Insurance Costs – The Problem or the Symptom?

EMC Insurance building - Des Moines
EMC Insurance building – Des Moines

As this Reuters article points out, the cost of providing insurance as a benefit to employees is a top concern for many company owners. The fact that Obamacare would require insurance providers to cover more people, including those with pre-existing conditions, leads many people to expect that insurance premiums will go up, and companies will either not be able to hire more workers, or may have to pass on higher costs to consumers. What I’m wondering is, is the cost of insurance the problem, or is it a symptom of something greater?

Insurance as a For-Profit Venture

Economists often point to the profit motive as the key that drives innovation, competition, and lowers prices to the consumers. However, in my opinion, the profit motive also encourages companies to do as little as possible, charge as much as the market will bear, in order to maximize profit instead of provide the highest level of quality of product or service to the public.

I feel like insurance companies might provide better service to more people if they were forced to operate as not-for-profit groups. When companies aren’t being managed in order to maximize profits and meet stock market expectations, then companies can focus on what they got into business for in the first place. Every entrepreneur out there wants to make money. But, what they build a business around is providing a product or service. If companies didn’t have shareholders and market analysts to worry about, they could focus on improving the products and/or services that they offer. This would hold true for the insurance industry as well.

The Morality of Insurance

When you hear about cases where a person suffered from a condition that wasn’t covered by an insurance company, I have to question the morality of issuing insurance for profits. People with pre-existing conditions don’t get those conditions covered because the insurance company knows it’s going to cost them money long-term. They’re deliberately compromising the level of service provided in order to maximize profit. This seems contrary to the economist viewpoint. I have to wonder how often a family member of an insurance company executive gets a denial of service letter for some condition that could have improved their life. I wonder how the policy writers justify telling people that they can’t be helped. I wonder how much better life would be if the insurance company could worry about the patient’s health instead of the company’s financial health.