Catashtrophic Healthcare

What is the real health care issue?

Catastrophic illness that is not covered by insurance companies.

Why don't insurance companies want to cover catastrophic illnesses? Its simple; catastrophic illnesses are like hurricanes: they cost the insurance companies a lot of money. Like hurricanes, catastrophic illnesses can have large impacts on the insurance company's cash flow. If the company's cash flow is too significantly impacted, they could miss their profit goals. And, in this case, executives for that company could lose a significant amount of money (compensation is usually linked to company performance). So, rather than take the risks, insurance companies prefer the easy money. They just want to provide insurance, where they are assured to make money.

All companies need to increase their earnings (profits). This means they either have to increase revenue or reduce costs. Reduced costs mean reduced quality for products (in some cases), or, reduced services for the same cost. Likewise, revenue is increased either by raising prices, or, by increasing market share. So, if a company is arbitrarily trying the increase their profits, then there is a good chance that consumers are going to be the ones that ultimately pay the price. Growth in profits without growth in market share is always going to lead to inflated prices for consumers. Simply put, consumers are getting less for their money. This is my definition of inflation.

In most cases, stockholders are not the ones that benefit the most from increased profits - the company's executives are the ones that benefit the most. And, the customers who are paying for products and services are the ones that benefit the least. This is a classic example of how the rich are getting richer and the poor (or middle class) are barely getting by. Companies increase their profits, which increases the amount being paid to top executives; increasing the gap between the rich and everyone else. But, I digress. I simply wanted to point out that perhaps insurance company executives are not motivated to provide the best service for the best price. Rather, they could be motivated by their compensation, which is linked to the profitability of their company.

Is this really the way a health insurance company should be run? The role of an insurance company in society is to provide the public with some degree of financial protection against unforeseen events in their lives. If you think about how much more benefit an insurance company could provide to consumers, if they were not paying executives so much money, its almost depressing.

Perhaps there should be a nationalized insurance company for catastrophic healthcare. In general, I am not for government intervention in the free market. However, I think my example here makes it clear that the only ones that are really benefiting from the current situation are the executives of these companies. I would much rather have a federal civil service organization managing a catastrophic heathcare trust fund.

Tell me what you think ...