"they pay more for hospitals and doctors so they can just raise premiums..."
What kind of crap is that? They can raise premiums without paying more to hospitals. In fact, that would raise their "fat cat" salaries even more.
The ACA requires insurance companies to spend 80% of premiums on medical care. (Sometimes higher and state law can affect this too).
This means that letting prices drift upwards is one of the only ways an insurance company can improve profits, so at least they’re taking a percentage of a bigger pie.
They could also go the other direction and focus on reducing costs and going for more market share. But this is very difficult in practice, consolidation in the hospital industry has given many hospitals immense leverage. You can also save by identifying and rejecting unneeded care-but this is extraordinarily difficult to do and makes the customer extremely unhappy even when you’re correct (more like dead or bankrupt if you’re incorrect) as the doctor is telling them otherwise.
The law says they can keep a _percentage_ of the premium. If they charge you $1000 maybe they're allowed to keep $100 of that as profit. If they charge $900 they only get $90. So, provide a "better" service and charge $1500 then they get to keep $150.
The law used to let them keep whatever they could make, so you'd be right, they could buy $400 of healthcare, charge $1000 for and they've made $600 profit. But the percentage rules mean they'd be told to give you $560 back, they'd only be able to keep $40 in profit. So hence as the article says they choose to spend more so they make more money.
[1] https://www.propublica.org/article/health-insurers-make-it-e...
> They can raise premiums without paying more to hospitals.
No, they cannot. The ACA sets out an 80/20 split system. 80% of the premium must go towards medical services, leaving 20% of whatever the premium is for "admin" (e.g. salaries).
This has had the unintended consequences of insurance companies trying to raise the cost of medical services in order to increase their slice of the pie.
> "....and the more money flows to their bottom lines."
The reason is because their profits come as a percentage of what is paid, through the enforced Medical Loss Ratio[1]. There is a clear way to increase profits...
[1]: https://www.healthcare.gov/glossary/medical-loss-ratio-mlr/
No, they can't. Insurance companies are required to payout >80% of premiums on health care costs.[1]
1 - https://www.healthcare.gov/health-care-law-protections/rate-...
BTW a win-win is often a 3 player game and they don't mention how the 3rd one does...
Hospitals will attempt to charge an exorbitant fee for any service (usually 3x or more of what they agree with an insurance company to charge). They do this in an attempt to sucker the uninsured out of money.
Then, for us lucky enough to have insurance, the insurance company will reject the charge, saying, "nope, we agreed this would cost $x". The hospital always lowers to the agreed price. You can see all this on your EoB - a hospital once tried to charge me $4500 for a test and the EoB showed the insurance company knocking it down to the agreed $800.
If all we did was follow emotional, binary reasoning and rid ourselves of the insurance companies, providers would just rip us all off. You have to fix the whole rotten ecosystem.