Indeed, I think insurance and health providers collude to jack up prices. “Saving” a heavily inflated price makes the insurance look good. The provider can use the high prices as a bludgeon against the uninsured.
There was no collusion, it was two sides that nearly hate each other arguing over rates. Hospital wanted more, insurer wanted to pay less.
1) Increase number of subscribers. Possible to do, but the market is pretty saturated.
2) Raise prices of healthcare overall. 20% of larger costs is more than 20% of smaller costs.
Intuitively, lowering costs would seem to be a money-making proposition, but if you are already at the 20% margin, it doesn't actually help you.
>1) Increase number of subscribers. Possible to do, but the market is pretty saturated.
>2) Raise prices of healthcare overall. 20% of larger costs is more than 20% of smaller costs.
The 20% profit margin also has to cover the insurer's operating expenses. After covering the costs, an insurer typically makes 2-3% in profit. Also, the insurance industry in aggregate is typically paying 85%-86% of premiums as medical services, so they still have incentive to negotiate prices with hospitals[0].
The insurance industry is likely to make a greater profit in 2020 due to the pandemic. Consumers have deferred a lot of their medical procedures, but their premiums have stayed the same.
[0]https://content.naic.org/sites/default/files/inline-files/20...
COVID will have drive up overhead, and also insurers will have COVID medical costs. If the net of the added medical costs of COVID and the reduced medical costs from deferring care is negative on medical costs, insurers will be driven over the 20% excess premiums cap and have to refund down; they don't get extra credit for COVID overhead.
If it increases medical costs in net, they'll have to pay the increased medical costs plus the increased overhead out of the same premiums, and so really lose.
The only way insurers win out of this is if medical costs are down enough to pay for the added overhead before hitting the 20% cap where refunds kick in.
(Or through external windfalls outside of the whole premiums and medical costs system, like if they manage to get forgivable PPP loans or something.)
As long as the insurance company isn't losing money between total paid premiums minus total claims, they don't have any incentive to care about overcharging. Artificially high medical prices do however work to their advantage during claim negotiations with health providers (e.g. "We know that piece of plastic you charged $1000 for only cost you $10, how about we give you $200").
While I am sure that happens, my experiences in that past of being without insurance most places gave me a discount for paying in cash. Up to 30% at some clinics. This is especially true for smaller providers as dealing with insurance companies was a huge time and resource suck so they preferred cash patients.