I’ve noticed a few more centrist “experts” like Ezra Klein trying to push this contrarian idea that Liberals are stupidly misplacing blame on private insurance companies. His analysis though ignores the central role our private insurance companies play in the politics of keeping the system broken.

While it is true the fractured nature of our health care system benefits hospitals and drug companies by allowing them to overcharge, the insurance companies are the only part of the system totally dependent on everything remaining broken. They are the most invested in preventing any real solutions because for them it is fight for their very survival.

American insurance companies’ only justification for being so large is that they must each individually negotiate millions of prices with thousands of different providers and then handle the huge paperwork demand this unnecessary complexity creates. This fractured market creates a side benefit for hospitals by allowing them to charge higher prices, but for insurance companies it is their own excuse for keeping so much of each premium.

If we adopt a single-payer or all-payer system doctors, hospitals, and drug companies would all remain largely profitable businesses. Reform would slightly reduce their profits but these parts of the industry would all still be fine. But adopting even just all-payer would basically kill the insurance companies as they now exist.

While other countries like Germany or Belgium technically have private health insurance “sickness funds,” they are nothing like American insurance companies. They are basically just bank accounts with very small processing centers. Their medical loss ratio overhead is around 2-3 percent compared to the roughly 10-20 percent for American insurance companies. All-payer should cut the operational size of health insurance companies by 90 percent. This would destroy the salaries of insurance CEO’s.

The real problem is whoever is standing in the way of the solution, and insurance companies know they, relatively speaking, have the most to lose. Any real fix to the system would either eliminate or at least radically shrink them.

Photo by Thomas Hawk under Creative Commons license