[joshfraser]

The problem with insurance companies is that they are fundamentally conflicted. As for-profit businesses they have a fiduciary responsibility to maximize profits. Unfortunately the only way to maximize profits is to decline coverage.

The problem with Obamacare is that it does nothing to fix this problem. Who wants to be the guy responsible for that many lost jobs?? So, instead they propped up the insurance companies and made everything more complicated for everyone.

The only solutions I see are to have non-profit insurance companies or a single payer system.

[canvia]

I always see this claim that companies have to try and maximize profits. Where does that originate? I see many companies like Costco take long term paths to sustainable growth and success without trying to wring every penny of profit out of the business. In my opinion customer satisfaction, quality products, and employee growth and retention are far more beneficial goals than short term profit taking.

[joshfraser]

The law’s basic position on corporate social responsibility famously was articulated in Dodge v. Ford Motor Co. In 1916, Henry Ford owned 58% of the stock of Ford Motor Co. The Dodge brothers owned 10%. The remainder was owned by five other individuals. Beginning in 1908, Ford Motor paid a regular annual dividend of $1.2 million. Between 1911 and 1915 Ford Motor also regularly paid huge “special dividends,” totaling over $40 million. In 1916, Henry Ford announced that the company would stop paying special dividends. Instead, the firm’s financial resources would be devoted to expanding its business. Ford also continued the company’s policy of lowering prices, while improving quality. The Dodge brothers sued, asking the court to order Ford Motor to resume paying the special dividends and to enjoin the proposed expansion of the firm’s operations. At trial, Ford testified to his belief that the company made too much money and had an obligation to benefit the public and the firm’s workers and customers.

The plaintiff Dodge brothers contended an improper altruism towards his workers and customers motivated Ford. The court agreed, strongly rebuking Ford:

"A business corporation is organized and carried on primarily for the profit of the stockholders. The powers of the directors are to be employed for that end. The discretion of directors is to be exercised in the choice of means to attain that end, and does not extend to a change in the end itself, to the reduction of profits, or to the nondistribution of profits among stockholders in order to devote them to other purposes."

http://www.professorbainbridge.com/professorbainbridgecom/20...

[bbanyc]

Ford's real motivation was to keep money out of the hands of the Dodge brothers - he thought they were going to use the dividend money to start a rival automaker, and he was right.

The court ruled against Ford because he was acting in bad faith towards his shareholders, not because it's wrong for a corporation to accumulate assets and reinvest in its business instead of paying dividends. (Otherwise Steve Jobs and Warren Buffett would be in trouble...)

[kefka]

In the last 20 years of judgments, how many times has this decision been cited?

[r0m4n0]

https://www.blueshieldca.com/bsca/about-blue-shield/health-r...

One of california's largest health insurance companies is a not for profit and doesn't stockpile money. why is healthcare still expensive?

[ceejayoz]

Remember that that pledge can be fulfilled by increasing employee (i.e. CEO) salaries, nicer buildings for the company, etc. That's what's happened at our local BCBS affiliate.

[joshfraser]

Doctors would say health care is expensive because of the threat of lawsuits which forces them to carry expensive insurance. It's easier for hospitals to price gouge when they're billing a faceless corporation instead of an individual.

[ceejayoz]

> Including legal fees, insurance costs, and payouts, the cost of all US malpractice suits comes to less than one-half of 1 percent of health-care spending.

http://www.slate.com/articles/health_and_science/medical_exa...

[ceejayoz]

Many of the insurance companies are non-profits, but that doesn't help much. http://seattletimes.com/html/localnews/2017460805_surplus09m...

[ABS]

This myth that businesses have a fiduciary responsibility to maximize profits has to die :-)

Fortunately there is now (since 2012 in fact) a book that explains it very well in terms that almost anyone can understand, certainly anyone here on HN:

The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corporations, and the Public http://www.amazon.co.uk/Shareholder-Value-Myth-Shareholders-...

Don't even need to read it all, the first few chapters are more than enough IMHO

[jimktrains2]

Corporations do not have the responsibility to maximize profits. Why do people keep saying this? They have a responsibility to do what is best for the corporation. Sometimes that means spending more on health coverage to retain employees, or give to charity or other programs. It's not all about money.

Often, it's almost all about the money:(

[omnibrain]

What about Dodge v. Ford Motor Company?

[ABS]

I highly recommend to just get the book [1], it's written very well and in layman terms but here's an extract taken from a review [2] of the same:

"Stout traces the birth of this “fable” to the “oversized effects of a single outdated and widely misunderstood judicial opinion.” Dodge v. Ford Motor Company was a 1919 decision of the Michigan Supreme Court. The opinion’s status as a meaningful legal precedent on the issue of corporate purpose is tenuous at best. Yet, its facts “are familiar to virtually every student who has taken a course in corporate law.” As Stout has observed in the past, “[t]he case is old, it hails from a state court that plays only a marginal role in the corporate law arena, and it involves a conflict between controlling and minority shareholders” more than an issue of corporate purpose generally.[11] The chapter explains quite well that any idea that corporate law, as a positive matter, affirmatively requires companies to maximize shareholder wealth turns out to be spurious. In fact, none of the three sources of corporate law (internal corporate law, state statutes and judicial opinions) expressly require shareholder primacy as most typically describe it. To the contrary, through the routine application of the business judgment rule, courts regularly provide prophylactic protection for the informed and non-conflicted decisions of corporate boards"

[1] "The Shareholder Value Myth: How Putting Shareholders First Harms Investors, Corportations, and the Public" by Lynn Stout http://www.amazon.co.uk/The-Shareholder-Value-Myth-Sharehold...

[2] http://arizonastatelawjournal.org/book-review-the-shareholde...

[omnibrain]

Thanks for the insight.

[sova]

well said! what do you mean by single payer system?

[joshfraser]

Single-payer health care is a system in which the government, rather than private insurers, pays for all health care costs.

http://en.wikipedia.org/wiki/Single-payer_health_care