But that doesn’t stop her from having opinions…
Indeed, one of the biggest problems in discussing health insurance is that Nancy Pelosi and others have no idea what insurance is or how it works. They do not allow their ignorance to stop them from using insurers as as their whipping boy.
An editorial in Barron’s notes that Pelosi “does not seem to grasp the nature of insurance, which relies on pooled risk—not forced coverage.” She has not let her ignorance stand in the way of having opinions:
“I do not like using words like villains, but people call me a villain all the time, so I figure it is probably OK to use it back,” the speaker said as she warmed up in an interview with Al Hunt on Bloomberg TV.
Why does Pelosi see the insurance industry as a nest of villains? “They have been the ones with exorbitant profits and immoral decision-making in terms of coming between patients and their doctors,” she squawked.
Unfortunately, this simply isn’t the case:
“Exorbitant profits? U.S. insurance industry profits are easy to look up. The managed health care companies in the S&P 500 are Aetna, Cigna, Coventry Health Care, Humana, UnitedHealth Group and WellPoint. In the four quarters ended March 31, their operating profit margin was 4.3%. For the whole S&P 500, the corresponding profit margin was 7.3%. Economist Ed Yardeni, who keeps track of such things and is a great hand with corporate data, says that since 1996, the insurance companies have averaged 2.9 percentage points below the profits of all 500 companies.”
Barron’s also explains:
“Insurance is a financial device protecting people from unlikely, unpredictable, adverse events, by pooling their funds to compensate those few who have losses. Fire insurance, for example, protects homeowners from extreme but unlikely losses.
“Covering people with pre-existing conditions is not insurance; it’s a social program. Imagine a homeowners’ policy that covered air-conditioning and heating bills as well as fire and other sorts of unexpected damage. Payoffs would be continuous and certain. Premiums would rise accordingly, just as they have with health insurance that offers too much coverage.
“The only way to insure a ‘risk’ that is actually a certainty is to make other people pay for it. As we do. Healthy people already are taxed to pay for the care of sick people. More than half of Americans receive tax-supported health care.”
As I observed below, health insurance companies do sometimes refuse to cover procedures. Here is what Barron’s says about that:
“If insurance companies come between patients and their doctors, Pelosi should not resent it unless patients are also paying for their own treatment. It’s true that insurance companies sometimes refuse to pay for treatments that patients want and doctors think are necessary. Usually the insurers do so because they did not insure that risk, because they did not receive a premium to pay for it. This is a shame, but not shameful.
“Only a government ‘insurance’ plan, such as Medicare and Medicaid, can cover risks without charging premiums for them. They have the government’s invisible bank account behind them — topped off by taxes and borrowing.”
A term for making this the only system available: socialized medicine.
Don’t believe we can have it both ways—if we embrace socialized medicine, we’ll lose our own ability to get private insurance. Companies won’t be able to compete with that entity with the invisible bank account.