The grotesque celebration of the murder of UnitedHealthcare CEO Brian Thompson across social media has been revolting, but it does illuminate one crucial fact, which is that many people clearly do not understand what it is that insurers do.
In the narrative embraced by journalists such as Taylors Lorenz and Ken Klippenstein--and which Senator Elizabeth Warren says she empathized with--health insurers are little more than callous gatekeepers motivated by profits to minimize access to healthcare of the people they insure.
However, this is a facile--and dangerous--stereotype that grossly misconstrues what health insurers actually do and does nothing to make life better for those who will need healthcare in the future.
Insurers provide an array of services that save money for the people they cover while ultimately improving their healthcare. The most important task of health insurers is to create networks of healthcare providers; one which includes physicians, clinics, hospitals, and other providers. They also ensure that the providers in their network meet certain performance standards. For instance, if a doctor has had multiple complaints from patients, the insurer may see fit to exclude him from coverage to protect the patients they cover. Most patients don’t have the information or ability to discern such problems, and there is no government entity providing such information that is easy for patients to find.
Health insurers also negotiate the price they pay for the services provided to the people they cover, which greatly reduces the cost of insurance. What people often forget is that ultimately, they do pay for the services they receive with their insurance payments (or, for those who receive insurance through their employers, via lower salaries).
It is not as if an insurance company that denies a treatment it sees as unnecessary pockets those savings. Insurers set the insurance prices it charges employers and individual customers based on the overall costs of the healthcare it covers and adds a small premium above that for its profit. For United, its margin was 6.6 percent, which is relatively small for the industry.
The role of health insurers in keeping down prices is particularly important these days as many hospitals continue to make strategic decisions to consolidate operations, which entails merging facilities and buying up physician’s practices, making them a de facto part of the hospital. Such actions push up prices in two different ways: Firstly, the reduction in competition gives the remaining hospital more leverage to raise prices, and acquiring physician’s practices--which typically entails contractual agreements mandating their patients be referred for any additional treatments necessary to their hospital--further constrains the choices of patients and their insurers.
Secondly, the cost of services provided by a hospital is typically priced higher than of identical services provided in a physician’s office, largely to contribute to the high fixed costs of operating a hospital. But a physician’s office owned by a hospital can often get away with demanding a higher hospital price for their services. This bureaucratic sleight-of-hand pushes healthcare costs--and insurance premiums--significantly higher, and it has been insurers who have fought the hardest to stop this practice.
Hospitals and doctors also have an incentive to provide unnecessary tests for which they receive reimbursement, and these are far from harmless: Besides pushing up healthcare costs, they can lead to people receiving superfluous or unnecessary interventions that themselves can create health problems. For instance, an effort to prevent doctors from ordering PSA tests for men over age 75--when the potential side effects from such treatment outweigh the potential benefits--brought significant health gains.
My own father’s health in his last few years was severely compromised by his healthcare provider’s insistence that he be treated for a malady that caused him no pain and that was not going to end his life.
The U.S. spends trillions of dollars on healthcare each year, and most established hospitals and pharmaceutical companies operate on profit margins that dwarf those of insurance companies, which in many cases serve as the only brake on their pricing power.
