In Defense of Health Insurance Companies

From Matthew Yglesias:

"But insurance companies are largely in the business of devising excuses to avoid helping you when you're in need. They employ people wake up every morning, drive to the office, and work all day denying sick people health care. The labors of these individuals line the pockets of the companies' executives. Most people find this repugnant. Bloodsucking vampires and flesh-eating zombies have the excuse of being driven by insatiable urges. Insurance companies have free will and just choose to do bad things because they're greedy.

That's not an argument that'll win you high grades in a public policy class or get you made a fellow at a think tank. It's demagogic and anti-intellectual. But it's effective and not, I think, entirely wrong."

Here is another way of looking at health insurance companies:

Sure insurance companies make a profit. But almost all of the revenue they take in from customers goes to pay for health insurance claims. So if an insurance company must pay an extra $20,000 to doctors their policy holders will have to pay almost $20,000 in extra premiums.

Insurance companies do employ people who try to deny unnecessary medical claims. Almost all of the savings that results from these peoples' efforts goes to lower the cost of health insurance. If not for their efforts Americans would pay vastly more for health insurance and so far more people would not have health insurance.

Unfortunately, insurance companies do pay for many medically dubious health expenses. These dubious expenses raise the cost of health insurance for everyone. The greatest problem with American health insurance companies, I believe, is that they don't deny enough claims.