HEALTH PLANS: Health Plans Behaving Badly

I spent Monday lecturing a bunch of health plans about their bad behavior and how that had to change or they’d eventually be put out of business. So how might that not play out? Here’s my best guess up at Spot-on. It’s called Health Plans Behaving Badly.

It’s not been too pretty a picture for America’s health insurers lately. Sure they’re still turning decent profits, but for the past two years their stocks have barely been matching the S&P 500 Index. What went wrong? Well, you can blame Wall Street. The Street is concerned with two things. Money now and money later.

Since 2001 the big health plans have managed to increase the percentage they keep of fast-growing health care premiums (which have been going up at 3 to 4 times the rate of inflation), a number known to stock analysts as the as the MLR. It used to be that for most big insurers roughly 82-87% of premiums went out the door to pay for actual doctors, hospitals, drugs et al. Now the MLR is generally below 80%, and in some cases below 75% meaning less money’s out the door and more is on the bottom line of the health plans.

But the health insurer party that’s been going on for most of this decade may be coming to an end. But perhaps being busted by the cops and being told to tidy the house might be the best thing that ever happened to the insurers. Let me explain.

Read the rest and come back here to comment as ever.

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5 replies »


  2. As I watch the public debate it’s disappointing to see that one party or another is being blamed for health care’s woes. We are all to blame. No one is talking about the real issues such as: Who is going to pay for the sharp increases in cost for care by physicians, hospitals and other care-givers? Who is going to pay when the federal government cuts its payments to the health care delivery industry? Who is going to pay for big pharma which nearly half of their revenues go to advertising/marketing? I mean, as you watch a football game, don’t you know which drug you need to tell your physician about? Guess what? It’s businesses who employ workers and the public who are paying. Without insurance companies or other means of brokering, who is going to stand in the way of skyrocketing costs and price increases? No party in this is perfect, but let’s level the playing field to have a fair debate. Given the market forces, what is the right solution for America? Legislators, the health care insurance industry and the health care delivery industry need to work collaboratively to resolve our concerns. Who here believes that the federal government can solve this situation?

  3. A universal health care system could be the right move for the United States, or at least something to consider. In the United States today, we may have state of the art equipment, but many citizens can not afford to get treated for their illnesses and ailments. In a democracy, everyone is supposed to be equal, so why isn’t everyone treated equally when it comes to health care?
    The fact is, insurance providers and the health care system in the United States is only worried about making a profit, just as any other corporation would be. For many U.S. citizens who have suffered a serious illness, the amount of money that goes into treating the illness is substantially more than they can afford. There for if they recover, they come home to an extremely large debt and no way to pay it off. If they end up not surviving, the family is in a huge amount of debt.
    Situations like these are so sad, but unfortunately are extremely common. The only way around this would to be to eliminate the privately owned health care providers and create some sort of national health care system where everyone could be treated without the stress of paying a fortune just to live from day to day. People pay taxes to the government everyday, so why not have some of that money come back to the people in a positive way, such as in health care, rather than spending in on things like an unnecessary war in Iraq.
    Everyone has his own opinion about this, but if you do some research, I bet you would find out that a universal health care program could be a very positive route for the United States to take.

  4. Matthew;
    Insurance companies have absolutely no interest in “managing their members”. It’s too much work for them,and it’s not what an insurance company is all about. Insurance is about risk minimization per premium paid, period.
    That’s why I think the very concept of health “insurance” is dead. We need companies whose mission is to truly manage patients’ care for the patients’ benefit, and make money as a side effect when those patients need fewer expensive treatments for disease. And no, that’s not the same as the old HMO’s – they were just insurance companies under a different name; still trying to minimize their own risk. Go back to what Porter’s book recommends about providers competing on value and the payors playing the role of patient advocate – that’s what I’m talking about.

  5. Two points:
    1. Healthcare has no business being a for profit undertaking.
    2. Private enterprize either wants government out of its life – to make a profit, or in its life – to make a profit. Funny how ideology shifts for the money.

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