8 ms·

Price caps always seem like such a transparent political move.

mgiampapa 2y ago
How about profit caps? I feel like government stepping in and being the insurer with a sufficiently large pool of risk to spread around lets them set a fair rate without the need to make a return or answer to shareholders. To some extent this has helped with health insurance. Each year I get a check back from my insurer saying they didn't spend enough on my care vs my premiums.
- ladberg 2y ago
  Insurance companies have pretty thing profit margins regardless, even in areas where profits are not capped. It's a competitive marketplace!
  - tomrod 2y ago
    I'm not sure I believe your factoid. Can you cite? UHC is one of the wealthiest companies in the world.
    - amazingamazing 2y ago
      their september 2024 earnings put them at 6% margin. that’s not very good. for reference apple is 15%, mcdonalds is 32% and costco is about 3%. that being said compared to a competitor, elevance at 2.5%, they’re doing well. a little worse than allstate (car and home insurance), which is about 7%.
      - tomrod 2y ago
        To be fair, they play a shell game by steering people towards their subsidiary owned medical providers (avoiding loss ratio limits of 15% to 20% by putting the money into providers, which have no profit cap).[0] [0] https://pnhp.org/news/insurers-avoid-loss-ratio-limits-by-shifting-profits-to-provider-subsidiaries/ https://pnhp.org/news/insurers-avoid-loss-ratio-limits-by-sh...
        anomaly_ 2y ago
        Yea, and after all that they still only eked out a 4% net profit after tax for 2024.
        tfehring 2y ago
        The 6.0% margin (for UnitedHealthGroup as a whole) already includes that. UnitedHealthcare (the subsidiary health insurer) had a slightly lower operating margin of 5.6% in Q3. https://www.unitedhealthgroup.com/content/dam/UHG/PDF/investors/2024/UNH-Q3-2024-Release.pdf https://www.unitedhealthgroup.com/content/dam/UHG/PDF/invest...
    - ladberg 2y ago
      Health insurance does have profit caps, so like the sibling commenter said their margins are small (6%) but also decently under the cap (20%) in the first place.
      - tomrod 2y ago
        The insurance subsidiary will have a cap, but provider subsidiaries have no such cap.[0] [0] https://pnhp.org/news/insurers-avoid-loss-ratio-limits-by-shifting-profits-to-provider-subsidiaries/ https://pnhp.org/news/insurers-avoid-loss-ratio-limits-by-sh...
- bitcurious 2y ago
  > To some extent this has helped with health insurance. Each year I get a check back from my insurer saying they didn't spend enough on my care vs my premiums. This has baffled me ever since Obamacare was first passed - it seems that each year the insurance companies have an incentive to drive up the cost of healthcare, since that’s how they earn more money in absolute terms. Is it not so?
  - nradov 2y ago
    That is so, to an extent. But it's balanced against employer demands to hold down medical costs because they pay most of the bills. If your HR department can save 5% on employee medical costs by switching from Blue Cross to Cigna next year they'll absolutely do it.
  - gunian 2y ago
    Any idea why Obamacare didn't follow the European model? Other than the freedom argument People on HN always talk about European health insurance seems like an easier route than to murder people lol
    - School-Cotton 2y ago
      First of all there isn’t one “European model”, every country in Europe has its own system. To answer the substantive point, it’s extremely difficult to pass substantial laws in the US due to the structure of its political system. The mandatory coalition of the president + 60% of the senate + 50% of the House of Representatives is a much higher bar than any other democracy. So laws aren’t written to be optimal policy, they are written to satisfy this extremely high coalition requirement — Obamacare in particular was very fundamentally weakened from some of the more expansive initial proposals to address the concerns of one or two senators and get them on board.
      - gunian 2y ago
        but people always talk about how insurance is guaranteed in europe something must be working if gunning down a CEO is pro the people wouldn't copying one of the European countries be even more pro the people? what makes senators hate something that is pro the people? wouldn't that give them better ratings? I come from a dictatorship so sorry if this is a dumb question
- cowsandmilk 2y ago
  > How about profit caps? What period do you put it over for property insurance? Profit caps work for health insurance because claims are typically not correlated. The percentage of your customers with cancer won’t 5x one year and go back to baseline the next. New drugs or treatments (or a drug going off patent) can cause correlated swings, but generally costs to health insurers don’t change a lot year to year. For property insurance, you need to bring in profits most years to fund the year when there are multiple category V hurricanes or large fires.
  - mgiampapa 2y ago
    The book of business has to be large and the pockets deep. Which describes our current insurance market and the government. The way we handle this now is with reinsurance.
- csomar 2y ago
  Sure. Because the response of a failure in governance is more government? What you are proposing is "unfair". You are essentially suggesting that the rest of the country subsidize a subset who wants to live near high-risk areas. Me too want to live in a dense forest and also have my house by the edge of the river. You could make the argument for this for healthcare, since no one can choose which illness he is born with. But choosing your housing location is a "choice". And you can/should move somewhere else where it is less risky.
  - macinjosh 2y ago
    People choose to smoke, overeat, engage in risky activities that can cause injury near and long term (Rock climbing, riding motorcycles, football, MMA). Why should society pay for these choices?
    - throw0101a 2y ago
      > Why should society pay for these choices? Because it's the only way to get universal coverage, which if you don't have, means a portion of the population gets really sick, jams the ER, can't afford to pay the resulting bill (maybe declaring bankrupcy), and someone then has to eat/cover the cost. Often by hiking prices for those that do have coverage. Do a search for "ACA three legged stool": > It starts by requiring that insurers offer the same plans, at the same prices, to everyone, regardless of medical history. This deals with the problem of pre-existing conditions. On its own, however, this would lead to a “death spiral”: healthy people would wait until they got sick to sign up, so those who did sign up would be relatively unhealthy, driving up premiums, which would in turn drive out more healthy people, and so on. > So insurance regulation has to be accompanied by the individual mandate, a requirement that people sign up for insurance, even if they’re currently healthy. And the insurance must meet minimum standards: Buying a cheap policy that barely covers anything is functionally the same as not buying insurance at all. > But what if people can’t afford insurance? The third leg of the stool is subsidies that limit the cost for those with lower incomes. For those with the lowest incomes, the subsidy is 100 percent, and takes the form of an expansion of Medicaid. * https://archive.is/https://www.nytimes.com/2017/07/10/opinion/obamacare-repeal.html https://archive.is/https://www.nytimes.com/2017/07/10/opinio... This 'architecture' was developed by Jonathan Gruber: * https://cdn.americanprogress.org/wp-content/uploads/issues/2010/08/pdf/repealing_reform.pdf https://cdn.americanprogress.org/wp-content/uploads/issues/2... * https://en.wikipedia.org/wiki/Jonathan_Gruber_(economist) https://en.wikipedia.org/wiki/Jonathan_Gruber_(economist) It is a form of social safety net.
- toast0 2y ago
  Most regulated insurance markets do have profit caps. California certainly does, but there was still a price cap added.
- waterhouse 2y ago
  Profit caps presumably create perverse consequences. If the profit I'm allowed to make is proportional to X, then I'm incentivized to maximize X. If X is my costs, then... Maybe that's where these unbelievably high line items on medical bills come from.
- JumpCrisscross 2y ago
  > How about profit caps? Transfers wealth from shareholders, patients and taxpayers to management, bankers and intermediaries. Broadly speaking, caps are stupid—akin to treating liver enzymes directly when they spike versus seeing them as the sign of deeper problems.
  - Spivak 2y ago
    I think that's a great metaphor for the situation, when you get a patient running a 105 fever you put them in an ice bath and then consider what underlying problem is ailing them. You do the first part so they don't die before the long-term treatment kicks in.
    - JumpCrisscross 2y ago
      Correct. Caps are fine as a short-term measure. In the long term, they’re putting a patient running a fever on immunosuppressants. The fever will go. But the patient will die.
- JKCalhoun 2y ago
  Or maybe C-suite pay/benefits caps, ha ha.
  - hb-robo 2y ago
    I'm all for this, lol.
- donavanm 2y ago
  > I feel like government stepping in and being the insurer with a sufficiently large pool of risk to spread around lets them set a fair rate without the need to make a return or answer to shareholders. Youre about 20-30 years late to the game, but arrive in time to see the conclusion does not match your assumption. See california for fire, florida for fstorm damage, and everywhere in the us for federal flood coverage. It doesnt work. CA FAIR has higher rates to account for increasing the coverage pool, but it doesnt look like premiums will cover the current or future loses. Which is the universal story when your policy attracts all the high risk/payout buyers. And FAIR, roughly, is setup to go recoup losses from all the _other_ insurance providers in the state. Even ones not insuring those policy holders _or that type of insurance_. Its just a layer of indirection to subsidize fire risk against all poly holders.
  - mgiampapa 2y ago
    In all of those examples you have the for profit private insurance leaving the market because it's not profitable enough. When you take away excessive profits and allow the governmental pool to compete with for profit insurance, risk is leveled across the pool and consumers pay less. If the big private insurance companies can't be more efficient or have better risk models than the government, well they should stop trying to sell policies.
    - Panzer04 2y ago
      The people are risk pay less, all of the other people forced to participate in your general insurance pay more. If I live in the middle of a city in an apartment block should I pay the same rates to insure against wildfire as someone in the middle of a dry forest? Probably not, but govenrment-mandated insurance programs force me to.
      - mgiampapa 2y ago
        Premiums should be based on risk, not flat. I don't know where you are drawing that line of reasoning from. Just because the government is providing coverage doesn't mean it's all the same rate. Every insurance product has a risk model to set prices. I was just advocating that we have a non profit minded entity with deep pockets do it vs private companies motivated by maximizing profit. Public benefit corps fit this model as do regulated utilities.

How about profit caps? I feel like government stepping in and being the insurer with a sufficiently large pool of risk to spread around lets them set a fair rate without the need to make a return or answer to shareholders. To some extent this has helped with health insurance. Each year I get a check back from my insurer saying they didn't spend enough on my care vs my premiums.

ladberg 2y ago
Insurance companies have pretty thing profit margins regardless, even in areas where profits are not capped. It's a competitive marketplace!
- tomrod 2y ago
  I'm not sure I believe your factoid. Can you cite? UHC is one of the wealthiest companies in the world.
  - amazingamazing 2y ago
    their september 2024 earnings put them at 6% margin. that’s not very good. for reference apple is 15%, mcdonalds is 32% and costco is about 3%. that being said compared to a competitor, elevance at 2.5%, they’re doing well. a little worse than allstate (car and home insurance), which is about 7%.
    - tomrod 2y ago
      To be fair, they play a shell game by steering people towards their subsidiary owned medical providers (avoiding loss ratio limits of 15% to 20% by putting the money into providers, which have no profit cap).[0] [0] https://pnhp.org/news/insurers-avoid-loss-ratio-limits-by-shifting-profits-to-provider-subsidiaries/ https://pnhp.org/news/insurers-avoid-loss-ratio-limits-by-sh...
      - anomaly_ 2y ago
        Yea, and after all that they still only eked out a 4% net profit after tax for 2024.
      - tfehring 2y ago
        The 6.0% margin (for UnitedHealthGroup as a whole) already includes that. UnitedHealthcare (the subsidiary health insurer) had a slightly lower operating margin of 5.6% in Q3. https://www.unitedhealthgroup.com/content/dam/UHG/PDF/investors/2024/UNH-Q3-2024-Release.pdf https://www.unitedhealthgroup.com/content/dam/UHG/PDF/invest...
  - ladberg 2y ago
    Health insurance does have profit caps, so like the sibling commenter said their margins are small (6%) but also decently under the cap (20%) in the first place.
    - tomrod 2y ago
      The insurance subsidiary will have a cap, but provider subsidiaries have no such cap.[0] [0] https://pnhp.org/news/insurers-avoid-loss-ratio-limits-by-shifting-profits-to-provider-subsidiaries/ https://pnhp.org/news/insurers-avoid-loss-ratio-limits-by-sh...
bitcurious 2y ago
> To some extent this has helped with health insurance. Each year I get a check back from my insurer saying they didn't spend enough on my care vs my premiums. This has baffled me ever since Obamacare was first passed - it seems that each year the insurance companies have an incentive to drive up the cost of healthcare, since that’s how they earn more money in absolute terms. Is it not so?
- nradov 2y ago
  That is so, to an extent. But it's balanced against employer demands to hold down medical costs because they pay most of the bills. If your HR department can save 5% on employee medical costs by switching from Blue Cross to Cigna next year they'll absolutely do it.
- gunian 2y ago
  Any idea why Obamacare didn't follow the European model? Other than the freedom argument People on HN always talk about European health insurance seems like an easier route than to murder people lol
  - School-Cotton 2y ago
    First of all there isn’t one “European model”, every country in Europe has its own system. To answer the substantive point, it’s extremely difficult to pass substantial laws in the US due to the structure of its political system. The mandatory coalition of the president + 60% of the senate + 50% of the House of Representatives is a much higher bar than any other democracy. So laws aren’t written to be optimal policy, they are written to satisfy this extremely high coalition requirement — Obamacare in particular was very fundamentally weakened from some of the more expansive initial proposals to address the concerns of one or two senators and get them on board.
    - gunian 2y ago
      but people always talk about how insurance is guaranteed in europe something must be working if gunning down a CEO is pro the people wouldn't copying one of the European countries be even more pro the people? what makes senators hate something that is pro the people? wouldn't that give them better ratings? I come from a dictatorship so sorry if this is a dumb question
cowsandmilk 2y ago
> How about profit caps? What period do you put it over for property insurance? Profit caps work for health insurance because claims are typically not correlated. The percentage of your customers with cancer won’t 5x one year and go back to baseline the next. New drugs or treatments (or a drug going off patent) can cause correlated swings, but generally costs to health insurers don’t change a lot year to year. For property insurance, you need to bring in profits most years to fund the year when there are multiple category V hurricanes or large fires.
- mgiampapa 2y ago
  The book of business has to be large and the pockets deep. Which describes our current insurance market and the government. The way we handle this now is with reinsurance.
csomar 2y ago
Sure. Because the response of a failure in governance is more government? What you are proposing is "unfair". You are essentially suggesting that the rest of the country subsidize a subset who wants to live near high-risk areas. Me too want to live in a dense forest and also have my house by the edge of the river. You could make the argument for this for healthcare, since no one can choose which illness he is born with. But choosing your housing location is a "choice". And you can/should move somewhere else where it is less risky.
- macinjosh 2y ago
  People choose to smoke, overeat, engage in risky activities that can cause injury near and long term (Rock climbing, riding motorcycles, football, MMA). Why should society pay for these choices?
  - throw0101a 2y ago
    > Why should society pay for these choices? Because it's the only way to get universal coverage, which if you don't have, means a portion of the population gets really sick, jams the ER, can't afford to pay the resulting bill (maybe declaring bankrupcy), and someone then has to eat/cover the cost. Often by hiking prices for those that do have coverage. Do a search for "ACA three legged stool": > It starts by requiring that insurers offer the same plans, at the same prices, to everyone, regardless of medical history. This deals with the problem of pre-existing conditions. On its own, however, this would lead to a “death spiral”: healthy people would wait until they got sick to sign up, so those who did sign up would be relatively unhealthy, driving up premiums, which would in turn drive out more healthy people, and so on. > So insurance regulation has to be accompanied by the individual mandate, a requirement that people sign up for insurance, even if they’re currently healthy. And the insurance must meet minimum standards: Buying a cheap policy that barely covers anything is functionally the same as not buying insurance at all. > But what if people can’t afford insurance? The third leg of the stool is subsidies that limit the cost for those with lower incomes. For those with the lowest incomes, the subsidy is 100 percent, and takes the form of an expansion of Medicaid. * https://archive.is/https://www.nytimes.com/2017/07/10/opinion/obamacare-repeal.html https://archive.is/https://www.nytimes.com/2017/07/10/opinio... This 'architecture' was developed by Jonathan Gruber: * https://cdn.americanprogress.org/wp-content/uploads/issues/2010/08/pdf/repealing_reform.pdf https://cdn.americanprogress.org/wp-content/uploads/issues/2... * https://en.wikipedia.org/wiki/Jonathan_Gruber_(economist) https://en.wikipedia.org/wiki/Jonathan_Gruber_(economist) It is a form of social safety net.
toast0 2y ago
Most regulated insurance markets do have profit caps. California certainly does, but there was still a price cap added.
waterhouse 2y ago
Profit caps presumably create perverse consequences. If the profit I'm allowed to make is proportional to X, then I'm incentivized to maximize X. If X is my costs, then... Maybe that's where these unbelievably high line items on medical bills come from.
JumpCrisscross 2y ago
> How about profit caps? Transfers wealth from shareholders, patients and taxpayers to management, bankers and intermediaries. Broadly speaking, caps are stupid—akin to treating liver enzymes directly when they spike versus seeing them as the sign of deeper problems.
- Spivak 2y ago
  I think that's a great metaphor for the situation, when you get a patient running a 105 fever you put them in an ice bath and then consider what underlying problem is ailing them. You do the first part so they don't die before the long-term treatment kicks in.
  - JumpCrisscross 2y ago
    Correct. Caps are fine as a short-term measure. In the long term, they’re putting a patient running a fever on immunosuppressants. The fever will go. But the patient will die.
JKCalhoun 2y ago
Or maybe C-suite pay/benefits caps, ha ha.
- hb-robo 2y ago
  I'm all for this, lol.
donavanm 2y ago
> I feel like government stepping in and being the insurer with a sufficiently large pool of risk to spread around lets them set a fair rate without the need to make a return or answer to shareholders. Youre about 20-30 years late to the game, but arrive in time to see the conclusion does not match your assumption. See california for fire, florida for fstorm damage, and everywhere in the us for federal flood coverage. It doesnt work. CA FAIR has higher rates to account for increasing the coverage pool, but it doesnt look like premiums will cover the current or future loses. Which is the universal story when your policy attracts all the high risk/payout buyers. And FAIR, roughly, is setup to go recoup losses from all the _other_ insurance providers in the state. Even ones not insuring those policy holders _or that type of insurance_. Its just a layer of indirection to subsidize fire risk against all poly holders.
- mgiampapa 2y ago
  In all of those examples you have the for profit private insurance leaving the market because it's not profitable enough. When you take away excessive profits and allow the governmental pool to compete with for profit insurance, risk is leveled across the pool and consumers pay less. If the big private insurance companies can't be more efficient or have better risk models than the government, well they should stop trying to sell policies.
  - Panzer04 2y ago
    The people are risk pay less, all of the other people forced to participate in your general insurance pay more. If I live in the middle of a city in an apartment block should I pay the same rates to insure against wildfire as someone in the middle of a dry forest? Probably not, but govenrment-mandated insurance programs force me to.
    - mgiampapa 2y ago
      Premiums should be based on risk, not flat. I don't know where you are drawing that line of reasoning from. Just because the government is providing coverage doesn't mean it's all the same rate. Every insurance product has a risk model to set prices. I was just advocating that we have a non profit minded entity with deep pockets do it vs private companies motivated by maximizing profit. Public benefit corps fit this model as do regulated utilities.