Comment by stevebmark | Hacker News Reader

Comment by stevebmark | Hacker News Reader

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Insurers are incentivized to pay higher prices for claims. The Affordable Care Act enforced that insurance companies must have at least an 80% "medical loss ratio." Meaning that insurance companies must make at least 80% of their total spend on actually paying out medical claims. This law was put into place because insurance companies would spend huge amounts of money on advertising and giving execs bonuses, all paid for by patient premiums. Some only paid out 50% of their spend on medical claims.

The Affordable Care Act introduced the newer perverse incentive of insurance companies tolerating higher prices. Because if you can only pay your execs bonuses based on 20% of your total spend, insurance companies can pay execs more if the underlying claims they're paying cost more. 20% of a $1,000 MRI isn't as juicy to your C levels as 20% of a $10,000 MRI.

All insurance companies, all of them are corrupt. The whole system needs to be burnt down. PPOs are the worst, I wish HMOs were the norm, but that won't fix everything.

Further reading: https://www.investopedia.com/terms/m/medical-cost-ratio.asp

>The Affordable Care Act introduced the newer perverse incentive of insurance companies tolerating higher prices. Because if you can only pay your execs bonuses based on 20% of your total spend, insurance companies can pay execs more if the underlying claims they're paying cost more. 20% of a $1,000 MRI isn't as juicy to your C levels as 20% of a $10,000 MRI.

If this perverse incentive were true, then you would expect the medical care costs to rapidly increase after the passage of ACA, but medical trend has actually slowed down since then[0] [1].

You can also look at the total dollar spend on hospital and medical expenses for the entire health insurance industry [2]. After the passage of ACA, there was a large increase in medical spend as more people obtained insurance coverage, but the increase in medical expenses year over year has settled back into the 5% range, which doesn't seem that perverse.

[0]https://www.statista.com/statistics/720767/medical-cost-tren...

[1]https://www.pwc.com/us/en/industries/health-industries/libra...

[2]https://content.naic.org/sites/default/files/2021-Annual-Hea...

Having no idea what the real trend is, couldn't any other factors counteract the perverse effect, making both parent's and your observations true at the same time ?

For instance rhe sustained efforts that lead to ACA peobably didn't stop there, and more effort surely were made to reduce healthcare cost from there. If ACA could be passed in the first place, it wouldn't be surprising if other effective actions were also passed as well ?

>Having no idea what the real trend is, couldn't any other factors counteract the perverse effect, making both parent's and your observations true at the same time ?

Absolutely. There could be other factors that are counteracting the effect, including those within the ACA itself since the bill contains many changes to healthcare, not just the restriction on medical loss ratios.

From your second link, except in the last year, healthcare spend has been outpacing inflation by more than 2 to 1. The economics of scale are backwards in healthcare, I find that perverse.

UnitedHealth total comp have been rising for C levels, except the CEO who recently left, who stayed around 17mil. https://www.salary.com/tools/executive-compensation-calculat...

I think we can agree that something will need to change as medical trend cannot outpace inflation forever. I don't think the issue is with executive compensation, because even if insurance companies magically could perform all their services for free, you would only reduce premiums by less than 20%.

Kind of but not really.

Insurers compete for customers, typically corporations buying group plans.

My employer switched insurers all the time to get the same or better coverage at a lower price.

Competition is scarce. Hospitals and providers don't take all insurances, based on backroom shady deals. Depending on location, there often isn't much choice for insurers. https://www.ncbi.nlm.nih.gov/pmc/articles/PMC1450072/

Insurance policies have dozens of knobs they can turn to charge your more while claiming it's a lower price. Premiums, copays, coinsurance, deductibles, out of pocket maximums, in network benefits, out of network benefits, and all of that for individual vs family. It's all a scam.

It’s not regular person negotiating 50,000 employee health plans that cost $500,000,000 per year.

I’m pretty sure a lower premium with higher deductible isn’t going to fool them.

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