Kansas Insurance Commissioner Sandy Praeger asked federal regulators to give Kansas a waiver from regulations requiring health insurance companies to spend at least 80 percent of premium income on health care.
She wanted the waiver, she said, to prevent damage to insurance companies that do business in Kansas. Her request was denied.
The 80 percent requirement is part of the health care reform bill that remains President Obama’s signature achievement. The object is to force insurance companies to spend health insurance premium income on health care. It doubtless was inserted in the legislature to limit the profits insurance companies such as UnitedHealth Group makes from policies largely purchased by employers for their employees rather than by individuals for themselves.
Good idea? Probably not. The profits made from health insurance vary widely from market to market. Companies selling to small businesses such as many Kansas firms have smaller profit margins. Mrs. Praeger was seeking to protect them so that they would continue to do business here.
But there are horror stories. Dr. William McGuire, CEO of the UnitedHealth Group, took home over $124 million in compensation one year — and that didn’t include stock option benefits. Congress probably had Bill McGuire in mind when it added that feature.
The theory is that competition keeps the health insurance industry from ripping off consumers. But the theory doesn’t work. It is human nature for CEOs and their boards to copy success. Bill gets $124 million, Andy wants the same, etc., etc., etc. Actually, Andy wants a bit more to show that his company is a leader. And so those tens of millions go to individuals, who don’t need more than a sliver of the total, rather than health care.
That’s the national perspective. Perhaps it doesn’t fit the picture in small-population states such as Kansas. We’ll take Mrs. Praeger’s word that it does not. She has always been on the consumer’s side.
BUT THE REAL solution to putting dollars to work on health care rather than insurance profits is to get rid of the middle man. Health care can and should be provided by non-profit management groups rather than profit-seeking companies whose primary goal is to increase payments to stockholders and, on the road to that achievement, crown management with princely incomes.
A better model is the way Medicare is managed — in Kansas by Blue Cross-Blue Shield under a fee-based contract.
In our for-profit health care system, the cost of management is about 30 percent. Management costs in systems such as Canada’s run about 5 percent. That is one of the reasons why Canada can provide quality health care to all of its people for about 11 percent of GDP while the U.S. spends 16 percent of GDP on health care and leaves 50 million of us out of the system.
But Commissioner Praeger can’t do anything about that.
— Emerson Lynn, jr.
