Hacker News Reader

Comment by tyre | Hacker News Reader

> It would be in the insurance companies’ interests to band together to fund the research so they can save huge amounts of money in the long term but they do not do this.

Insurance companies do not want cheaper care.

In the US, insurance companies must spend 80% of premiums on care. So if you pay $1k/mo, they have to pay out at least $800/mo in care. (Not to you specifically, but averaged out across all subscribers.)

This is a cap on their potential profits. They always have to pay out 80% of premiums for care, so how do they make more money?

Well, imagine care is twice as expensive. Instead of paying $800, they have to pay $1600. That sounds worse, but, instead of $200/mo, they now $400/mo for themselves!

So, no, paradoxically, it is not in the interest of people paying for the treatment to save money. Quite the opposite.

View on HN

It's worse than this. Their cap is 80% of the Insurer's profit. Not the Insurer's Parent company. So often the parent company will own the Insurer as a subsidiary and own the Pharmacy, Hospital, Healthcare etc under the parent company.

This way as costs go up, it's really just bypassing the 80%. Because the hospital can charge the insurance subsidary X amount, and then the hospital profits to the parent company.

There needs to be a law in the US that health insurance organizations cannot be owned by anyone who owns a healthcare provider. Nor can the insurance company own healthcare providers.

We've allows the Ma Bell of healthcare to exist.

I tried to explain to people in The Netherlands this exact problem when they were thinking about switching from single-player to a commercial insurance company model.

Insurance companies always have an incentive to make healthcare services expensive. They have even more incentive to make healthcare expensive and do deals on the backside where their suppliers give them a kickback. Even better if said kickback comes via a side door.

So we went for the commercial insurance companies. It took them 4 years before they change the drug choice from decentralised (Pharmacies deal with drugs companies, received small discounts which funded a good quality of care) to centralised (Insurance deal with drug companies, receives kickbacks) and the Pharmacies funding was drastically cut leading to worse quality of care and more drugs being used. Double-whammy because in the previous system the Pharmacy did medication reviews which almost always result in a reduction in drugs (the thing with drugs is that quite a lot of them are given to reduce side effects of other drugs, the original drug gets cancelled but the side effect reducer gets forgotten and just continues ad infinitum).

Health insurance has been super inflationary since then when controlled for quality of care.

> Insurance companies always have an incentive to make healthcare services expensive.

No, it's when their profits are capped by regulation that they have this incentive.

Insurance of other types absolutely seeks to reduce claims payouts.

> So, no, paradoxically, it is not in the interest of people paying for the treatment to save money. Quite the opposite.

I'll assume they're on company insurance. Which is often "self-insured" in that the company actually foots the bill as opposed to the insurance company.

Why don't corporations just drop insurance companies that decide to not allow cheaper medicines?

UNH is so big because its customer Apple has its own pool. Apple deducts $24k/y for your healthcare. Healthy 29 year old male doesn't use anything. UNH denies the claims anyway. It gives that money back to Apple, which doesn't give it to you.

The 80% rule has a lot of loopholes. It doesn't apply to employer funded plans. There's a reason UNH is so big!

Employer funded plans are not all the same. Large entities with a lot of money (like universities, big firms) self-insure. Thus the insurance company in those cases is simply managing all the administrative sides of insurance while the plan owner is the actual insurer of risk.

There’s an article about how a Wall St employee’s expensive care came up in C-suite meetings, as a real world consequence of this

> simply managing all the administrative sides of insurance

if you punch into a chatbot questions about the employer pool insurance product, your comment is exactly how the chatbot characterizes it.

of course, "administrative sides of [health] insurance" includes requiring pre-auths and approving/rejecting claims, which is, haha, all the fucking evil parts of what they do! it's not "simply" anything. they need a huge, comprehensive, defensible model of what regulations and customers will accept as valid healthcare. apple does not need to have an opinion on ten thousand treatments and the standard of care across all these things. the insurance company does.

this is a line of investigation that the chatbots are absolutely terrible at informing people about. "administrative" is ALL the work, that is why UNH is big! you are starting from the wrong premise. you must always ask yourself, why are health insurance companies so big?

> if you punch into a chatbot questions about the employer pool insurance product, your comment is exactly how the chatbot characterizes it.

That's because it's the truth? I've taken graduate health policy classes from people like Don Berwick - I assure you that I did not and do not need to ask chatgpt to explain self-insurance to me.

> f course, "administrative sides of [health] insurance" includes...

How does this have anything to do with the fact that the self-insuring entity bears the risk for its insureds? The problem with the GP comment about 'giving money back to Apple' is that the money always belonged to Apple and its co-insurance / copays only exist to steer employee behavior.

it doesn't matter if the "self insuring entity bears the risk for its insured." every word in that quote misses the point. it might as well say "blah blah blah blah blah blah blah." it doesn't tell you why UNH is an interesting and successful business, or why people are pissed off about it.

Uh ok bud.

haha okay, what i am trying to say is that from apple's point of view, it doesn't really matter if UNH is selling them a health insurance product or jacuzzi or eyebrow threading services or whatever.

apple employees say they want it, for some idiosyncratic reason apple is the party that gives it to them, and UNH is providing a uniquely cheap version of it. the gap between what employees think they are getting and what they are actually getting is huge. when you go on hacker news and people are talking about 80% medical loss ratios (that don't apply here, but that's not what you are spending your breath talking about) and "insureds" or whatever, you are enhancing the illusion.

that UNH has people carrying its water in this way: that's another reason, of many, that it is so big.

Why do we need to ask why UNH is so big?

This comment chain was started to question why limiting profits to 80% of claims has to result in insurance companies denying cheaper options.

I have yet to see an argument as to why a company isn't incentived to drop a health insurer if they're forcing employees _not_ to do a $50/month option and instead pick a $1k/month option.

> I have yet to see an argument as to why a company isn't incentived to drop a health insurer if they're forcing employees _not_ to do a $50/month option and instead pick a $1k/month option.

That definitely does happen, but companies have a lot of levers to pull around how employees select health insurance. When I bought health insurance for a small firm (~60 people), I provided a set number of dollars and workers could use these for any plan they wished (an ICHRA plan).

Large swaths of US insurance are underwritten by employers, with the insurance companies acting as contracted administrators. Employers don't have the incentives you list.

Great, just work a well paying megacorp white collar job and you'll get slightly less fucked on healthcare.

What about the other 90% of the country?

You could get angry about anything I say, I don't really care, you do you.

I guess Medicare and Medicaid also don't have the incentives. Nor does Tri-care or the VA. My employer self insures as far as I know, and we are a few hundred people. Maybe 90% is a bit off?

I'm not angry about what you say, I'm angry at the parasites that have built this system, and the cynical bastards that work their ass off to perpetuate it.

They operate with similar supply and demand constraints and competition, even with prices increasing

>Insurance companies do not want cheaper care.

Why is there a continuous stream of healthcare providers threatening to or becoming out of network for various managed care organizations because they cannot come to an agreement on healthcare prices?

I suspect it's because the insurance companies are not in control. The idea would be to drive up costs when they profit on both sides (example: United and OptumRx) and push down reimbursements elsewhere.

We baked the snake charmer problem into the law?

Good lord.

> snake charmer problem

Perhaps you mean the "cobra effect" [0]? I think that's an apocryphal story about killing snakes, rather than using them in a performance.

[0] https://en.wikipedia.org/wiki/Perverse_incentive#Historicity...

So the meaning of what I said was slightly obscured but actually easy to apprehend?

oookay.

If I guessed right, then there are probably readers who haven't heard the term/story before [0], or won't make the same jump to recall it.

If I guessed wrong, then I wanted to hear about the new thing that resisted a casual web-search.

[0] https://xkcd.com/1053/

Reply on news.ycombinator.com