Opinions are formed, positions taken, policy proposals made about health care, often based on misinformation and a misunderstand of how things really work.
- The primary driver of health care costs and hence the cost of coverage is the price and use of health care. That’s true whether the coverage is Medicare, Medicaid or any form of private insurance or other coverage.
- Insurance company “greed,” profits and CEO compensation are insignificant in the determination of the premiums you may pay.
- There is a direct relationship between deductibles, co-pays and co-insurance and premiums. The higher the former, the lower the latter.
- Insurance is based on a pool of people with different levels of risk and claims. Affordable premiums are dependent on a good mix of high, low and medium risks.
- The inability to underwrite that risk such a limiting coverage from pre-existing conditions, established enrollment periods or waiting periods directly results in higher health care spending and thus higher premium costs because it encourages adverse selection.
- The application of deductibles, co-pays, limited provider networks, pre-certification and concurrent review are intended to manage costs and to the extent that is successful it is reflected in premiums.
- Insurance company profit margins are in the 5-7% range, not much different than state regulated utilities. In most states insurance rates must be justified, are reviewed and approved by an insurance commission.
- Profits should be viewed on a per insurance contract basis, not in the aggregate. High appearing total profits can be driven more by volume of insurance contracts than by high premiums.
- There is no motive to charge higher premiums than necessary for a reasonable profit. High premiums drive away customers. The more customers in the pool, not only the higher aggregate profit, but also the lower risk of greatly fluctuating claim costs.
- High health care costs and the rate of increase applies to all forms of coverage. The majority of Americans do not have coverage actually using insurance. Most coverage comes from various government programs and large employers who are self-insured and thus no premiums are paid to an insurance company.
- The price of many prescription drugs are questionable, but before we jump on the issue, we need to understand the prices from start to finish and that is not accurately reflected in the rhetoric. And, overall prescription drug spending is still only about 10% of all spending.