They're Insurance Companies, Not Healthcare Companies, by Drexel Kleber
I wonder what insurance companies are thinking about healthcare reform. It seems to me there is a fundamental shift occurring for them and I have to imagine they don’t like it.
What is the purpose of an insurance company? Insurance companies are for-profit businesses whose modus operandi is to get us to give them our money so that they can invest it in a variety of vehicles which provide profits for the company. They entice consumers to give them their money based on the agreement that if a policy holder gets sick or injured the company will pay for their medical needs. As such, if I have minimal medical needs the insurance company will pay out less money to me and, thus, have more money at their disposal from which they can earn investment profits. If, however, I am prone to illness or injury, the insurance company must pay out more money for my care, even to the point where they pay out more than they earn from me in premiums and interest. For the company, these are losses. (It’s interesting to note that few individuals invoke the same language when we are healthy. If I don’t get sick or injured or go to the doctor, then I have essentially paid more money IN than I have received back: rightfully, I should view these as losses. Of course, my ability to recoup my investment requires injury or sickness– situations which most folks would rather avoid.)
From the insurance point of view, this entire arrangement is a wager. The bottom line is they are making an informed investment decision: they evaluate my medical history and current health and venture a guess regarding the capital outlay required to attend to my health care needs. They then charge a premium sufficient to cover those expenses and still return a profit to their shareholders.
Insurance companies and individuals enter into a binding agreement. Specific items will be paid for, specific items will be excluded. Caps are provided in order to protect the insurance company from catastrophic losses, and which underscore the basis of their decision and support the assumptions they made in establishing a premium. When I read my insurance policy, I know what is covered and what is not and I sign the document agreeing to its terms.
Insurance companies are NOT healthcare companies. They take no Hippocratic Oath. They are closer to lawyers—enforcing contracts—than medical professionals—healing the wounded and infirm. I have no illusion that they will show benevolence or compassion. They exist to make money for their shareholders. I can’t imagine that I will ever hear in a hushed whisper from an insurance company representative, “Mr. Kleber, as you know you haven’t been paying for coverage that includes FREE prescriptions, but your story of job loss and misfortune has touched my heart so, just between you and me (and, please, don’t tell my supervisor) I’m going to approve those benefits.”
The other side of this coin is equally relevant, however. I expect the company to provide nothing less than to what it’s contractually obligated. I understand that their goal is to minimize capital expenditures and doing so requires a certain amount of belligerence to ensure that abuses aren’t taking place. But we’ve got a deal—we both signed. If there’s a covered benefit, well, they lost the bet. Tough.
Yet the healthcare debate in Washington these days seems to be taking place with the notion that insurance companies are “healthcare” companies, whose primary purpose is to provide access to healthcare. How can an insurance company make money for its share holders if it can’t cap certain expenses? If there is no way to control costs, they would, theoretically, have to charge exorbitant premiums to allow for such possibilities. Personally, I’m not prepared to pay the premiums required to make that math work. I take a certain measure of responsibility on my end of the arrangement–I pay a limited premium for limited coverage. I eat right and exercise to limit the chances of uncovered health needs.
I’m surprised that I haven’t heard more outrage from the insurance companies; even to the point of threatening to go out of business. I don’t understand how they will be able to run their business given the proposals that are being bandied about in the name of healthcare reform. It would be as if Congress suddenly told GMAC that even though their customers are only making payments on Chevy Cobalt, GMAC had to provide them with a Cadillac Escalade to drive.
We ought to proceed cautiously where healthcare reform reaches beyond healthcare companies. Insurance is but one means of PAYING for healthcare, but it is a limited contract arrangement. Expecting more from insurance companies would fundamentally change their mission. Smart people may decide that there is still money to be made in a new system, but it’s wrong of us to assume that companies will continue to operate in a new system with outdated methods.
There are many unknowns in the healthcare debate. One thing we do know is that companies will find a way to make a profit or they will go out of business. Assumptions about the future and who might facilitate implementation must include a realistic assessment of the players involved and their motives.