[thesausageking]

Key problem is that the average consumer is with their health insurance provider for about 3 years. This means that when you have drugs that provide significant health and cost benefits in the long term, the patient's current insurer pays the cost but another company receives most of the benefits.

It would help tremendously if the US changed the rules and made it so most people got insurance directly and not through their employer.

[abletonlive]

That's not really a key problem and not how insurance companies evaluate cost/benefit. We overall want a healthier population and if you think hard enough about it, you lose some subscribers and gain some subscribers so it's a win win for all health insurance companies.

source: i'm in the health insurance industry

[s1artibartfast]

My understanding is that insurance companies have fixed profit margins by law— essentially a cost plus model (just like California power companies). So Why don't health insurers wan't the least healthy and most expensive general population in the long run?

[nobody9999]

>My understanding is that insurance companies have fixed profit margins by law

Right. And (IIUC) those profits are set at 10% of revenue, not revenue - costs.

That creates perverse incentives to increase premiums above all else.

[vel0city]

That's not accurate. The Medical Loss Ratio (MLR) created by the ACA is 80% of revenue collected must be spent paying benefits. So, 20% of revenue goes towards all operational expenses and profits. If they go over that ratio, they need to refund to policy holders.

[s1artibartfast]

So maximize medical costs and minimize opex for best returns.

At least opex is in the calculation, California utilities don't even have that. It goes a long way to explaining why I pay 50c/kwh in sf (CA private) vs 15c in Sacramento (municipal) or Nevada (private without cost+)

[nobody9999]

I stand corrected. Thank you.

I think my larger point, that jacking up premiums increases revenue, thus increasing the opex/profit pool (regardless of the percentages) is a perverse incentive to jack up premiums as much as possible

As in a 3-5 year (which is about what I've seen with ACA premiums) doubling of premiums, thus doubling the potential profit pool without increasing opex in any way. In fact, the use of third parties to provide "pre-approval" for an increasing number of drugs, tests and procedures reduces opex, leaving more of that 20% for profits.

In fact, my insurer has consistently raised premiums while squeezing providers who are now charging separate fees (meaning additional co-pays for me) for stuff that was once included in a single fee (one example is charging an "outpatient facilities fee" in addition to the copay for seeing a doctor. Increasing my costs, while the insurance company can just shrug and say, "that's not covered, suck it up!"

Meanwhile, doctors (especially GPs) are over-scheduled (my GP is scheduled to see every patient in 20 minutes or less), allowing the practices to charge for seeing more patients -- increasing their profits -- at the expense of patient health.

And heaven forfend having multiple related issues which require more than one specialty -- you're just shunted from specialist to specialist without much (if any) communication and a shrug if something unrelated to the specialist's area comes up.

The point is that the whole industry is fraught with perverse incentives that drive up costs, reduce the quality of care and a laser focus on the wrong stuff (i.e., services provided vs. holistic health outcomes).

It's disgusting and harms people. You'd think that by now we'd have decent healthcare. But the perverse incentives pushing toward financialization of, well, pretty much everything medically related, are actually impacting the average lifespans of Americans.

And more's the pity.

[vel0city]

While I agree there's still some perverse incentives and I'm largely a pro-universal healthcare (or at least public option) kind of person, they can't just jack up premiums and thus increase their profits. They'd have to also increase benefit payouts if they're near the cap. And FWIW, its generally a good thing for them to reduce opex, so long as quality doesn't suffer (although it often does go hand in hand in practice).

One could point out though, it kind of incentivizes them to no longer negotiate prices as hard. This makes benefits more expensive, growing the total size of their 20%.

But on the other hand, pointing out the idea of holistic health outcomes, increasing benefit payouts to those kind of processes is something incentivized by this rule. Adding a lot of these more "fringe" holistic health benefits, like telehealth nutritionists gym membership subsidies and what not, also grows the benefit payout side and then lets them take more total profit. But there's no free lunch here, those benefits are largely coming from the premiums being collected.

Also, a lot of these insurers don't even end up getting any of that 20% some years. The first few years after the ACA pretty much every insurance company had some big losses. It has been a while since I looked at the industry, but they're not always making massive money margin-wise.

Don't take my comment as me endorsing the current system. Its dumb and broken and I hate it.

[Domenic_S]

> average consumer is with their health insurance provider for about 3 years

Are they? That sounds right for how long they're with an employer, but if I move companies I'm probably going with the same insurance carrier under the new company's plan. The total list of carriers [0] is pretty dang small (and not every licensed company is doing new policies).

Even if what you say is true it seems like reciprocity would make up for it - Company A pays and Company B benefits like you say, but for every situation like that there's a situation where Company B pays and Company A benefits.

[0] https://www.insurance.ca.gov/01-consumers/110-health/20-look...

[pixl97]

> That sounds right for how long they're with an employer, but if I move companies I'm probably going with the same insurance carrier under the new company's plan.

At least middle sized companies seem to change insurers commonly enough that both my wife and I have had our employers change said insurers in the middle of our employment.

[HumblyTossed]

> It would help tremendously if the US changed the rules and made it so most people got insurance directly and not through their employer.

This seriously needs to happen. Before we can have ANY other reform, this needs to happen.

[l1tany11]

I think decoupling health insurance from one’s employer could greatly change the entire healthcare industry. It would go a very long way to reduce cost obfuscation, among many other things. So many people think their health insurance costs $30 a month because that’s their “contribution”.

Unfortunately it will never happen, as it’s insanely politically unviable as almost no one wants that to happen. It’s the ultimate free market approach, but then people would have to pay for something they “get for free”. And once they realized how insane the system is, and how much everything actually costs, you might see knock on effects from that. Some bad, some good. It would be an experiment for sure.

Single payer is more realistic, even if it doesn’t do much to affect many of the underlying issues.

[darth_avocado]

On an average, the cost averages out.