Feb 29, 2008
WHY INSURERS SUCK, AND FIVE WAYS TO MAKE THEM BETTER.
This is a great article from Ezra Klein. First he makes clear that our current insurance system actually works against the commonhealth, not for it. Then he offers five steps to improving the system — none of which have any chance of ever happening — ultimately making the case for non-insurance-based, universal coverage:
It is actually counterproductive for insurers to compete on giving us the best care. It’s not simply that they’re not doing it, but given the structure of the marketplace, they shouldn’tdo it. Imagine insurer X creates the best damn diabetes protocols in the country. And they begin advertising this fact. What happens on Day Two? Well, they’re flooded with individuals suffering from diabetes, or individuals who fear they will one day be suffering from diabetes. These people, in the current system, are a bad deal. Not only is it near impossible to insure them at a profit, but pooling their costs (which is what insurers do, after all) raises premiums for all the insurer’s other customers. When the average customer of an insurer gets sicker, prices go up for all their customers. So the healthy folks contracting with that insurer quit the pool, and go find a cheaper deal, which forces the insurer to raise premiums again, driving out more healthy folks, which forces them to raise premiums again, which drives out more healthy folks, and so on. It’s what we call an insurance death spiral, and it ends with the collapse of the insurer.
Given those incentives, insurers cannot compete to offer better care, because if they offered better care, all that would happen is they would attract worse deals. Which is why, in the current system, insurers make things worse.
