Inside Dope on Health Insurance Companies according to Wendell Potter, Former CEO for Cigna Insurance Company
One of the big rules of capitalism...Competition! Not so with health insurance companies.Health Insurance Companies are EXEMPT from the Sherman Antitrust Act. That means that Health Insurance Companies are pretty much a monopoly. Each state has primary companies. There's no Interstate competition. There's no global competition. Actually, there's no Intrastate competition to speak of.
But the insurers cry and complain that their critics don't understand their business practices.
The industry is driven by "two key figures:
1) Earnings per share
2) The medical-loss ratio, or medical-benefit ratio, as the industry now terms it. That is the ratio between what the company actually pays out in claims and what it has left over to cover sales, marketing, underwriting and other administrative expenses and, of course, profits."
The best way to drive down "medical-loss" is to stop insuring unhealthy people. You won't, after all, have to spend very much of a healthy person's dollar on medical care because he or she won't need much medical care. The insurance industry accomplishes this through two main policies.
1) "POLICY RESCISSION" They look carefully to see if a sick policyholder may have omitted a minor illness, a pre-existing condition, when applying for coverage, and then they use that as justification to cancel the policy, even if the enrollee has never missed a premium payment."
And don't be fooled: rescission is important to the business model. At a recent hearing before the House Subcommittee on Oversight and Investigation, Rep. Bart Stupak, the committee chairman, asked three insurance industry executives if they would commit to ending rescission except in cases of intentional fraud. "No," they each said.
2) "PURGING." This is where insurers rid themselves of unprofitable accounts by slapping them with "intentionally unrealistic rate increases."
The reason Insurance Companies generally like markets is - that the profit incentive spurs useful innovations. But you won't ever see a bustling market in how to cleverly revoke the insurance of people who prove to be sickly!
The issue isn't that insurance companies are evil. It's that they need to be profitable. They have a fiduciary responsibility to maximize profit for shareholders. STOCKHOLDERS LOVE MONOPOLIES!