A post by Andrew Barna

Capping profits…the words bring a chill to the ears of capitalists everywhere, but the insurance commissioner in California is supporting legislation that would do just that for the state’s health insurers (see the LA Times story here). While I tend to fall in the government-non-interference camp, I do agree that something needs to be done about insurance industry profits. While most hospitals, being non-profit, return their profits to the community through re-investment, healthcare dollars are siphoned out of the system through for-profit insurers (there are of course other players in the industry that are for profit, physicians and IT companies, to name a few).

Rather than such a draconian intervention as capping profits, which will never be acceptable to the insurance industry, we should reach a different compromise. The public release of information is becoming a powerful tool in modifying provider behavior around cost and quality. We could and should exert the same pressure on health insurance companies by organizing and comparing their profit, administrative costs per dollar of premium, and charitable activities. Imagine adding that information to such health insurance comparison websites, such as insurance.com and healthia.com. When people shop for insurance they could compare a company’s corporate citizenship along side its premiums and benefit plans.

As with other cost and quality comparison sites, the mere presence of the information in the public eye motivates a change in behavior, whether or not there is a change in purchasing behavior. I think the public would actually be surprised at both the level of charitable work that insurance companies provide, as well as the size of their profits. As with most issues that hit the politicians’ radar, it is largely a matter of a lack of information that creates public anxiety and impetus for action. Let’s give the public the information it needs to moderate health insurance profits.