Gerald (Jerry) Zezas

Home » Affordable Care Act » Health Insurance Companies…They Do What Now?

Health Insurance Companies…They Do What Now?


In 1993, most health insurance companies in the country spent about 95% of their premiums paying claims (this is called their Medical Loss Ratio). During that same time, Medicare paid almost 97% of their premiums on claims. Since then, by denying claims and cancelling policies of those who get sick often, we have arrived at the following:

Blue Cross/Blue Shield-medical loss ratio=82%
United Health Care-medical loss ratio=82%
Aetna-medical loss ratio=81%
Humana-medical loss ratio=84%

So, our health insurers have found a way, in a suspiciously lock-step manner, to decrease the amount of their premiums which go to pay claims by as much as 14%. On total premiums in excess of $500,000,000,000 ($ one half trillion) that means that, on average, health insurance companies are pocketing an additional $75 billion per year over and above their normal profits. For comparison purposes, Microsoft made $20 billion last year-total. Apple made about $24 billion.

Now, as good capitalists, we would normally say, “good for them”. There’s nothing wrong with success, right? Well, sure, but I think it’s time that we determine what, exactly, these companies do for us.

Insurance companies are aggregators of risk. That’s it. They don’t provide any other services that we can’t provide on our own. They don’t give us advice on how to stay healthy, find good doctors, or determine if a recommended treatment is or isn’t called for. We do that all on our own, in conjunction with our doctors. Insurance companies simply hold our money, pool it with the money they get from others, and presumably pay it out to those who make us well. The concept makes sense because, like all insurance we buy, we expect it to accumulate enough money to pay for our needs should a medical issue arise.

But now, we have the ACA, (Obamacare). What the ACA does is gather together numerous insurance companies in one central location, or Exchange (that’s what the web site is for). It gives us a place to pick from numerous insurance companies, presumably find the one with the best coverage at the lowest price, from which we can then buy our insurance. Seems simple, huh?

Well, it’s simple until you look at it from 30,000 feet. The ACA is, in effect, aggregating the aggregators. They are sweeping up a group of insurance companies and putting them in a bank, much as the insurance companies sweep up our premiums and put them in a bank. The government, in an effort to ensure that Americans have health care, is making us pay, not for the health care itself, but for insurance. And by forcing us to buy insurance, they’re forcing us to give anywhere from 16%-18% percent of that money to these insurance companies in pure profit. This is, in actuality, a form of Corporatism, used largely by the Fascists in Italy before WWII. (I use words like “Fascists” quite sparingly and, due to the fact that these words are so often used by those who do not understand them, I affirm very strongly that I’m not accusing anyone of being a Fascist).

So, the question remains, what are insurance companies doing for their profits? They’re helping us to bank some money for future medical bills. That is what they do, in totality.

Now, there are some other entities which do the same thing. One, Social Security, takes money from our paychecks every week and aggregates it, paying out money to us when we get old. (Contrary to what some in certain political parties will say, Social Security is fully funded through 2050 and is not even remotely going bankrupt. I’ve been hearing about its impending bankruptcy for the last 20 years). Another is Medicare. A small amount gets deducted from your paycheck and put in a big ole’ account, paying for your medical expenses from when you’re 65 until you die.

With all the Tea Party protests over the years, especially when Obama was running for re-election, I have never, not once, heard of a rally, protest or national candidate which advocated abolition of Social Security and Medicare. Not one! Although some, like GW “Cowboy” Bush advocate privatizing it (he quieted down, murmuring to himself, after the stock market tanked) and badly hair-plugged Rand Paul says the same, I have yet to hear anyone, anywhere claim that either of these programs are failures.

Oh, and to repeat: Medicare spends 97% of its revenue on claims. That’s, on average, 16% more than the collective insurance companies.

Your tax dollars at work…

So friends and neighbors, I hope you’re seeing where I’m going with this. Since our government has proven itself quite competent at managing health care (they’re a little slow on websites, I’ll give ya that one) and have a decades-long track record of helping to keep Americans healthy, why aren’t we simply bypassing the highly profitable health insurance companies and sending it all to the government?

It’s called “Single Payer”. Barack Obama did not attempt to get it through Congress and I can now see why. The herculean effort to pass the ACA proved to be so difficult that I believe his refusal to go for single payer was prescient, if not visionary. It would have failed, and I think he was smart enough to know it.

But single payer has to be the next step. The resistance to it, however, will be much more transparent in its mendacity than toward the ACA. Once the ACA is fully in place and functioning, the only argument against single payer must be made on the part of insurance companies. There is no one else who will suffer, once we have a fully functioning ACA, from the complete dismantling of our current risk-aggregation-for-profit system than the companies who add more to the cost of it than any other single entity.

What must be remembered is the inevitability of the need for health care. There is no question but that we will all get sick. The medical industry and all its component parts have a monopoly-like hold on humans. We will be forced to use their services sooner or later, yet we let them determine how much to charge us, knowing full well that we have no place else to go.

The use of auto insurance is not inevitable. The use of flood or fire insurance is not inevitable. Many of us go through our entire lives without a car accident or an overflowing river damaging our homes. Life insurance, although inevitable, is not for us-it is a gift for our heirs. There is no comparison to health care in any other aspect of life, or of insurance.

Governments exist to do for people what they cannot do for themselves, like protecting borders, fighting wars, damning rivers and repairing the damage from earthquakes. Virtually every other industrialized country provides some method for their citizens to have the health care they need. There are no alternatives to health insurance for us. We have no place else to go.

Americans, some of whom quite vaingloriously describe themselves as “exceptional”, do not seem to think that that exceptionalism should extend to the goal of majority of its citizens being healthy.

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