Most of us are familiar with the concept of a corporation, that is, a company that issue shares of ownership known as stocks. Those that own the stock own the corporation.
In general, what a company makes or offers is referred to as its “product.” These products usually fall into two categories: goods or services. For instance, Ford makes vehicles and an accounting firm provides bookkeeping and tax services.
Most large corporations have many stockholders (owners) and the company’s stocks are traded publicly on stock exchanges.
Milton Friedman, the famous and respected economist from the University of Chicago vigorously asserted that the main purpose of a corporation was to maximize the return or profit going to its stockholders. Most often, the hosts of CNBC’s stock market TV programs seem to believe the same thing as Friedman. On these programs whether this or that company is making enough money for its stockholders is a common theme – sometimes the only theme discussed.
So, it stands to reason that Ford is expected to make attractive and reliable vehicles and grab as much of the vehicle market as it can in order to make as much as possible for its stockholders. The same can be said for the accounting firm. They better get their customer’s taxes in on time and without any mistakes or they will fail to maximize the profit going to their stockholders because their customers will leave and go to a competitor.
This brings me to health insurance companies. Customers pay insurance premiums in order to be insured. So, what exactly is the “product” health insurance companies are selling to those customers who pay these premiums? Is it “spreading risk” amongst their customers so that no individual goes bankrupt if they have a catastrophic illness? Is “spreading risk” their product? Or is there something else they make or offer? And how does a health insurance company maximize profits going to its shareholders? By paying customer’s claims? I don’t think so.
Isn’t it paradoxical that a company exists that can make money for its stockholders by seducing others into spending their hard-earned cash betting that they will get sick? Isn’t that exactly what a premium is? The person paying the premium is betting that he will get sick!
I see no good reason whatsoever necessitating the existence of health insurance companies. They’ve just discovered a way through boogie-man scare tactics to convince the public that they will be the knights in shinning armor leaping in to save you from financial ruin because of a sudden, dramatic and expensive medical event you can’t pay for. But there are far too many infuriating and sad stories of people being excluded or dropped from coverage after paying premiums for years or even decades. Or people who’s illness is not covered like they expected as some administrator or agent reveals what the “fine print” on page seventeen of their policy actually means.
And if that isn’t bad enough, as an example, in 2010, the Chief Executive of Wellpoint, a large health insurance company, had her total compensation package bumped up to over 13 million dollars per year. Who paid for that? It certainly wasn’t Santa Claus! Do you suppose it came out of premiums customers were paying for health insurance coverage? Well, duh.
Is there a solution? I think so. It’s government sponsored health care coverage like virtually every other industrialized nation on earth offers. Like I said in my introduction to this blog, you’re not going to find any silly positions arising from myths or superstitions and sacred cows are likely to get kicked.
The foul ruse of private health insurance just got kicked.