WHAT ‘S THE MISSION OF INSURERS?

Included in the latest Benefits Package blog carnival (see previous post) is a piece from Joe Paduda’s Managed Care Matters, criticizing health plans and their industry groups for their contradictory attitudes to escalating hospital costs and government involvement in the health care system. On the one hand, Paduda comments, health plans are looking for help from the government in controlling health care costs, while on the other hand fighting any government intervention in their own industry. Paduda complains: “health plans have not fulfilled their primary mission – [to] control costs and deliver quality care.”

This produced the scathing comment from one reader to the effect that insurers perceived their mission very differently; it was simply to extract profit from the system.

Therein lies one of the major reasons for the public’s dissatisfaction with the insurance industry. The public believes that insurers exist to control the costs of health care for consumers, while for-profit insurers, like other businesses, believe that their primary responsibility is to their shareholders. This doesn’t mean that insurers don’t try to negotiate affordable provider rates or limit their networks, but it does mean that they are much less hard-nosed than if consumer cost were the only criterion.

Like other businesses, insurers succeed by giving their consumers what they want—and it turns out that for the majority of Americans whose coverage is being paid for in large part by their employers, lower cost is less important than access to the most prestigious hospitals or being able to keep the same providers. Only when employees have to pay significantly more for these benefits do they decide that lower cost is truly important.

If the public really wants insurers to control health care costs more aggressively, there are a couple of options. One is to go beyond the “confess and explain” premium increase provision of the Accountable Care Act to impose absolute limits on increases—a crude tool that fails to consider individual insurer circumstances, and that could prove counter-productive. The other is to eliminate the tax break for employer-paid coverage in order to raise employees’ cost-consciousness—an increasingly popular idea on Capitol Hill but one that would face enormous opposition from unions and from many employers.