The Audacity of Greed: How Private Health Insurers Just Blew Their Cover

The health-insurance industry has finally revealed itself for what it is. Background: The industry hates the idea that’s emerged from the Senate Finance Committee of lowering penalties on younger and healthier people who don’t buy insurance. Relying on an analysis by PricewaterhouseCoopers, insurers say this means new enrollees will be older and less healthy — which will drive up costs. And, says the industry, these costs will be passed on to consumers in the form of higher premiums. Proposed taxes on high-priced “Cadillac” policies will also be passed on to consumers. As a result, premiums will rise faster and higher than the government projects.

It’s an eleventh-hour bombshell.

But the bomb went off under the insurers. The only reason these costs can be passed on to consumers in the form of higher premiums is because there’s not enough competition among private insurers to force them to absorb the costs by becoming more efficient. Get it? Health insurers have just made the best argument yet about why a public insurance option is necessary.

Right now they run their markets and set their prices, and pass on any increased costs directly to consumers. That’s what they’re threatening to do if the legislation attempts to squeeze, even slightly, the colossal profits they plan to make off of thirty million new paying customers.

They want every penny of those profits. They demand every cent. And if the government dares raise their costs a tad higher than they expected when they first signed on to support the bill, they’ll pass those costs on to consumers in the form of higher premiums. They can carry out their threat only because they have unaccountable, untrammeled market power.

But they’ve now hoisted themselves on their own insured petard. They’ve exposed themselves. If they had to compete with a public insurance plan, they couldn’t get away with this threat. They couldn’t pass on the extra costs. They’d have to compete with a public insurance option that forced them to give consumers the best deals possible.

Now’s the time for Senate Finance Committee and the White House to say to the insurance industry: You want to play hardball? Okay. We’ll play it, too. You didn’t want a public insurance option. That was one of your conditions for supporting the bill. You wanted gigantic profits from having thirty million new paying customers and the market to yourself. We agreed because we wanted your support and were afraid of the negative ads and hurricane of opposition you could finance. But you’re even greedier than we imagined. And now you’ve demonstrated that greed to the American people. They don’t want to turn over even more of their hard-earned money to you. So, insurance companies, we’ve got news for you. We’re going to make sure Americans have the freedom to choose a public insurance option that’s cheaper and better, and you’re going to have to work hard to keep them your customers.

Originally published at Robert Reich’s Blog and reproduced here with the author’s permission.

6 Responses to "The Audacity of Greed: How Private Health Insurers Just Blew Their Cover"

  1. Guest   October 13, 2009 at 7:00 pm

    Choice? What is choice if a certain type of coverage is mandated? Will young single or the elderly be forced to have maternity coverage? Will I be able to keep my current health coverage where I pay the first 3000 dollars out of pocket? Will I have a choice? What if I do not want health care coverage – will I have a choice?

    • Guest   October 14, 2009 at 4:17 am

      Just as long as any expense you incur related to health care is full recourse. You can choose to reject coverage. fine. You get in an automobile accident and get hauled to the hospital and spend some months in a coma then those that provided that service under law to “stabilize” you can attach your wages, take your home, toys and whatever else because you refused to insure yourself, but wanted everyone else to take care of your bill.

      • Guest   October 16, 2009 at 5:19 pm


      • Guest   October 17, 2009 at 2:44 am

        You make an asumption because one who does not have insurance will not pay their bill and wants the public to pay. Not everybody is like Wall Street, you know privatize the profits and socialize the losses. We have a religious group in our area who do not have helath insurance as we know it but I can assure you when they go for medical care in a hospital the hosptial knows they will get paid. I agree there should be full recourse on health care expense, people need to be taught responsibility.

  2. Guest   October 14, 2009 at 4:27 am

    Robert, the thing to do here is eliminate the exclusion from anti-trust laws the health insurance industry enjoys. Require an insurance company truly compete in every market in order to have a license and that their US business be completely run through a US registered company.In the final analysis this whole debate is a sick joke. Folks will either have a Twinkie eating bureaucrat making their health care decisions for them & their doctors, be they for profit or non profit. The real issue here is that it is and will remain impossible for an individual to be able to shop for health care services they way they shop for groceries. Try to go to a health services provider and get a hard price for a service in cash. All but impossible since the whole system is geared to definitions or “reasonable & customary” or contractually allowable under whatever specific plan and conditions. Until this dysfunctional system of TBTF like process of cost determination is standardized you are wasting my time and everyone else’s.

  3. Guest   October 17, 2009 at 3:02 am

    Are insurance companies the evil ones here? In our society how can it be medical insurance companies are evil but home owner’s insurance or auto insurance are not? Is the medical profession price gouging? Do insurance premiums go up first than doctor’s charge more later or do doctor’s charge more than premiums go up? Is it the legal profession? Is it their cash cow? I believe some of the problem is expectations. I grew up in a farm family where health insurance was purchased and for a part of my life I did the same. When I bought a premium my goal was not to have a policy that paid everything but to purchase an affordable insurance policy – to insure me and my family against unforeseen expenses that I could not afford and would wipe me out financially. Maybe the real problem too many people want something but do not want to pay the piper.