Show Me the Money

Misinformation Everywhere. There are very few willing to defend health insurance companies as part of the health care reform debate. It is fair to critique their treatment of "insureds" when most vulnerable and their ineffective role as an integral part of health care financing. But, we must hold our fire for the right issues. Unfortunately, the demogogues in Washington have mis-portrayed the real money issues. Let's clean that up here.

1 . Insurance profits are not a big deal. Insurance company profits are under ten percent of the premiums collected. In many cases, their profits are two to four percent of health insurance premiums. If, as a matter of popularist policy, we confiscated all of their profits, we would a.) have no more insurance companies, and, b.) the total decrease in health insurance premium costs would only be their margin of profits. The "proverbial" drop-in-the-bucket.

2. Many Americans with health care are not "covered" by insurance companies at all. In fact, many Americans with health care protection are covered by "self-insured" plans paid for by employers. In all of these cases, the three primary costs are the cost of i.) health services paid to doctors and hospitals, ii.) reinsurance costs of large and unexpected claims, and, iii.) adminstrative costs paid to a third party administrator which may be an administrator or insurance company providing administrative services.

3. Most health costs go to doctors and hospitals, not insurance companies. The Washington rhetoric would have Americans believe that the bill for health insurance goes entirely to insurance companies. It does not. Most of the payments for health insurance, whether paid to employee insurance funds of corporations, insurance companies or even medicare, goes to doctors and hospitals. Accordingly, if we want to dramatically reduce/impact the cost of health care in America, we must reduce the utilization, and the unit costs of health care services.

The Simple Truth is that current legislation largely ignores this reality.