Posts Tagged ‘insurance’

Market positioning for private insurers in the face of statutory health insurance reform in Curaçao 2013

April 3, 2013

I recently got a chance to read a very interesting draft of a thesis, Market positioning for private insurers in the face of statutory health insurance reform in Curaçao 2013, prepared by Dennis Arrindell.

The thesis describes the context of health care and health care finance in the Netherlands Antilles and got me thinking about all sorts of things. I suggested to Dennis that we dialogue on a blog about some of the issues it raised for me.

This is the first of what I hope will be several posts/exchanges about topics covered in his thesis and in my work on Professional Caregiver Insurance Risk.

I will leave it to Dennis to introduce himself.

I chose to focus on “efficiency” in this post because I think it is a poorly understood term in the ongoing debate about health care (finance) reform in the US and elsewhere in the world. So here goes…

I think the first thing is that the word “efficiency” is being used in multiple contexts without ever really formulating a coherent definition or standard of efficiency.

I am perhaps hyper vigilant for it because I struggle with it so much myself. So I would suggest careful review of the chapters on how epidemiology, service capacity, service delivery and payment determine the costs for health care, who gets treated and at what overall cost.

The problem as I see it is that no private, for profit insurer can ever really win the “efficiency” argument if by efficiency we refer to converting the maximum amount of premiums into health benefits for policyholders.

The most efficient insurer, based on that definition of efficiency will always be the insurer that elects to operate without a profit margin, without charging a risk premium and which need not set aside any surplus reserve at all because in times of insurance catastrophe it can rely on the unique capability of government to print debt or sell bonds.

When we specify the epidemiology, system resources, treatments that will actually be provided and the amounts that will be paid, at least as broad societal averages, we can begin to set a standard for efficiency with respect to cost, waiting times, diagnostic delays, and treatment delays.

The danger, as it occurs here in the US and around the world is that we simply assume that government insurers MUST be less efficient when their inefficiencies tend to be manufactured rather than unavoidable.So, for example, here in the US, Medicare/Medicaid COULD compel physicians, hospitals, pharmacies and other providers of health related goods and services to cut their profit margins but the special interests involved prefer to hamstring these programs, forcing them to operate inefficiently.

Private insurers are not intrinsically able to bargain better than governments – after all, in the final analysis bargaining takes place between human beings, it is only the red tape designed to make government agencies operate inefficiently that prevents such accomplishments.

But I think there is an even deeper issue here. If I read between the lines, the implication appears to be that it is inherently good for private insurers to engage in profitable operations and that we ought to encourage and support them in this.

I think such a case can, ad should, be made, but one has to be careful that in making this case one is not arguing in contradictory ways.

You have made the point that when profits in the insurance sector are high, the industry accumulates and that this wealth may be distributed to shareholders, re-invested in these insurance companies, expanding their ability to offer insurance, new products or support government through bond purchases or consumers through mortgages.

The wrinkle here is that physicians, hospitals, pharmacies and other providers of health related goods and services can make an identical argument that their profit margins are inherently good because as their wealth rises they will also use that wealth toward the betterment of society. Given adequately strong profits, their wealth may be distributed to shareholders, re-invested in their health services operations, expanding their ability to offer new products and services and/or support government through bond purchases or consumers through mortgages.

If the only way private sector insurers can build their profit margins is by shrinking profit margins of other entities I personally think there is little justification for preferring financial transactions to have higher profit margins than the components of the health care system that actually provide health care services and products.

So, framed this way, the question becomes: What intrinsic value do insurers bring to the table, what benefit to society do insurers produce, that is of such estimable value that it is acceptable for them to extract their profit margins from the profit margins of other economic actors?


MadAsHellDoctors for a single payer health care finance system

March 23, 2011

Thomas Cox PhD RN
March 21, 2011 at 8:23 pm

I tried to post this on the Mad As Hell Doctors website in support of a single payer health care finance system, but they don’t seem to like it… It is awaiting moderation…

The missing detail is what I call “Professional Caregiver Insurance Risk.”

Small insurers are terribly inefficient risk managers. Their loss ratios vary far more than loss ratios of large insurers. That is important! It is the reason insurance works.

Soooo, when you have lots of small insurers or you transfer insurance risks to health care providers through managed care, capitation, DRGs or PPS, health care providers become our insurers.

But inefficient insurers have lower probabilities of earning profits, higher probabilities of incurring operating losses, and higher probabilities of insolvency than larger, more efficient insurers.

So small insurers and insurance risk assuming providers have to reduce benefits to cope with their inefficiencies as insurers.

Why do we need a single payer system?


Its about math… The arguments agains SP are political double speak and Voodoo economics.