Insurance companies absolutely benefit from the higher and opaque prices, because they negotiate rebates with providers. This allows them to maximize patient copays and ensures they hit their deductible, i.e. paying as much as possible under their respective insurance plans. Contrast this with a no-rebate world with cheaper/more transparent pricing. Fewer patients would hit their out of pocket maximum.
They can use the rebates they get from the providers to subsidize the insured, allowing them to offer lower premiums and gain market share. This is what people mean when they say "In America, the sick people pay to subsidize the health care of the healthy people".
Of course, that above only applies if there is competitive pressure. If there is no competitive pressure (e.g. in states with only one or two insurers), they can keep premiums high and book as profit the difference between what the patient paid out and what the patient would have paid out in a lower-cost no-rebate world.
> Contrast this with a no-rebate world with cheaper/more transparent pricing. Fewer patients would hit their out of pocket maximum.
And premiums would go up. Every insurer has to get their premium approved by every state’s insurance regulator, and every state’s insurance regulator is not going to allow them to have more than a few percent of profit.
> They can use the rebates they get from the providers to subsidize the insured, allowing them to offer lower premiums and gain market share. This is what people mean when they say "In America, the sick people pay to subsidize the health care of the healthy people".
I’ve never heard of this, and it’s legally not allowed. The ACA mandates insurers price plans so that old people only pay at most 3x what young people pay. And the ACA does not allow insurers to charge more to people likelier to need healthcare. Mathematically, that means younger and healthier people pay higher premiums so that older and sicker people can have lower premiums.
NY state goes even further and says all ages pay the same premium, so young subsidizes old even more. MA has a 2x cap, I believe. And then of course, FICA taxes mean the young and working are paying for the healthcare for the old and non working, the vast majority of all healthcare spend in the US (Medicare).
Yes. As I wrote above, insurers compete on premiums, and they do do so by using rebates to subsidize those premiums by spreading patients' deductibles across the insured population. As far as profits go, I can't speak to regulatory issues since they will vary by state, but in any case the same critique would apply if insurers are pocketing a fixed percentage of a larger amount.
Re your second point, it completely twists my point and is largely irrelevant. Yes, older people paying the same premiums as younger people is a counter-argument in that older people are more likely to need healthcare, but the central point is that people who have to USE their insurance (i.e. sick people) subsidize the premiums of people who don't (healthy people), and this critique applies regardless of age. Now, one could argue that the structural factors that control costs across age cohorts counterbalances this phenomenon. And I'd agree with you! But that doesn't negate the original point that insurance companies benefit from, and advocate for, high sticker prices.
> but the central point is that people who have to USE their insurance (i.e. sick people) subsidize the premiums of people who don't (healthy people), and this critique applies regardless of age.
You’re losing me here. This claim is categorically false. You cannot consider only the deductible when calculating who subsidizes who.
The only way to calculate it is premiums + deductible + out of pocket maximum = total healthcare costs. And the subsidy via premium is so large that it negates effects of a deductible and out of pocket maximum.
Note that all plans have to be actuarially equivalent, regardless of what deductible you choose. The actuaries have to account for rebates and other pricing strategies when ensuring actuarial equivalence, so that the ratio of what the plan pays versus what you pay meets the required ratio for that metal level.
Since your health is not a factor in pricing your insurance, it has to be that people less likely to need healthcare pay for the people likely to need healthcare.
It is the same as if the government forbade auto insurers from using moving violations history, or life insurers from using health measures, or home insurers from using flood maps.
The claim about who subsidizes who was always hyperbole, I'll grant you that. I included the statement to make the point that this is the phenomenon people are referring to when they make that statement.
I happen to think there is validity to the statement if you control for other actuarial factors. But if you don't think that makes sense as a lens through which to look at the problem, I won't quibble, even though I disagree. We're also only talking about drug prices here, which is a small portion of overall healthcare spending.
In any case, the central point, that insurers benefit from higher prices, still stands.
> In any case, the central point, that insurers benefit from higher prices, still stands.
All sellers benefit from higher prices. No one limits the price they ask for out of the goodness of their hearts. Lower prices are because a competitor offers a lower price, and because buyers can’t pay a higher price.
They can use the rebates they get from the providers to subsidize the insured, allowing them to offer lower premiums and gain market share. This is what people mean when they say "In America, the sick people pay to subsidize the health care of the healthy people".
Of course, that above only applies if there is competitive pressure. If there is no competitive pressure (e.g. in states with only one or two insurers), they can keep premiums high and book as profit the difference between what the patient paid out and what the patient would have paid out in a lower-cost no-rebate world.