having been employed by the government, I would be astounded that ANY government agency could be so effective and cheap. Somone in here claimed that medicare has only 3% administrative costs. Where can I find support for that? That is not retorical sarcasm, I really am interested.
To all the business loving posters....worry yourselves not a bit....when all is said and done IF a health care "reform" bill is passed it will simply be a scheme by which public funds will be handed over to insurance companies to provide coverage (watered down and lousy) to previously uninsured or uninsurable people. Your darlings the insurance companies will then charge their typical massive administrative "load" to each insured's coverage thereby enriching themselves while allowing all of you to carp about the so called "government" program (which in reality will be nothing more than handing over yet more public funds to private business).
Just for fun....why don't you free marketeers opt out of any employer provided coverage you may have, go on the open market, and see how much coverage your friends the insurance companies will provide you (that you can afford) for you and your family. Then come back and tell us all about it.
Free marketer here.
I'll pass on opting out of my employer provided coverage. The benefits at my company are fantastic and I looove my health insurance. It is one of the reasons I pursued this employer.
However, I had a pleasant experience being self-employed at a non-profit company for 3 years where I purchased my own insurance. I paid what I thought were reasonable rates of $330 per month for an 80/20 plan (shopped around a lot). My wife and I are healthy and there was plenty of incentive to stay healthy, but it wouldn't have bankrupted me if I faced a catastrophic illness because there was a cap on what I would pay in a year. Included in that plan was a nice little ryder for prescription drugs. If I was more disciplined I would have preferred to have a little health savings plan and gone for a higher deductable. We were working our way in that direction. $330 was tight - we made peanuts in our not-for-profit jobs. But it was a conscious decision to live very modestly, no cable TV, no eating out, second hand clothing, etc.
I realize there are countless horror stories. But I thought I'd toss in some balance.
Great piece. I find it funny (not in a good way) that people have been complaining about rising healthcare costs for YEARS and the health insurance industry did NOTHING about it. But once a public option is seriously floated, NOW they want to work with the president to lower costs. I say too late.
These people aren't concerned, and never have been, with the healthcare of their customers. They are only concerned with their bottom-line...PROFIT. Didn't these same folks just say recently that they STILL wouldn't cover everyone?? And that they'd still deny people coverage? How is that reform?
Now, if we could only get our members of Congress to understand what the public understands...
Why are you surprised that extortion brings about a cooperative spirit?
all i have to say is this, if we donot get healthcare reform and a public option to compete with these for profit entities,
fine I will lobby for congress an dsenate to loose their tax payer paid for coverage
lets make that the next beig darn debate, if none for me none for you pay for your own insurance.
these guys pay like 65.00 per month for their coverage, and a private plan like that would cost 250 per month.
the kicker is they make over a 100 grand per year each n every one.
USG employees, including the members of congress, have insurance through the Federal Employee Benefits Plan http://www.opm.gov/insure/archive/health/09rates/index.asp. They choose from among several private insurers that have negotiated with the government. That does not mean it is as cheap as you believe. Most members of congress have families, and no plan gives family coverage for $65/mo. Where did you find that?
As a retiree, my premiums for Blue Cross have gone up about 40% in the last few years, to well over $300/mo for two people - same as for a family of six. I chose BCBS because it is honored in different states, but I get different coverage in the state I now live from when I lived in Virginia. And retirees pay taxes before the insurance premiums - no breaks, even though pensions are less than half the salary made of an employee. It is still a private scheme, and I pay plenty for what the insurance company does not cover - and there is always something they don't cover.
I would much prefer a single payer plan, like that proposed by Physicians for a National Health Program, private docs, public pay. I don't mind paying taxes, if I get something in return.
Great article, very informative.
Too bad so many posters here din't bother to read it. Somehow, the deniers keep missing all the facts----most of all, the fact that the public option isn't free gov't welfare, it requires a monthly premium.
Mr. President, I don't understand. You acknowledge that Medicaid and Medicare are the two main driving forces contributing to our national debt. How does a government run health care system provide a solution?
HOW HAS PRIVATELY RUN, PURELY FOR PROFIT INSURANC EBENEFITED AMERICANS,
we live less are obese and addicted to paying high premiums, addicted to prescriptions that make us sicker with their side effects.
we are bankrupt every minute, and we u actually get sick, they drop your coverage, even after decades fo collectign premiums.
but u didn't read the articla i can tell
here is a quote formt he article
"private insurers are not in business to provide health care coverage for every American, or to slow the growth of health care costs. They are in business to maximize return for their investors and the pay of their top management."
get it now, we are bieng robbed and left to die by the for profit industry that is not right and our elected officials need to fix this this decade dammit
Mr. President didn't write this piece. So, unless you think he's reading the comments section, you've directed your delusional question to the wrong place. Good luck finding your way back to reality; I see a long journey for you.
Many recipients, if not most, don't go to doctors until there's an emergency. Or go to the emergency room for a cold. And to qualify for either program, you have to be old, poor, or disabled--which means a higher incidence of expensive, chronic illness. Moreover, geriatrics isn't a widely populated profession, so doctors do a lot of experimentation. Further, the poor and aged don't get much respect from doctors or hospitals, so I would imaging the incidence of hospital-borne infections is higher among them than among healthier, wealthier patients. These patients cost more than the average, so these programs are basically taking all the high-risk, low-informed individuals. The insurance companies take all the low-maintenance customers, then try to deny them benefits. That's the American way.
Oh, no, but what's going to happen when all those fat cat health care CEO's, Corporate V.P.'s, and silk-suited managers and sales reps lose their jobs in the race to compete with a lean, mean, public plan? Think they'll be out on the street in labor pool lines and on interstate interchanges with hand-lettered "I work for food" signs?
Hell no.
They'll just retire to their modest multi-million dollar mountain retreats in Colorado and Wyoming, or their beachfront bungalows in the Bahamas.
Poor babies!!!! And what a loss to the economy---just think of all those new Mercedes and BMW's that will sit owner-less at dealerships.
My heart simply bleeds----for all of them.
They'll ask for a bailout, like all their wealthy colleagues. And their footstools in Congress and the Treasury will give it to them.
GMS: GREED MISMANAGEMENT AND STUPIDITY RULES THIS COUNTRY,
AND HAS RUINED IT.
Our so-called leaders are shameless in the application of their self-interest,
loyalty to their financial backers, and hypocritical double-speak to their constituents.
Liars, thieves, and cowards.
Excellent analysis of the current situation!
Please, Public health care now! 72% of americans WANT this, Do the right thing. If the Democrats don't pass a PHC plan this year. They will LOSE in 2010. The party will look like a bunch of wimps and I and many others,will never vote for the Dems ever again! Do the right thing! Vote for the Public plan this year!
Excellent article easy to understand and right on point as far as insures and their motivation.
The denial of claims of some who are insured is and has been a death sentence. Cherry picking the young and healthy is profiteering. Suddenly now they want to insure everyone.
Too late.
Years and years of watching people die speaks directly to what the insurers motivation is and always will be.
Bingo, *****
Oh, my box of Chardonnay just gave up it's last gasp so I gotta go. On parting this topic I'd like to say by way of farewell, just be careful of what you wish for, cos it will eventually come back and bite you (hard) in the ass. I'm old and probably gonna die before all this socialization will take effect so I don't really care all that much. Ciao!
May you be found to have a pre existing condition
Member since June 2009 - 'nuff said.
Are you old enough to be on Medicare?
If so, are you a recipient?
Because you are being ridiculous to complain about socialization.
Anyone who thinks that Medicare is not socialized medicine is as ignorant of facts as he/she is to believe we liberals and progressives drink boxed Chardonnay.
I sort of wish it *would* put the greedy buggers out of business. Medicare worked very well until Bushco screwed it up, and a similar program to cover all Americans would work at least as well.
Would public healthcare work PERFECTLY?
Of course not. No system designed by humans works perfectly.
Would it work better than the current system that only grants coverage to those patients selected by insurance companies for their low-risk, high-profit status?
Oh, probably...
Oh, lets put the greedy buggers out of business and have a one-party pay all system. Be careful of what you wish for, the old saying "ya think health insurance is expensive now, just ya wait until it's free!" You betcha!
Better accountable to Congress than to no one.
Considering the fact that this has basically already happened, with government paying almost half of all healthcare dollars, and thus insuring more people than private insurers....
I'm sorry, but the evidence just ain't on your side, public insurance costs less, provides for more individual coverage, and provides for everyone to be covered. Private insurance costs more, gives each covered person less, and allows for almost 1/6th of the US population to not be covered at all!! When you account for those who have insurance some of the year but not the rest of the year, it's closer to 1/3 of the US population!!!
It's really a no-brainer. Private insurance companies cannot compete with the government so yes, they will eventually go out of business. My question is what will happen with my health insurance plan which is subsidised by the company I work for. How long will my company want to subsidize the 20,000 employees on my current plan. Wouldn't it be more cost effective for my company to do away with the health insurance plan and let all of us 20,000 suck on the government teat? Which will be what other companies will also do. Private insurers cover 99% of the US via company subsidized plans. Can somebody explain otherwise to me? I'd really like to hear someone tell me I don't have to worry about losing my private insurance and having to go on a rationed, socialized, European style medical system. Obama telling us we can all keep what we have now (with nothing backing that statement up) scares the living crap out of me.
Me too - and I feel pretty sure that there's good reason to be scared.
When a president carries on the way he has since being in office, everyone feels scared
If he wants to be trusted he needs to be trust-worthy. Too Late.
I agree. Tons of talk, it seems He loves talk, and talk, and talk. Give me something backing up all His talk so perhaps I might feel somewhat comforted. Tons of promises, but nothing yet to give me any warm and fuzzys!
u no trut and only 6 months have gone by,
guess u didn't trust inthe first place
fair weather friend, ggodbye.
Did you know that your US senators and representatives are beneficiaries of that socialized plan?
Did you know that your state and federal employees are also beneficiaries of a socialized plan that you and everyone else is paying for?
Maybe the cap needs to be placed on HOW MUCH MONEY the tax payer can afford to pay for all these public servants health care and retirement plans while our 401s have tanked, so that there's something left for us to take care of our own families and loved ones. Does that seem fair? Maybe public servants need to kick in their fair share?
And why would competition cause a problem for companies whose PROFITS rake in BILLIONS, while Robin Beaton gets beaten down and denied care until someone fights for her right to be treated with human dignity?
You suggest private insurance will go out of business?
"Private insurance overhead and profits eat up 20% and more of health care premiums while Medicare overhead (and no profit) is closer to 3%... The top 7 "for profit" health insurers made a combined $12.6 billion in 2007-- an increase of 170.2% from 2003. The same year, the average CEO compensation package for these health insurance companies was $14.3 million. Pay packages ranged from $3.7 million to $25.8 million." (Cohen)
Let's be real clear what this is REALLY ABOUT.
It's about MONEY, PROFITS, AND GREED LITERALLY DRIVING OUR RIGHT TO AFFORDABLE, HUMANE HEALTH CARE!
Ain't it always about money? So there is no way in hell us private citizens are going to ever be afforded the system of health insurance afforded to politicians. That's why they are all so free and easy debating our life and death important facts since they are all immune from them. Across the board, Dems and Repubs have not one whit of care for us since they are all immune from it. They have cradle to the grave for themselves and all their loved ones full 100% coverage until they all die (soon would be good) but seriously, do any of you think they really care about us? They are all giving us lip service and saying whatever will keep them in office for another 4 years. They are all skunks!
A little disinformation there. US government, senators and congresspeople are not in a socialized plan. The government is their employer, and they have an employer subsidized plan, like many employers. USG employees and retirees pay substantial premiums and copays, choose among several HMO, PPO, and FFS plans. USG employees, including the members of congress, have insurance through the Federal Employee Benefits Plan http://www.opm.gov/insure/archive/health/09rates/index.asp. They choose from among several private insurers that have negotiated with the government. That does not mean it is as cheap as you believe. Check out the rates. It is cheaper than individual private insurance, but not less than other employer negotiated rates.
And retirees pay taxes before the insurance premiums - no breaks, even though pensions are less than half the salary made of an employee. It is still a private scheme, and I pay plenty for what the insurance company does not cover - and there is always something they don't cover.
I would much prefer a single payer plan, like that proposed by Physicians for a National Health Program, private docs, public pay. I don't mind paying taxes, if I get something in return.
That's nonsense.
Canada has had a public health policy for decades.
Canada also has a robust private healthcare industry.
The insurers sell supplemental policies that cover things the basic health coverage does not--dental, vision, non-essential surgeries, travel insurance -- and many of these are also paid for by employers.
30-odd other industrialized nations also have national health care - and insurance companies.
It is ludicrous to claim that America cannot do what the rest of the developed world is doing--care for its citizens' basic health.
You DO NOT HAVE TO WORRY about losing your private insurance. As long as they can make a buck, the insurance companies will stick around.
But with a national backup -- they won't be able to set the rules and deny coverage or lifesaving treatment to anyone who might cost them money.
Do the math. Healthcare + hefty profit = higher cost to the consumer than Healthcare + basic administrative fees.
I lost a good friend because Kaiser Permanente would not put him on teh waiting list for a heart transplant--for a congenital defect that killed his dad at 42. He was in excellent health, a perfect transplant candidate, and he died a week after his 40th birthday.
Kaiser's CEO got over a million $ bonus that year. Blood money.
As long as healthcare is FOR PROFIT, it is not FOR PATIENTS.
Wow! Finally a public plan that won't be able to set the rules and deny coverage or lifesaving treatment!
AND, WAIT FOR IT.....
Brought to FREE OF CHARGE (man I love our rich benevolent government They work so hard at creating all this national wealth)!
HOW LUCKEY ARE WE?
Wait before you answer...
We get to be in a plan like CANADA... This should reduce the flood of illegal Americans sneaking into Canada for that TOP NOTCH health care!
And you know why this is such a lay-up? It's all brought to me by the same folks who have been taking 15% plus self employeement tax and 15% plus Social Security (1.35% Medicare) and send me a projection of my $1800/mo benefit when I'm 67. Well sort of... That is IF I don't save for my own retirement, cuz if I do, the same hand that givith the benefit will be taxing it right back.
Thank you Barack and Company. We're saved....
Bahhh, bahhh
WE DON'T LIVE IN CANADA, OR ENGLAND, OR SWEDEN, we live in the USA and we want our own system of healthcare. What works in third world countries doesn't always fly in the USA.
What makes you think you will be able to hang on to your plan even if there is no government option? My husband lost his job a month ago and lost our 100% health coverage with it. At least we wouldn't lose our coverage with a government plan. Our health care should not be tied to our jobs. It's been a disaster in the making for a long time. Well, the disaster is here, and I don't see anything good happening in my lifetime. I lived in Europe (Germany) and I'll take their system any day over this mess.
The corporations have been cutting back everything for employees anyway, do you really believe that in 5 years you will have 1 week of vacation let alone for profit health insurance....Look at the writing on the wall from the last 30 years.... you are going to loose health insurance just like you have lost your decent pension package for a 401k....Do you have any clue what Walmart does for insurance coverage, they don't they hire part time workers who get NO BENEFITS......
If you read your own statement, "How long will my company want to subsidize the 20,000 employees on my current plan." Youre health care is already being rationed with your enormous company covering so many employees. You wont lose your plan. Private health insurance companies will just have to modify their practices and stop sending 30 percent of the money you pay for your health care to overhead and administrative costs. Aka their CEO's wont be able to make 20 million a year, and they wont spend billions lobbying Congress and putting out tv commercials. How horrible for them.
You must be logged in to comment. Log in or connect with
