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Private insurance companies have earned the public’s distrust. They routinely put profitability above their policyholders’ well-being. And a system of private health insurance provision also has higher administrative costs than a single-payer system, in which the government is the sole insurer.
But the avarice and inefficiencies of private insurers are not the sole — or even primary — reasons why vital medical services are often unaffordable and inaccessible in the United States. The bigger issue is that America’s health care providers — hospitals, physicians, and drug companies — charge much higher rates than their peers in other wealthy nations.
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I think they are saying, even if they must spend 80% of premiums on health care, that leaves 20% for profits/admin. But if a premium is $100, $80 goes to care, $20 to the company. But if the price of care goes up and the price of premiums go up, then a $200 premium means $160 on care and $40 to the company. The company still makes more, even though the ratio of care/profit is the same, incentivizing the company to do what it can to make ALL COSTS go up, and raise premiums to match. If they can get premiums to $1000, that means $200 can be kept.
Sure, but the problem is that they can’t control ALL costs, only their own.
If another insurance company manages to reduce their own costs (e.g. by paying anesthesiologists less), then that company will have an opportunity to lower premiums instead of raise them. And since insurance customers are extremely price sensitive, those companies that are trying to get to premiums to $1000 will see their customers switch to the one that keeps premiums at $100 or better yet $80.
All the insurance companies know this, which is why they are all trying to reduce own costs rather than raise them.
But for the most part, patients aren’t really their customers. Employers are. They may want to decrease premiums, but making changes is difficult and at most an annual event. It is very, very far from a free market in the US.