Insurance companies are businesses, and ultimately, operate for profit. However, as mentioned below, an insurance company's profit isn't the most relevant or reliable indicator of value to the consumer. Value is measured by price for provided services, and in health insurance, this might be the best price for best coverage. (This is likely a bigger issue for individuals on the Wild West market, rather than for those who receive coverage through their employer). When shopping for auto insurance, for example, we choose a plan that's based upon price for coverage, rather than the company's profits. (Although the Geico gecko might win us over regardless).
Furthermore, it is difficult to compare companies based upon profit, because companies may differ in terms of size, resources, business models, etc. These factors may affect profitability, which makes it nearly impossible for use in consumer comparisons.
However, this doesn't mean that measuring a company's profitability isn't important. As mentioned in the LA Times article, some publicly traded health insurance companies may be driven to raise prices for investors, rather than keeping the consumer's best interests at heart. In such situations, profit may indicate Wall Street's role in health insurance prices.
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I think Aparna makes some interesting points. The first is that like auto insurance, people shop for health insurance based on a price a person is willing to pay, and then perhaps matching suitable coverage within that price range. What makes auto insurance different is that the insurance we purchase will have at least a minimum coverage that is determined by the state. With health, "minimum" coverage is not really mandated by the state, and what is best for those who are healthy will not work for those who are disabled or chronically ill. For the most part, people can buy auto insurance with minimum coverage and just hope that nothing bad will happen while driving (the same mentality of healthy individuals about their health). Without the baseline that "minimum" coverage can provide, it makes it more difficult to compare different plans from different companies. Paying more or less for medical insurance doesn't always guarantee a better or worse product, and like others have said before, neither does a company's profit margin.
ReplyDeleteThe second was that companies are of different sizes and so profitability is not a great comparison for consumers. Profitability is just a measure of how well a company is running. On the consumer side, of course we hate to hear that companies are making a profit off of our health, but ultimately it is a business. It may not be a good indicator of a a good health plan but at least a positive profit margin means that the insurance company we sign on with won't be going out of business, and we won't have to shop for another medical plan! That might affect one's choice in terms of which companies they may choose to go with, but not necessarily how one chooses a specific plan.
Aparna made a great point about how profitability shouldn't be a concern to the consumers. Some companies are more efficient than others, and why should they be punished for that? But the problem arises when these companies really lie about the services they provide or cut coverage at a time when someone needs it. Even so, people definitely don't care about the profitability of the company in choosing their plans, as all they want is to get the best bang for their buck.
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