Health Care Reform, Part 2

In an earlier post, I highlighted a column discussing some details of proposed health care legislation.  As I said, it is a very complicated area.

One very important (and highly contentious) issue in health care reform is whether the health insurance industry needs more regulation and/or more competition, i.e. “a public option.”  For a special view of an insider, I recommend the July 10th episode of Bill Moyers Journal.  This TV program had an extended interview with Wendell Potter, who is the former head of Public Relations for CIGNA, one of the nation’s largest insurance companies.

In a change of heart, Potter decided to speak out against the insurance industry. Here is a salient quote from the program’s description.

Looking back over his long career, Potter sees an industry corrupted by Wall Street expectations and greed. According to Potter, insurers have every incentive to deny coverage — every dollar they don’t pay out to a claim is a dollar they can add to their profits, and Wall Street investors demand they pay out less every year.  Under these conditions, Potter says, “You don’t think about individual people.  You think about the numbers, and whether or not you’re going to meet Wall Street’s expectations.”

Conclusion

I am all in favor of corporations making a profit.  That judgment assumes that a competitive market exists and that consumers have real choice.  In general, if companies have an incentive to provide a better product or service, shareholders can prosper and consumers will benefit.

But there is very little competition in the health insurance marketplace.  If insurance companies have perverse incentives to deny coverage and to game the system, consumers are obviously harmed.  The insurance that you thought you had may be a costly illusion.

Watch the video or read the transcript, and decide for yourself.