Could Health Insurers Do Things Differently?

I'm going to hazard a guess and say here that I think the health insurance industry would prefer not to have to spend millions of dollars lobbying politicians year after year in order to stay in business. I'm not entirely confident my guess is correct, especially considering that the Baucus health care plan wants to force people to buy health insurance even if they don't want it. There's no doubt the big insurers play the political game well and have become increasingly audacious in their attempts to use the system to their advantage. They're on a precipice, though -- the health care debate going on now might well be very different if the economy were in better shape and if the US government wasn't so deeply in debt. Denying coverage to Americans in desperate need for medical care and rescinding policies for frivolous reasons may have made good business sense, but it was a terrible public relations policy for the insurance industry.

Ideally, health insurance companies really ought to be looking out for people's health for the simple reason that they make more money when people don't get sick. While rising health care costs have coincided with rising premiums, that's ultimately a path to oblivion. At some point, most people won't be able to afford either health care or health insurance the way things are going. Cutting the costs of health care and creating a healthier country is actually in the insurance companies' best interest. Apart from embracing preventative care and spreading health information, though, I'm not sure the insurers have really tried to play an active role in trying to fix the underlying problems with health care in the United States. If their industry survives health care reform (and it certainly looks like it will considering the level of resistance to the public option, let alone single payer) intact, they should start doing some things differently in my view. Differently in what way? Thanks for asking; I do happen to have a few ideas...

#1. Branch off into the medical devices business.

I've done a little studying of public health insurance companies' income statements and noticed they're consistently quite profitable, but not quite making Exxon profits either. Insurance companies (well, apart from AIG) tend to be somewhat conservative -- after all, they have to always consider the worst case scenario. For a health insurance company, there are some scary worst case scenarios, like epidemics. Right now the big insurers have money, but I don't think it's realistic to expect them to directly enter the hospital or pharmaceuticals business in a notable way due to the sheer costs involved. It probably wouldn't even be desirable for them to do so; it's scary to have one entity controlling health care. If you don't want the government in charge of your health from cradle to the grave, you definitely don't want insurers to have that level of control, either.

What I think the insurers might be able to do, though, is enter the medical devices industry as a side business. High tech medicine is expensive. It's undoubtedly true that some technologies are overused and that that overuse plays a big part in increasing health care costs, but we definitely don't want technology to go away from medicine...it's still saving lives every day even if it isn't always used efficiently or wisely. The insurers could try to fill niches in the medical devices business, probably through acquisitions. At the very least, a medical devices side business can be used as a hedge against rising health care prices (if insurance profits go down, there's a good chance medical device income will go up so maybe premiums won't need to be raised so much). What would be better is if the insurers used the medical devices business as a loss leader for their core business. They wouldn't need to count on medical device profits so they could sell at lower prices, bringing the costs of this aspect of health care down and in turn making their insurance business more profitable. However, to remain competitive in their new sector, they'd have to invest in R&D as well so it'd be rather a delicate balancing act for them.

#2. Invest in research.

I think insurers might be able to work with smaller universities and pharmaceutical companies to develop new drugs. Here, the insurers should try to be financiers rather than overseers and try to work with other organizations that also want drug costs reduced, but there should be strings attached to their funding which will in some way lead to reduced drug costs. I'm not entirely sure how to go about that myself -- I'm not in the health care business, I just pretend to be someone who knows what he's talking about online -- but I think there ought to be a way that the insurance companies could help new players emerge in the pharmaceutical market who would have been held back by the costs of doing business. (The insurers could also lobby the government to change its regulatory methods and make developing drugs less expensive, I suppose, but I tend to think we need tight drug regulation...medicine is useless if it isn't safe to use. However, it is very scary that it costs nearly a billion dollars to develop a new prescription drug, though that isn't solely because of regulation.)

#3. Increase supply.

One way to reduce health care costs is to try to reduce how much medical professionals make. That sounds mean, but there are a couple of reasons why entering health care is lucrative that aren't such good things at all: first of all, there is a shortage of personnel in some areas (right now we're hearing a lot about the lack of general practitioners) and secondly education is expensive. Insurers should want more nurses, more X-ray technicians, more general practitioners, more nurse practitioners...more of everything...to bring costs down and help create a healthier population. They can help make this happen through scholarships among other things. I would particularly like them to look into helping universities start new medical schools, typically a very expensive undertaking, and also helping to fund additional residencies for doctors beyond what is funded by Medicare where possible.

#4. Let people help.

The uninsured as a group are not viewed with a friendly eye by the health insurance industry. They're potential customers who are refusing to pay up. That attitude is embodied in the idea of a mandate on individuals to buy health insurance. That attitude is flawed, though, because it overlooks the possibility that people really cannot afford insurance even though they may not be eligible for Medicaid. Every person, every family, and every household has a unique financial situation -- just looking at annual income doesn't always give the whole story. I would like to see the health insurers team up and let their customers voluntarily help fund the premiums of those who cannot afford the costs yet aren't being covered by Medicaid (I would suggest that the goal be to extend catastrophic coverage so more people can be covered. This also gives people a motivation to get more comprehensive coverage down the line instead of just accepting freebies). Let people help tackle the problem of the uninsured themselves if they want to do so. This shouldn't cost the health insurers much at all...the tricky part would be setting it up in accordance with state and federal law. The undertaking could even take the form of an Internet site like Microplace or Kiva which would allow people to read about the circumstances of the uninsured whose health insurance they are funding. Each individual donor might only fund part of a premium on average; the wealthy or organizations might put a lot more money in. The important thing, though, is that there would be fewer uninsured. That would be a good thing. It won't solve the problem, but it would help at least a little bit.

I don't know how realistic any of my propositions really are individually, but I do think the insurers need to either take a more proactive role in the process beyond protecting their own skin or slash premiums and at least try to stop being part of the problem. The best argument I can think of against the insurers taking several of the steps I suggested is the expense of it all -- rather than reinvesting in other areas of health care, the insurers could just reap less profits and pass the savings to the consumer. The problem with that argument, though, is that health insurance can't be decoupled from the larger costs of health care...they're as directly related as two businesses can be. We certainly can't expect the insurers to solve everything on their own -- they have definite financial limits, and I think some of my ideas would be difficult to implement due to legal requirements. They can play a very important role in the process, however, and I think they've been shirking that role in favor of maintaining the status quo and lobbying the government for gifts.