I've never understood people who say this, insurance companies' profit margin is set by law and they can't change it.
And reduction in claims paid just goes into lower premiums. And more claims paid equals higher premiums. In no case does their profit change.
Also a fixed profit margin can as well translate to higher salaries and other costs that the company controls, not necessarily lower premiums?
I doubt that it has much affect, for two reasons.
1. Looking at graphs of US health care costs over time I don't really see much change in the growth of health care costs during pre-ACA times and post-ACA times.
2. Looking at health care costs of other first world countries, their health care costs over the 50 years have been growing fairly similarly to the way US health care costs having been growing.
This suggests that the reasons for most health care cost increases in the US are neither things we do differently than most other first world countries (e.g. more heavily relying on private for-profit insurance companies) nor any relatively recent changes to how we regulate things.
Yah, that's not really true. Sure if they can increase healthcare costs, then they can increase premiums, but that also makes them less competitive.
But the bigger reason it's not true is that insurance companies don't set the reimbursement rate for drugs in the first places. Instead that's set by PBM's, which are separate companies. Insurance companies hate PBM's because the PBM's prevent the insurance companies from doing exactly like you describe.
(This hate translates into a lot of badmouthing which I'm sure you'll find if you lookup PBM's. They get called "middlemen" who take money and don't provide a service - this is just propaganda by insurance companies.)
The whole hero worship of Luigi is based on a complete misunderstanding of who actually causes healthcare costs to be high. It's not insurance companies or PBM's! It's actually Dr's and hospitals.
It's not trendy to hate those though.
Those expenses are internal and increasing them doesn't change the above at all, those expenses affect profit and that it.
Insurance companies profits come from reducing expenses. Reducing claims doesn't change the profits in any way.
Reducing claims means lower premiums, and that's it.
Cigna executive-turned-whistleblower says Wall Street drives up health care costs https://www.wbur.org/hereandnow/2024/12/18/cigna-whistleblow...
> Robin Young: ...you testified before Congress during the passage of the Affordable Care Act, and at that time, that law demanded that health care plans spend 80 to 85% of premiums on patient care. This is called the Medical Loss Ratio. So what happened?
> Wendell Potter: They figured out how to work around that. For one, they've gotten more and more into health care delivery, and they now own physician practices and clinics and big pharmacy benefits middlemen, and none of that is affected by the medical loss ratio. So in other words, they've figured out how to work around it, plus it also has enabled them to jack up their premiums. So the more premiums they take in, the more money they have.
I used to do health insurance company PR. Here’s what I think the backlash is missing https://www.statnews.com/2024/12/11/wall-street-unitedhealth...
> Congress would ultimately include language in the ACA to require health plans to spend at least 80% to 85% of premiums insurers take in on enrollees’ care, known as the medical loss ratio. But big insurers have figured out if they also become health care providers — by buying physician practices, clinics, and pharmacy benefit managers — they can meet that threshold by paying themselves and avoiding payment for their customers’ care.
> An argument could be made that the medical loss ratio provision of the ACA has contributed to or even fueled the vertical integration of the big insurers, UnitedHealth especially. UnitedHealth is massively bigger and more profitable than it was on the day I first testified as a whistleblower, June 24, 2009, when it ranked 21st on the Fortune 500 list of U.S. companies. Its share price at the close of trading that day was $24.81. Hundreds of acquisitions later, UnitedHealth is now the fourth largest U.S. company — just behind Walmart, Amazon, and Apple. At the end of trading on Monday of this week, the share price was $560.62. That’s an increase of more than 2,100% since June 24, 2009. By comparison, the Dow Jones average has increased 438%.
> In the years since then, UnitedHealth, Cigna, and a handful of other New York Stock Exchange corporations have cemented their roles as unelected gatekeepers to care, and Americans are now waking up as they never have before to the consequences of that. If their rage can be harnessed and channeled with clear policy proposals, that dike the industry built might just give way without more violence.
But it has nothing to do with the claim that "denying claims increases profits", which is simply not true.
Well, it's kind of transparently true. If the worst-case scenario is that you need to return some premiums, then you should always deny enough claims that you're always returning some amount money, as you should always hit your profit cap. The second reason issue is that an approved claim has Opex costs. The platonic ideal of an insurance company in the current system is one that collects (# of patients * annual premium), and approves 0 claims. If you don't approve any claims, you'll have the lowest possible Opex costs, because there's no processing to do, no fraud to check for, no follow up visits that might take you below the profit cap, etc.