No, Ezra, you've got this all wrong. What insurance companies are selling is insurance, the absence of fear that you'll be screwed if something goes wrong with their health. The price of that product is dictated by the demand for it. And lately people are more and more afraid that they'll be screwed if something goes wrong with their health. So the product the insurance companies are selling, absence of fear, is worth more and more. It's simple supply and demand.

Your solution, on the other hand, would completely take away people's fear that they would be screwed if something went wrong with their health. And by doing so you would destroy all that hard-earned value which insurance companies have built up in their product. It's practically un-American.

Probably should post the revenue figures associated with profits.

No, Ezra, you've got this all wrong. What insurance companies are selling is insurance, the absence of fear that you'll be screwed if something goes wrong with their health.

Ezra has this right. It isn't that people are unreasonably fearful of bankruptcy. More than 2 million Americans experience the promise of that fear each year. Rather it is supply and demand. Insurance companies set a price and supply what services are needed to maximize the profit and if that happens to coincide with pooled risk and better care fine and if not, fine as well.

While I roughly agree with your conclusions, most of your post doesn't sit right with me.

Most of the criticism could really apply to any for-profit industry. The purpose of the media is to make a profit. The same could be said for pharmacies, farmers, construction companies, real estate companies, etc.-- all with a similar "incentive" to fleece their customers. The level to which a for-profit industry is able to profit from fleecing is related to consumer transparency and effective regulation. Health insurance is no different, although more complicated than others. (And for those that say that health care shouldn't be something that people can "profit" from denying-- I chose my examples above carefully-- the same isn't true for medicine, food and shelter?). And that's the presumed point of the Congressional Hearing. We don't have sufficient transparency or oversight, so consumer aren't getting what they want. So how can "insurance work" better?

Who the hell cares how many $$$ they earned? What is always important is the % return on investment.

Dan B., my snark may not have been well snarked. Obviously Ezra is right. The point is that universal health insurance would eliminate people's fear that they won't be able to pay for health care, thereby damaging an industry which makes its profits off of people's fear that they won't be able to pay for health care. Naturally, that industry is fighting back.

wisewon, the difference between health insurance and the media is that health insurance doesn't produce anything. All they do is charge you a premium, then pay for health care if you need it. If they're making higher profits, all that means is that the premiums their customers are paying are too high. It's like a casino. If the house's profits are higher, the only possible explanation is that the odds it's giving to customers are worse.

Wisewon--I would argue that the difference between insurance (and a good portion of the financial services industry) and other industries is that insurance is more of a zero sum game. There's no fundamental product--i.e., you're not buying a hamburger or a car where it makes logical sense for me to be paying more than the cost of production--where my purchase and your selling of the hamburger is mutually beneficial. Health insurance is basically a big pool of money--an insurer's goal is to get as much money as possible into the pool and pay out as little as possible.

Granted, there are underappreciated and valuable aspects of health insurance--I don't think most people understand the value of a provider network, for example--but I don't think you can draw an easy comparison to other industries.

I am sympathetic (at least somewhat) to your point that better transparency and reasonable regulations--setting the medical/loss ratio at an appropriate percentage by federal law, etc.--would be beneficial. But on your broader point regarding the nature of insurance vs. the nature of most products, I think you're missing the point.

I would take brad's notion one step farther and add that an individual's health is something more critical than to be considered a 'commodity'. It seems we have reached a critical juncture where as a society we have to decide how to protect the health and livelihood of our citizens. The current system is breaking down leaving only the medical providers and insurance industry to prosper while more and more of our citizens lose their livelihood to rising costs or death and disability.

It seems our two options are to either watch as the majority of our citizens succumb to poverty and death or we pay less for medical treatment and try to reign in costs, either by cutting out high-tech medical technology and research or by paying doctors and nurses less. Those are the only two options since nothing else makes sense or seems fair, right?

brooksfoe and brad,

Good comments, but I think both of you are missing the essence of what "insurance works" could mean-- they do offer something besides spreading risk-- Ezra suggests the same in his post.

They already negotiate prices on our behalf, similar to a wholesaler/distributor. More importantly, insurance companies could enable better quality, which is a product that should be sold. That is the essence of making "insurance work." The fundamental question is, rather than having them focus on cherry-picking/seeking underwriting profits, we could have them focus on how to offer their customers better quality care. Health insurance is very different from other insurance for this very reason-- they don't just do a simple pay-out when you get sick. The term "insurance company" is really a misnomer.

Ezra,
You're usually a little more sophisticated than this, so I'm a little disappointed.

Are the major insurers particularly efficient at spreading risk? Of course not.

But are they raking in windfall sickness profits hand over fist, akin to say Exxon-Mobil? No.

All of these companies have net margins in the low to mid single digits. Some allocate more per health care dollar to paying out claims and some are more efficient in administration -- but at the end of the day, it's not a hugely profitable industry.

You know as well as anyone that insurance company profits and executive pay are very small drivers in pushing health care spending up. Sure it's distasteful, but it's also a bit of a canard.

Wisewon--see above, I'm not denying that there is some value to what insurers do besides spread risk.

As to your latter point about effectiveness--this gets somewhat beyond the scope of this thread, but I'm not sure I completely buy the idea that insurers could improve quality without a fundamental realignment of incentives. That is, I'm not sure that risk protection and quality effectiveness can be part of the same product insofar as a denial, even an appropriate denial, will spark outrage. This is why, once every few months, there's a firestorm over some claim denial for a sick child (or whatever.) Oftentimes, insurers are making the right call--at a macro level--but that's not comforting to the parents of a terminally ill child, and the appearance of a conflict of interest is enough to spark controversy.

You're right: Transparency might help. But transparency is only so meaningful for a very complicated product that most people would prefer to avoid thinking about.

So the product the insurance companies are selling, absence of fear, is worth more and more.

Why aren't the insurance companies selling 'absence of two-hour phone calls with repeated non-answers over coverage'? You'd think there'd be a market for that.

Snark taken, but they actually become the agents of fear, where your doctor's opinion doesn't matter a fucking iota if some pestilent scrote with a spreadsheet decides that you'll have to wait another four years before you're old enough to have a test covered.

I do think it's time for the private insurers to develop a fear of having their businesses taken over by compulsory purchase. To keep them 'honest'.