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private insurance needs reform as well

Private Healthcare Insurance in America

As the graphic indicates insurance companies as a composite only make 3% in profit, perhaps typical of a retail concern.  Unlike a retail concern or business, the expense side is unpredictable, in the form of unpredictable outlays or benefits to patients.   Private insurance does not need to be destroyed, just made more competitive with a proper role.

Healthcare Dollar 

The cost of doing business in healthcare includes 6% of government activity costs.  87% of the gross receipts goes to the patients. 

The real customer of insurance is employers most of the time.  Current co-pay has risen to $28.8B in 2005.

With the mandates on insurance companies at the Federal and State level, most of the attention has been to lobby in DC and handle the employers wrath at the high cost of  healthcare.  This leaves little energy left over for becoming better at competing and in serving their real customer, the patient.  Insurance companies are very unpopular as a result.

A good bit of the burden of cost shifts from Medicare and Medicaid have to be made up by Insurance companies.   This places them also at odds with the doctors and hospitals.  

Imagine if the patient controlled the dollars in the form of a HSA account approach coupled with a catastrophic illness insurance policy.   This would place the insurance company back in the role of a financial risk manager, and not a treatment/payment decider/negotiator.   It would be a much more favorable business model and one that would make all more satisfied.  

Are the over 1300 insurance companies in this country gouging the consumer?  Not exactly, with a 3% profit this cannot be considered excessive.   There are simple ways to improve this business and make all happier. 

The cost of a policy for a 30 year single male is not excessive and is quite affordable already.   As far as the uninsured, 40% can afford it and do not see it as something they should pay for.   Also if a consumer could also buy insurance as an individual in any State with the other reforms in Proposal, then a group buy would not be needed to obtain the best price, just as a person buying a personal computer does not need a group buy to obtain the lowest price.  Make the markets in insurance work as well, and the options will occur that help the consumer/patient and drive down costs.

The insurance industry however is also undergoing the beginnings of a transformation, as detailed by McKinsey.  This is a potential quantum shift in the industry, so the companies had better pay attention to the shift to the individual rather than a company.