Frustration with health insurance companies in America is at such a fever pitch that Luigi Mangione, the 27-year-old who faces murder charges in the 2024 killing of UnitedHealthcare CEO Brian Thompson, has become a folk hero for some. Mangione, who has pleaded not guilty, is the subject of a musical and also a forthcoming book by a best-selling writer. An apparently fake image of him modeling a shirt even appeared briefly on a fast-fashion website.
The old adage is that everything that comes before the “but” is insincere. In this case, what comes after the “but” isn’t true either. The things that people hate about private health insurers are almost always things that the government encourages – and even requires – them to do.
Health insurance companies are making billions by overcharging us and shortchanging the sick not because that’s what a free market rewards, but because that’s what government intervention rewards. Regulation won’t solve this problem because regulation is the problem.
Those who say that private health insurance companies are evil entities that profit from denying health care to patients fail to appreciate that private health insurance companies are in fact a wondrous force for good.
Outrageous? Not at all. Health insurance companies get complete strangers to pay each other’s medical bills voluntarily.
The customers who enroll in any given health insurance plan speak different languages, practice different religions and might even hate each other if they met. Yet health insurance companies induce them to put all that aside and help complete strangers when they are sick, vulnerable and afraid. Without threats or penalties, insurance companies get people to contribute to insurance pools even though, for most enrollees, most of the money they contribute will go toward covering the bills of strangers who end up needing medical care.
Consider the case of Jeanne Balvin, an Arizona retiree who needed emergency surgery for diverticulitis, an inflammation of the colon, in 2017. Serious surgeries and hospitalizations in America can cost from tens of thousands to more than a million dollars. Fortunately, thanks to the premiums that other customers paid voluntarily, a health insurance company paid for Balvin’s surgery. The insurance company played a role every bit as important as her doctors.
That everyday marvel doesn’t square with the harsh picture critics paint of health insurance companies. After all, don’t executives and shareholders only care about making money? Don’t customers participate only because they selfishly want someone to pay their medical bills? To the extent those things are true, it means health insurance companies transform selfishness into compassion.
Sometimes, denying claims produces a compassionate result, like when one insurer refused a prior authorization request for an orthopedic procedure because they discovered the surgeon was mistakenly planning to operate on the wrong body part.
And while critics demand more regulation to curb abuses, they ignore that government intervention more often than not encourages abuses. Government intervention has given health insurance companies more control over our health care, while putting unrelenting pressure on them to deny claims and coverage.
The federal tax code threatens all 150 million U.S. wage-earners with implicit but very real penalties – in the form of higher taxes – if they buy portable insurance that stays with them between jobs rather than enroll in a plan through their current employer. As a result, every year, millions lose their current health insurance after they get sick and they (or a family member) leave or lose a job. Medicare, Medicaid, Obamacare and scores of government regulations all try to fill this massive coverage gap – but it’s a gap that the government itself creates.
It gets worse. Regulations under the Affordable Care Act, better known as Obamacare, purport to protect individuals with pre-existing conditions from discrimination by insurance companies. But economist Michael Geruso, who was an advisor to former President Joe Biden, has shown that those regulations encourage insurers to engage in “backdoor discrimination” against the sick.
For example, while multiple sclerosis patients cost insurers an average of $61,000, Obamacare’s health insurance price controls effectively limit the premium that insurers receive to just $47,000 per MS patient. The result, Geruso and colleagues found, is that if an insurer offers the best MS coverage, those price controls effectively penalize the insurer by $14,000 for each MS patient they attract. Regulation thus creates perverse incentives for insurers to make their plans less attractive to the sick than their competitors’ plans, through endless measures such as higher coinsurance and more requirements for prior authorizations.
The result is a race to the bottom that “undoes intended protections for those with pre-existing conditions” and leaves the sick with “economically sizable” losses, to the point that even “healthy consumers cannot be adequately insured,” according to Geruso and his fellow researchers. Blame insurers if you like, but Geruso finds these dynamics “beyond any insurance carrier’s ability to control.”
A free market isn’t perfect, but it does not create this race to the bottom.
Government regulation also found Balvin, the Arizona retiree. Congress had exempted the type of health plan she purchased from Obamacare regulations. But a 2016 rule required her insurer to terminate all such plans after three months. Why? Because the government did not want insurers to offer an attractive coverage option at a lower price than Obamacare-compliant plans.
So when medical complications required Balvin to undergo two further hospitalizations, she had no insurance. Critics blamed her insurer, but it was in fact a government regulation that left Balvin with $97,000 in hospital bills.
Absent that regulation, Balvin could have purchased a longer-term health plan that would have covered all three of her hospitalizations. In fact, when the government doesn’t interfere, health insurance companies sell lifetime coverage that protects enrollees from cancellation and higher premiums after they get sick. They did so before Obamacare, indeed before Medicare. They are doing so today in countries including Australia, Germany and Chile. They do so without the government forcing them to do it, because that is what their customers want.
In fact, in 2008, one insurer introduced a novel, low-cost product with the potential to fill the huge health insurance gap that the government creates by penalizing lifelong coverage. This insurance product, which 25 states approved for sale, ensured that if a worker got sick and left or lost her job, health insurance would remain affordable for the rest of her life. Unfortunately, the government believed that its own attempt to fill that gap – Obamacare – wouldn’t work if consumers had the freedom to choose this alternative. So the same price controls that are creating a race to the bottom by Obamacare plans also quashed this innovation.
Indeed, most everything that critics hate about health insurance companies is an unintended consequence of some government regulation or tax penalty.
Hate how much control insurance companies have over health care decisions? The government penalizes workers for every health care payment decision we don’t let a health insurance company make.
Hate how little choice and control you have over your health insurance? The government penalizes us unless we enroll with an insurer we didn’t choose (i.e., the one our employer chose for us), and if we fire that company.
Hate how often insurance companies overrule doctors? Regulatory roadblocks frustrate, and the tax system falls hardest, on insurers and doctors who try to work together to avoid disagreement and mistakes.
Yet when things go predictably wrong, supporters of those government interventions still blame the insurers. Decide for yourself whether the benefits of government intervention justify the pressure it places on insurers to deny care. But stop blaming health insurance companies when it happens.
If it helps, remember this: The insurer that could have paid for all of Balvin’s hospitalizations were it not for government regulation, the insurer that stopped the surgeon from operating on the wrong part of the patient’s body and the insurer that Obamacare blocked from introducing low-cost, lifelong coverage were all the same company.
If you’re wondering which, here’s a hint: Someone murdered their CEO.
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