Why doesn't the American market provide efficient and effective health insurance like it does for car insurance?

Submitted ⁨⁨3⁩ ⁨months⁩ ago⁩ by ⁨HottieAutie@lemmy.dbzer0.com⁩ to ⁨nostupidquestions@lemmy.world⁩

Car insurance is relatively simple. I shop around, telling them how much coverage I want. They request my driving history, and give me a quote. At any time, I can shop around and change insurance policies without any problems. Once it’s time to collect payment, it’s a relatively simple matter. What makes health insurance so difficult, controlling, unreliable, and expensive? For example, with health insurance:

Can only shop during a specific enrollment period
Policies are so complex, the vast majority of the population can’t understand them
It’s commonly provided in part by the employer because buying a policy otherwise is prohibitively expensive
Insurance companies are notorious for denying payments

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BearOfaTime@lemm.ee ⁨3⁩ ⁨months⁩ ago
Car insurance isn’t efficient nor effective. It’s a complete ripoff.

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- Hildegarde@lemmy.world ⁨3⁩ ⁨months⁩ ago
  I have made two claims with my insurance and they paid without any pushback. I think that’s just your insurance company. I would highly encourage you to name and shame.
  
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  - fuckwit_mcbumcrumble@lemmy.dbzer0.com ⁨3⁩ ⁨months⁩ ago
    Yeah I’ve also had 0 issues with my insurance the two times I’ve used them.
    
    Hell when I went to a repair shop I insisted on only OEM parts and the guy there said insurance typically wouldn’t replace that part OEM. But when I asked them about it they said they were happy to keep things 100% OEM.
    
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- bionicjoey@lemmy.ca ⁨3⁩ ⁨months⁩ ago
  My sister lives in British Columbia, and from what I’ve heard, they have sjngle-payer provincial government run car insurance (in addition to health insurance like the rest of Canada). It sounds awesome.
  
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- Montagge@lemmy.zip ⁨3⁩ ⁨months⁩ ago
  I also had to get the state involved when the insurance agent just wouldn’t return my calls
  
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- Passerby6497@lemmy.world ⁨3⁩ ⁨months⁩ ago
  Might be your company, I’ve had 3 not at fault and 1 at fault accident and I’ve never had any issues with the insurance company paying out. In fact, my insurance has always been super chill about it, and the two not at faults that involved another driver both had the opposing insurance company tried to screw around to get out of paying.
  
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- DBT@lemmy.world ⁨3⁩ ⁨months⁩ ago
  How do you file a complaint? I had frame swap that cost almost 20k a couple years ago after getting rear ended and my insurance said the diminished value was only 60 bucks. I never even cashed the check I was so pissed.
  
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  - ChapulinColorado@lemmy.world ⁨3⁩ ⁨months⁩ ago
    I agree that insurance companies are a scam, but it sounds like you had the work done before repairs and shops were agreed in? Insurance companies generally work like that…
    
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- taiyang@lemmy.world ⁨3⁩ ⁨months⁩ ago
  I also have to say I’ve had only good experiences with my current insurance provider (Amica) but I also pay a little more. My mom got an at fault accident in my car she borrowed when her car was in the shop and it was handled without complaint nor did they raise my rates.
  
  But you’re still right about a lot of others. I’m almost certain GEICO or Progressive would have raised mine. I wish it was regulated such that my experience is the mandatory norm.
  
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dogsnest@lemmy.world ⁨3⁩ ⁨months⁩ ago
Why doesn’t America join the first world and provide Universal Health Care?

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- finley@lemm.ee ⁨3⁩ ⁨months⁩ ago
  Because rich people on large corporations refuse to pay their fair share of taxes
  
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- DemBoSain@midwest.social ⁨3⁩ ⁨months⁩ ago
  Because the American system provides for a rich ecosystem of middlemen and lobbyists. If we switch to Universal Healthcare, what will they do? Code?
  
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- FlashMobOfOne@lemmy.world ⁨3⁩ ⁨months⁩ ago
  [deleted]
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  - dogsnest@lemmy.world ⁨3⁩ ⁨months⁩ ago
    [deleted]
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- yemmly@lemmy.world ⁨3⁩ ⁨months⁩ ago
  No one knows, but for sure the reason is something rotten. I’ve never ever heard a reasonable argument against it.
  
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- abbadon420@lemm.ee ⁨3⁩ ⁨months⁩ ago
  Not the entire “first world” has universal health care. The Netherlands for example has only 62% UFC. Which is fairly managable in paractice, with proper regulations and support for thos ewho can’t pay the €120 obligatory monthly insurance fee, but obviously it’s complete bullshit.
  
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litchralee@sh.itjust.works ⁨3⁩ ⁨months⁩ ago
At its very core, an insurance company operates by: 1) pooling policyholder’s risks together and 2) collecting premiums from the policyholders based on actuarial data, to pay claims and maybe make a small profit. But looking broader, an insurance market exists when: a) policyholders voluntarily or are obliged to obtain policies, b) insurers are willing and able to accept the risks in exchange for a premium expected to support the insurance pool, and c) the actuarial risks are calculable and prove true, on average.

The loss of any of A, B, or C will substantially impact a healthy insurance market, or can prevent the insurance market from ever getting started. For some examples of market failures, the ongoing California homeowner insurance crisis shows how losing B (starting with insurers refusing to renew policies near the wildland-rural interface) and C (increase in insured losses due to climate change) results in policies becoming unaffordable or impossible to obtain.

As a broader nationwide example, an established business sector that operates wholly without insurance availability is cannabis. A majority of US States have decriminalized marijuana for medical use, and a near-majority have legalized recreational consumption. Yet due to unyielding federal law, no insurer will issue business policies, to protect from risks that all businesses would face, such as losses from fire, due to a product recall or product liability, or for liability to employees. These risks are calculable and there’s a clear need for such policies – thus meeting criteria A and C – but no commercial insurer is willing to issue. Accordingly, the formal market for cannabis business insurance is virtually non-existent in the USA.

With these examples, we can see that the automobile insurance market meets all three criteria for a healthy market, but it’s how these criteria are met which is noteworthy. Motorists in the USA are obliged in every state except New Hampshire and Virginia, it is a criminal offense to drive a car without third-party liability insurance, meaning the motorist might spend time in jail. Note: NH and VA won’t send a motorist to jail, but they do have administrative penalties for driving without “financial responsibility”, which includes insurance or a bond at the DMV.

The exact requirement varies per state, with some requiring very low amounts of coverage and others requiring extra coverage a like Personal Injury Protection (PIP, aka no-fault insurance). The point is that criteria A is easily met: motorists want to avoid jail, but also want to avoid the indignity of being sued after having caused a road incident, in addition to protecting their apparently only viable mode of transportation.

Insurers can take into account the overall trends in national risks trends for automobiles (eg new car safety) as well as local or hyper-local risks (eg hail damage in the southeast, property crime in a particular zip code). And as a large country with nearly as many cars as people, many insurers are willing to meet the demand. This satisfies criteria B and C.

So well-organized is the automobile insurance market that you could almost say that it’s vertically integrated: the largest nationwide insurers have contracts in place with every dealership network, auto collision chain, new and used parts dealers, as well as automatic data sharing with state DMVs, plus with firms like CarFax that buy information. Despite each state being slightly different, the insurers have overcome and achieved a level of near uniformity that allows an efficient market to exist.

Things are drastically different for the American healthcare system and for American health insurance companies. While most think of their healthcare provider as a national name like Anthem Blue Cross or Kaiser Permanente, the reality is that each state is an island. Even federal programs like Medicaid and Medicare are subject to state-level non-uniformities. Hospitals can be either privately operated (eg religion-affiliated, or for-profit) or run by a public entity (eg county or state), and can exist as a single entity or form part of a regional hospital network). Some entities operate both the insurance pool as well as providing the health care (eg HMOs like Kaiser Permanente) while others dispatch to a list of contracted providers, usually being doctor’s own private practices or specialist offices.

With so many disparate entities, and where healthcare is a heavily-regulated activity by each state, the cost of insurable risks – that is, for routine healthcare services – is already kinda difficult to compute. Hospitals and doctors go through intense negotiations with insurers to come to an agreement on reimbursement rates, but the reality is that neither has sufficient actuarial data to price based on what can be borne by the market. So they just pass their costs on, whatever those may be, and insurers either accept it into their calculations, or drop the provider.

Suffice it to say, there are fewer pressure to push the total cost of healthcare down, given this reality, and more likely prices will continue to climb. This fails criteria C.

financial flow in the US healthcare system Source

Briefly speaking, it’s fairly self explanatory why people would want health insurance, since the alternative is either death or serious health repercussions, paying out-of-pocket rates for service, or going to the ER and being burdened by medical debt that will somehow haunt even after death.. Criteria A is present.

As for Criteria B, that was actually resolved as part of the Affordable Care Act (ACA). During discussions with the drafters, insurers bargained for an obligation for everyone to have insurance (aka the individual mandate, bolstering criteria A), in exchange for an obligation to issue policies for anyone who applies, irrespective of pre-existing health conditions. Thus, Criteria B is present for all ACA-compliant policies in the USA, even though the individual mandate was legislatively repealed.

So to answer your question directly, the costs for healthcare in the USA continue to spiral so far out of control that it causes distortions in health insurance market, to everyone’s detriment. Specific issues such as open-enrollment periods, employer subsidies, and incomprehensible coverage levels all stem from – and are attempts to reduce – costs.

Enrollment periods prevent people from changing plans immediately after obtaining an expensive service, like a major surgery. Employer subsidies exist due to a federal tax quirk decades ago, which has now accidentally become an essential part of the health insurance and health care situation. And coverage levels try to provide tiered plans, so people can still afford coverage for “catastrophic” injuries while others can buy coverage for known, recurring medical needs.

But these are all bandaging the bleeding which is unchecked costs. It would take an act of Congress – literally – or of state legislatures to address the structural issues at play. The most prominent solution to nip costs is the bud is to achieve the same near-vertical integration as with automobile insurance. This means a single or very few entities which have contracts in place with every provider (doctors and hospitals), negotiated at once and uniformly, so as to achieve criteria C. The single-payer model – which Medicare already uses – is one such solution.

Going further would be the universal healthcare model, which discards the notion of health insurance entirely and creates an obligation for a government department to provide for the health of the citizens, funded by taxes. This means doctors and hospitals work at the behest of the department for then citizenry, or work privately outside the system entirely, with no guarantee of a steady stream of work.

These models could be approached by individual states or by the nation as a whole, but it’s unclear where the Overton window for that idea currently is.

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- hakase@lemm.ee ⁨3⁩ ⁨months⁩ ago
  Thanks for taking the time to write such an informed and in-depth comment!
  
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  - Ersatz86@lemmy.world ⁨3⁩ ⁨months⁩ ago
    Indeed! Bestof’d.
    
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- Cryophilia@lemmy.world ⁨3⁩ ⁨months⁩ ago
  That is an extremely well-written and researched answer!
  
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  - Ersatz86@lemmy.world ⁨3⁩ ⁨months⁩ ago
    Agreed. Bestof’d.
    
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- WolfLink@sh.itjust.works ⁨3⁩ ⁨months⁩ ago
  I find it hard to believe that a far market can exist when everyone is required or effectively required to purchase something. If you think of supply and demand, the demand for something like health insurance or legally mandated car insurance is effectively infinite.
  
  The decision to get car insurance or not is not “is the value this car insurance provides worth the money” it’s “is the value this car provides worth the money”. Similarly, the value of health insurance becomes the value of getting any sort of medical treatment, because it’s generally impossible to get treatment otherwise.
  
  This allows the insurance companies to charge rates far beyond the value they actually provide, because they are legal gatekeepers to far more valuable opportunities.
  
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  - HottieAutie@lemmy.dbzer0.com ⁨2⁩ ⁨months⁩ ago
    Assuming that demand for car insurance is artificially inflated because people are mandated to purchase it, wouldn’t an open market still drive down prices due to competition? Another market that has even more demand is food. People aren’t even legally mandated to buy food. They either buy it or die. There may be a few people that can grow enough of their own food to sustain themselves without ever purchasing it, but I would guess that there are more people that make enough money to live without insurance than people that grow all of their own food. Despite that, food seems to be relatively affordable. If one food vendor is charging too much or I don’t like their product, I can easily go to a competing food vendor and purchase there. Adam’s invisible hand then ensures that the market provides an efficient quality-to-price ratio. I’m not arguing it’s perfect, but we don’t hear about how food stores are ripping us off as much as we do about insurance companies. My argument is that despite there being inflated demand, the insurance companies still have to compete with each other for those customers, which would have a considerable impact on price. Let’s say we all buy cars that are valued at $20k. If one company is providing insurance for $100/month and the other company is charging $150/month, everything else being equal, the former would earn more customers.
    
    Also, since demand is high, I think it would LOWER rates. Here’s why. If insurance was not mandated, then the people that would get it would include everyone that thinks they may need it. The ones that think they will not use it will avoid wasting their money since they’re not receiving anything in return. That means that there will be less contributions and more expenditures from the pooled money, making insurance more expensive. Mandate insurance makes it so that even the people that will not use it contribute to the pool, so everyone’s costs are lower than otherwise. Of course, this would only happen in a market that allows for competition. Otherwise, if there were only one insurance provider, they would be in a position to price gouge everyone since the only other option would be to break the law.
    
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Ziggurat@sh.itjust.works ⁨3⁩ ⁨months⁩ ago
You, don’t have any bargaining power regarding your health. Let’s say you broke a arm, a Mundane thing. You’re in pain, and would do anything to make it stop. Once they give you some morphine, you’re high and can’t take any reasonable decision.

Moreover, you can decide to thrash away a car, it happens all the time, you can’t do it with your life.

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snooggums@midwest.social ⁨3⁩ ⁨months⁩ ago
By tying insurance to employment (side effect of some economic policy) the option to shop around was removed. When people are already forced to use the insurance provided by employment so that they can afford it, there is no way for some other insurance agency to be competitive. Then it just got worse over the years.

The ACA attempting to make a competitive market was a half assed substitute for just going all in on single payer, but at least people with the jobs that don’t provide insurance have the possibility of affording it now so it is better. Just getting stabbed instead of being shot better.

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cerement@slrpnk.net ⁨3⁩ ⁨months⁩ ago
(easier for health insurance companies to double-dip this way)

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Xeroxchasechase@lemmy.world ⁨3⁩ ⁨months⁩ ago
So many explanations, but here’s a summary: The concept of the efficiency of free markets is an illustration. Especially in conditions of guaranteed damand

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tobogganablaze@lemmus.org ⁨3⁩ ⁨months⁩ ago
Because Americans care about cars.

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SatansMaggotyCumFart@lemmy.world ⁨3⁩ ⁨months⁩ ago
It is effective and efficient, just not for the consumer.

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Shimitar@feddit.it ⁨3⁩ ⁨months⁩ ago
Not all cars and drivers have accidents, but everybody in his/hers life WILL need health care of some kind

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HobbitFoot@thelemmy.club ⁨3⁩ ⁨months⁩ ago

Can only shop during a specific enrollment period.

With most other insurance, it only pays out of something unplanned happens. With health insurance, there are medical issues that can be known about in advance of them being to be addressed. So you might know you have a heart condition that needs to be operated on soon, but not immediately. This is known as a medical precondition.

Before the ACA was passed, health insurance companies would always exclude medical preconditions. So, if you switched insurance while needing that heart operation, you would find that you weren’t covered and have to pay all the costs.

The ACA got rid of being able to limit coverage of medical preconditions, but it needed to provide a way for insurance companies to limit their exposure to people switching from a bad plan to an amazing plan that covered everything and would have to pay out immediately. To handle that, it made it a requirement for all people to get a minimum amount of medical insurance and to restrict when people could shop for insurance.

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Cosmos7349@lemmy.world ⁨3⁩ ⁨months⁩ ago
I mean, people are more complicated and more expensive to fix

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- NocturnalMorning@lemmy.world ⁨3⁩ ⁨months⁩ ago
  Maybe, but the U.S. does have some of the most expensive health system in the world, and the quality of care isn’t really better.
  
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  - snooggums@midwest.social ⁨3⁩ ⁨months⁩ ago
    More expensive, worse care, and not available to everyone.
    
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  - Cosmos7349@lemmy.world ⁨3⁩ ⁨months⁩ ago
    but my understanding is that’s mostly because they don’t fully rely on the market, the way the US does. The market’s priority is not the wellbeing of people, which is why government regulation is important for affordable healthcare.
    
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- neidu2@feddit.nl ⁨3⁩ ⁨months⁩ ago
  And for some of our parts, the warranty outright sucks.
  
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  - Nougat@fedia.io ⁨3⁩ ⁨months⁩ ago
    https://youtu.be/vVoMyR9X-4Q
    
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CrimeDad@lemmy.crimedad.work ⁨3⁩ ⁨months⁩ ago
I think, from the perspective of the insurance companies, the risk is greater for insuring people’s health than their vehicles. Also, people’s lives are at stake, so it’s basically just a complicated extortion market. I don’t know I think all the pharma and healthcare industries should be nationalized and all the healthcare workers conscripted. Can’t be worse than what we have now.

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- ThrowawayPermanente@sh.itjust.works ⁨3⁩ ⁨months⁩ ago
  It can always get worse
  
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  - CrimeDad@lemmy.crimedad.work ⁨3⁩ ⁨months⁩ ago
    How is nationalized healthcare in one of the wealthiest countries in the world supposed to be worse than what we have now?
    
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mkwt@lemmy.world ⁨3⁩ ⁨months⁩ ago

Can only shop during a specific enrollment period

With cars it’s relatively easy to determine if a particular collision occurred before or after you bought insurance. It’s also very hard to predict exactly when these commissions will occur. Consequently, it is not so easy to delay and only buy a policy when you already have a claim ready to go.

With many progressive diseases, it’s much easier to wait and only buy insurance if you think it’s going to be expensive, but haven’t been diagnosed with anything yet. That’s why health insurance has open enrollment periods.

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Kaboom@reddthat.com ⁨3⁩ ⁨months⁩ ago
You can get your own health insurance. Its called market place insurance. Most use their employers health insurance, but that option exists. And theres no “enrollment period”

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- fifbiff@lemm.ee ⁨3⁩ ⁨months⁩ ago
  Yeah but it’s way more expensive
  
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  - Kaboom@reddthat.com ⁨3⁩ ⁨months⁩ ago
    Yes. With employment insurance, your employer pays a large chunk of it, its called benefits for a reason. Like 401k matching, if you dont use it, youre leaving money on the table
    
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Tikiporch@lemmy.world ⁨3⁩ ⁨months⁩ ago
Because the human body needs way more maintenance and expertise to maintain.

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set_secret@lemmy.world ⁨3⁩ ⁨months⁩ ago
universal health cover is also realtively simple too…

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Rookwood@lemmy.world ⁨3⁩ ⁨months⁩ ago
Obamacare really fucked up the health insurance market. Open enrollment is because of Obamacare. Obamacare was written by the insurance lobby. They created a porous law and likely already had ideas to exploit it before it passed. And they have. It has been an incredible boon to them and Americans have suffered. Healthcare was NOT this expensive before Obamacare and insurance wasn’t this complicated and was more affordable too.

Obamacare is the biggest piece of regulatory capture in our lifetime, and in a time of rampant regulatory capture, that’s saying a lot. It also showcases why our 2 party system is just broken. When the so called left option can produce such a broken capitalist piece of legislation.

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- PeepinGoodArgs@reddthat.com ⁨3⁩ ⁨months⁩ ago
  You’re only partially right. There was a penalty for not having healthcare that was reduced to $0 where it has stayed since 2017. When that happened premiums shot up because healthier people decided to not get insurance. Considering health insurance is about pooling risk, healthier people left weren’t there to subsidize the relatively sicker folks. So, it’s also a problem of incentives
  
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- elephantium@lemmy.world ⁨3⁩ ⁨months⁩ ago
  I don’t think you can blame it all on Obamacare. I vividly remember wondering “How TF do people with families afford this?!” when looking at the individual vs. family insurance at a job back in 2002. Premiums were skyrocketing then, and they’ve been skyrocketing ever since.
  
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- LesserAbe@lemmy.world ⁨3⁩ ⁨months⁩ ago
  Open enrollment isn’t because of Obamacare. Your employer-provided health plan had open enrollment periods before the ACA.
  
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eran_morad@lemmy.world ⁨3⁩ ⁨months⁩ ago
Dolla dolla bill

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