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Blaming health insurers for high health care costs is foolish

Here is a number to ponder, 198,600,000.

That’s the number of Americans who are enrolled in Medicare, Medicaid, CHIP or an employer self-insured health plan. To that number you can add military and VA beneficiaries and millions of state and federal workers.

Why is that significant? Because these Americans do not use health insurance. In other words, their health plans pay for the health care received and then pay a fixed fee for claim administration (excluding the VA and active military where services are provided). An insurance company has no risk for the claims incurred.

No insurance company is ripping these employers off, no insurance company has a higher profit because of higher or lower claims. And all these plans have or should have admin costs far lower than the 15% typically used for health insurance. These plans must deal with rising health care costs and are often frustrated in the attempt.

And yet ….

political rhetoric continually claims the cause of our health care woes is the insurance companies that rip us off and their profits from high health care spending. Just not true.

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5 replies »

  1. I agree that these companies that do work with big corporations know they will get set amounts for coverage. guaranteed just about. As you are aware of our plans; You were our director a while ago. the price we pay is an average of I think it was two years past the company laid out for our care. They add it up and base the cost on what they paid out. We all help pay that cost after what the company has agreed up for each of us. years of service, what your base pay was….we pay a % of the cost. I think I am at 12% for 46 yeas+. Plus to retire with medical; we have to have 30 years service. I don’t know how insurance companies figure the cost when you pay outright for the plans.

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  2. “… No insurance company has a higher profit because of higher or lower claims.” ?

    An employer pays an insurance company a per capita fixed fee to cover their employees. If the claims far exceed the estimate that the insurance company used as the basis for their negotiated fixed fee, then they will have less, perhaps no, profit. If the claims are far less, then their profits increase.

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    • Not with a self insured plan, the fee is typically based on per member per month, not claims or dollar amount of claims. It is possible that if the covered lives had a very unusual number of individual claims it could affect next years fees, but that’s still not dollars spent on claims.

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  3. It would be interesting if there was a way for the VA and military base hospitals to provide non-combat medical treatment costs. I would expect that they could not operate on the same reimbursement that Medicare currently pays. I would suspect that besides their long wait times that they have higher administrative costs and more complicated purchasing rules. I would also bet that they struggle to the maintain staff, the building, and get the latest equipment required for accepted standards of care.

    Assuming that I am right and that it could be proven by facts, why do people think that the Federal government is better at providing healthcare or dictating to others how to control costs when I am sure that federally run hospitals are more likely β€œmoney pits”?

    My son’s army family health insurance coverage is run by Tricare part of Military Health System. It is not blanket coverage but has networks and co-pays, just like other private plans to help control costs. So I guess that military gets it and they pay an administrator to help control costs.

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