The health insurance companies are in business to make profits, not to provide health care. When they have a choice between paying for health care a client expects or for making a profit, they will refuse to pay for the health care in order to increase their profit. They won't admit this, because admitting it is bad for business, but it is what they are in business to do. They collect as much money as possible and pay out as little as they can get away with.
The so-called free market for health insurance does not work to provide the best benefit at the lowest price. Effective free markets of knowledgeable sellers and buyers negotiating price and service is not possible. Since most geographic areas are provided insurance by a dominant insurer and a lot of people get only the insurance offered by their employer, there is little real price competition. Worse, most healthy people buy insurance to protect them from the unknown, so they have no idea what will really happen if they get sick or have an accident. The result is that since the insured has no idea what they are buying at the time they contract for it, price competition doesn't work. The lowest price will win most decisions even if the contract limits payments below what is needed. That results in many bankruptcies for supposedly insured people who find their insurance does not provide the protection they expected.
Right now, if you have insurance, all you have is a contract for which you have to pay rapidly increasing premiums and which you can be kicked out of at the insurance company's whim. Once you are kicked out you become uninsurable. This may be hidden from you if you get your health insurance through your employer, but it applies to you also.
If you do get sick and the expense of your illness or accident is expected to be large, then your insurance policy is much more likely to be canceled. In the meantime, the prices for all insurance and for health care services are rising uncontrollably. Many people are simply priced out of the market for insurance, or are sold policies with high deductibles, high copays, and caps on the total that will be paid out. Even if you have "insurance" if you get ill you have a high chance of being bankrupted by high medical expenses. This is exactly why you purchase health insurance - to get health care if you get ill and to avoid bankruptcy if you need health care.
Government regulations that require insurers to accept anyone who applies will keep them from selecting only the healthy and from avoiding or dropping the sick. A standardized set of benefits will permit the insured to know in advance what they are paying for, and a national regulator will give anyone the right to appeal unfair denial of payments. The public option will offer a safe and reasonably priced competitor to anyone who objects to the dominant private insurer in any given area. That completion will prevent private insurers from raising premiums unreasonably.
Is there any value in private insurers developing innovative ways to collect from the insured and paying for the services required? Not if everyone is insured. That reduces the entire process of providing health insurance to a simple administrative process of collecting the money and paying it out. Innovation needs to be done in actual provision of health care services, and insurance companies can only innovate in ways to avoid payments for health care services. That eliminates the complexity of insurance policies. Customers choose the policy they expect will offer the best services for the price, with full knowledge that they are getting real insurance against the unexpected.
That deals with fairness to people who need to buy and pay for health insurance. It also cuts down on the additional costs created when insurers fight to avoid paying for people who are sick or who should be insurance by some other insurer. What it does not do is slow the increase in medical costs.
Those have to be addressed by revising the way physicians and other health providers practice medicine and by removing the unnecessary aspects to administration in getting reimbursement for services provided. Studies of best practices and wide publication of the most effective and efficient are one answer to that. Another is to make sure that when someone needs medical care, the provider knows he or she will be paid for providing it. The cost of dealing with the uninsured is effectively eliminated by providing universal health care. If all Americans are in the insured pool, the costs of paying for the uninsured are pretty well eliminated. That means there is no excuse for cost-shifting by hospitals and health care suppliers who charge the insured more to cover the expense of people who cannot pay for the services they receive.
Addendum 8/15/2009 9:24 am
Steve Benen has written an excellent post about what Wendell Potter is saying about how the insurance companies "put profits before patients" and how they are behind the current public attack on the effort to reform health care.
Wendell Potter was the top Public Relations Manager for one of the major health insurance companies, and was himself directly involved in killing Bill Clinton's attempt to reform the health care system.
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