Private Health Insurance

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.

Ken Kollodge

8 thoughts on “Private Health Insurance

  1. Hey Ken,

    That’s the case for all types of insurance. Reduction of catastrophic risk. I don’t think you’ve made a breakthrough here. And when was the last time you saw a government entity operate more efficiently than a private sector equivilant?

    • I think government is good! We’re the government! We choose to elect our leaders and if they don’t perform the way we think they should, we vote them out. Some areas of our lives are much better run by a good and intelligent government because those public servants will be thinking of what is best for the whole county, state or nation, not just trying to make money for their stockholders.

      Why should anyone make a profit from the sickness and suffering of others? That whole idea is immoral. Consider the Wellpoint example – don’t you think that 13 million dollars could be better spent on paying legitimate claims instead on one executive?

  2. Ken — I stumbled onto your blog through the newspaper, and read your pieces on health insurance companies and Dayton’s veto. With your stance on one hand, for the single payer health care system, and pro gun stance on the other — I can’t figure out if you’re a Liberal Conservative, or Conservative Liberal? Help me out!?

    • I used to be a registered Democrat but couldn’t buy into all of it any longer. I started loosing blind faith right after McGovern in 72. Now I hope to be a real “liberal” meaning trying to move society to a better place to the best of my ability and insight never loosing sight of justice. I think “Independent” is too loose and smacks of going this way or that sometimes for the wrong reasons and with insufficient deliberation. Consequently, I may be a party of one and chose for my party label- “Well Informed, Viciously Patriotic Rationalist.”

  3. I went to a forum here in Duluth discussing the Affordable Care Act and I finally got up the nerve to stand up and say that “I don’t think it gets said enough, but insurance companies are incredibly corrupt institutions! The ACA only perpetuates their nasty control!” And everyone looked at me like I was an idiot, and they shook their heads and said, “Alas, ’tis the American Way! We Heart Insurance Companies!.’ Then someone else stood up and gushed over how Cigna paid for some major operations for her very elderly parents and I wanted to barf. . . What we need is universal healthcare now! – but what is really surprising to me, is that much of the general public thinks that that is what the ACA is! Ha!

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