Increasingly health insurance companies and healthcare providers are intertwined. So they may spend 80% on healthcare, but then a big chunk of that could go to the urgent care clinics that they own.
And even if they don’t own the provider, they don’t have much incentive to lower total cost because 20% of a larger number means more total profit.
Kaiser is an HMO. They are the insurer and try to have their employees, such as these nursing lines, perform almost all of their care. Shifting from one line of business to another is purely internal and can't game Medical Loss Ratio like your scenario.
> they don’t have much incentive to lower total cost because 20% of a larger number means more total profit
There is some bad incentive here for sure. That being said, insurers do compete on price so they lose customers if they charge more than other insurers. Also, regulatory rate review can decide whether they can raise premiums a given amount.
> That being said, insurers do compete on price so they lose customers if they charge more than other insurers.
Yeah but that’s a second order effect. Most companies are incentivized to cut costs because they will directly realize the profit. Insurance companies are incentives to cut costs only to grow market share.
I understand the point of the profit limits, but I don’t think it works very well in practice. I think it would probably be better to just have private companies without that profit cap and add a government insurer to compete with them.
>Maybe healthcare shouldn’t be primarily for profit?
Which is a far larger topic than what the article was about.