Reinventing the healthcare insurance business model

If there is a more obtuse business model than the one used by insurance companies I have not seen it.  While I am not an advocate of privatization—because I am a right-wing nut who favors capitalism—I do think there is a smarter way to earn profits.

Taken to its extreme, the ideal way for a payor to earn profits is for payors to take in money without ever having to pay out money.  This is the same model your cable company uses—people simply send them money every month, and never get it back.

To contrast the healthcare insurance model with an insurance model that actually provides some degree of benefit, one needs look no further than the automotive insurance model.  While nobody loves paying car insurance, we do so somewhat secure in the fact that if we are in an accident our insurance will cover us.

A large reason we feel this way is because we have a choice in which auto insurer we select.  If we do not like the coverage, we change providers.  Our employers do not tell us which auto insurer we must purchase, and yet they do when it comes to providing health insurance, and yet ninety-nine percent of the people who work for a firm drive, so the insurable population is about the same size for health and auto.

With health insurance, they best we can do when we are ill is hope our insurance will cover us, and we do so with the hidden expectation that it will not.

Health insurers need to change their model.  If a single payor changed its model to actually cover the claims made by its members it would not have to worry about being profitable because they would be beating people off with a stick.

Instead of hiring so many people to figure out how not to reimburse their members, why not change to model to one by which they actually provided their members with what those members need?


2 thoughts on “Reinventing the healthcare insurance business model

  1. Always a great read – no exception to this one. The comparison to Auto insurance is near perfect. The one difference – which I think we can/should fix – is that the States require us to carry auto-insurance. Since the Feds can’t do that for either Auto or Health (without stepping on some serious legal issues) – why don’t the states just extend their existing requirement to include Health insurance? Seems like it’s a fairly easy extension – and would benefit everyone (Feds, States, Providers, Payors – and consumers). There – problem solved 😉


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