Are Private Health Insurance Companies Really the Problem?

Part of the debate regarding health care reform of late has been demonizing private health insurance companies, blaming them in part for the high costs of health care and its associated insurance coverage. In an article entitled, “What’s Wrong With Private Insurance?” from Forbes, author Tomas J. Philipson discusses that private health insurance companies are far from the problem that drives up the cost of health care.

According to the article, profits at health insurance companies are just around 3%. The group Health Care for America Now claims that profits at health insurance companies have risen 428% from 2000 to 2007, totaling about $12.9 billion. However, if overall health care costs are $2.2 trillion as specific in the article, then their profit is worth .0058 of the total health care costs. Quite an insignificant number indeed.

The author goes onto say that more public options like Medicare and so on will only drive up the costs of health insurance even more. He cites that competition among the nation’s 1,300 health insurance companies — and I truly had no idea there were that many — is one of the driving forces keeping costs low. It’s an interesting idea, one I’m not sure is true, but it’s interesting. If health insurance costs aren’t the problem, than what is? People point to things like overtesting, overuse of emergency rooms and so on. If the high costs are caused by all of these factors, then why target simply the health insurance industry?

Time will tell whether health insurance reform will bear fruit, but it’s an interesting struggle to see. Right now, the barrier between us and huge health care bills are the companies that provide insurance, and we rely on them to keep health care affordable for us. Hopefully health care will be affordable on its own one day, and accessible to everyone. Sadly, until then, we’re left to the devices of these companies we rely on.