They already doing that with AI, rejecting claims at higher numbers than before .
Privatized insurance will always find a way to pay out less if they could get away with it . It is just nature of having the trifecta of profit motive , socialized risk and light regulation .
> They already doing that with AI, rejecting claims at higher numbers than before
Source?
Haven't risk based models been a thing for the last 15-20 years ?
If you think that insurance companies have "light regulation", I shudder to think of what "heavy regulation" would look like. (Source: I'm the CTO at an insurance company.)
Light did not mean to imply quantity of paperwork you have to do, rather are you allowed to do the things you want to do as a company.
More compliance or reporting requirements usually tend to favor the larger existing players who can afford to do it and that is also used to make the life difficult and reject more claims for the end user.
It is kind of thing that keeps you and me busy, major investors don't care about it all, the cost of the compliance or the lack is not more than a rounding number in the balance, the fines or penalties are puny and laughable.
The enormous profits year on year for decades now, the amount of consolidation allowed in the industry show that the industry is able to do mostly what they want pretty much, that is what I meant by light regulation.
I'm not sure we're looking at the same industry. Overall, insurance company profit margins are in the single digits, usually low single digits - and in many segments, they're frequently not profitable at all. To take one example, 2024 was the first profitable year for homeowners insurance companies since 2019, and even then, the segment's entire profit margin was 0.3% (not 3% - 0.3%).
https://riskandinsurance.com/us-pc-insurance-industry-posts-...
It's an accounting 101 thing to use all tricks in the book to reduce the reported profit, to avoid paying taxes on that profit.
The total profit of ALL US health insurance companies added together was $9bln in 2024: https://content.naic.org/sites/default/files/2024-annual-hea.... This is a profit margin of 0.8% down from 2.2% in the previous year.
Meta alone made $62bln in 2024: https://investor.atmeta.com/investor-news/press-release-deta...
So it's weird to see folks on a tech site talking about how enormous all the profits are in health insurance, and citations with numbers would be helpful to the discussion.
I worked in insurance-related tech for some time, and the providers (hospitals, large physician groups) and employers who actually pay for insurance have signficant market power in most regions, limiting what insurers can charge.
They have too much regulation, and too little auditing (at least in the managed healthcare business).
I agree, and I can see where it comes from (at least at the state level). The cycle is: bad trend happens that has deep root causes (let's say PE buying rural hospitals because of reduced Medicaid/Medicare reimbursements); legislators (rightfully) say "this shouldn't happen", but don't have the ability to address the deep root causes so they simply regulate healthcare M&As – now you have a bandaid on a problem that's going to pop up elsewhere.
I mean even in the simple stuff like denying payment for healthcare that should have been covered. CMS will come by and out a handful of cases, out of millions, every few years.
So obviously the company that prioritizes accuracy of coverage decisions by spending money on extra labor to audit itself is wasting money. Which means insureds have to waste more time getting the payment for healthcare they need.
>>They already doing that with AI, rejecting claims at higher numbers than before .
That's a feature, not a bug.
This is a great application of this quote. Insurance providers have 0 incentive to make their AI "good" at processing claims, in fact it's easy to see how "bad" AI can lead to a justification to deny more claims.
The question is how you define good. They surely want the Ai to be good in the sense that it rejects all claims that they think can get away with rejecting. But it should not reject those where rejection likely results in litigation and losing and having to pay damages.
> It is just nature of having the trifecta of profit motive , socialized risk and light regulation.
It's the nature of everything. They agree to pay you for something. It's nothing specific to "profit motive" in the sense you mean it.
I should have been clearer - profit maximization above all else as long it is mostly legal. Neither profit or profit maximization at all cost is nature of everything .
There are many other entity types from unions[1], cooperatives , public sector companies , quasi government entities, PBC, non profits that all offer insurance and can occasionally do it well.
We even have some in the US and don’t think it is communism even - like the FDIC or things like social security/ unemployment insurance.
At some level government and taxation itself is nothing but insurance ? We agree to paying taxes to mitigate against variety of risks including foreign invasion or smaller things like getting robbed on the street.
[1] Historically worker collectives or unions self-organized to socialize the risks of both major work ending injuries or death.
Ancient to modern armies operate on because of this insurance the two ingredients that made them not mercenaries - a form of long term insurance benefit (education, pension, land etc) or family members in the event of death and sovereign immunity for their actions.
Couldn't they accomplish the same thing by rejecting a certain percentage of claims totally at random?
That would be illegal though, the goal is do this legally after all.
We also have to remember all claims aren't equal. i.e. some claims end up being way costlier than others. You can achieve similar % margin outcomes by putting a ton of friction like, preconditions, multiple appeals processes and prior authorization for prior authorization, reviews by administrative doctors who have no expertise in the field being reviewed don't have to disclose their identity and so and on.
While U.S. system is most extreme or evolved, it is not unique, it is what you get when you end up privatize insurance any country with private insurance has some lighter version of this and is on the same journey .
Not that public health system or insurance a la NHS in UK or like Germany work, they are underfunded, mismanaged with long times in months to see a specialist and so on.
We have to choose our poison - unless you are rich of course, then the U.S. system is by far the best, people travel to the U.S. to get the kind of care that is not possible anywhere else.
> While U.S. system is most extreme or evolved, it is not unique, it is what you get when you end up privatize insurance any country with private insurance has some lighter version of this and is on the same journey .
I disagree with the statement that healthcare insurance is predominantly privatized in the US: Medicare and Medicaid, at least in 2023, outspent private plans for healthcare spending by about ~10% [1]; this is before accounting for government subsidies for private plans. And boy, does America have a very unique relationship with these programs.
https://www.healthsystemtracker.org/chart-collection/u-s-spe...
That's a great and thorough analysis!
My take away is that as public health costs are overtaking private insurance and at the same time doing a better job controlling costs per enrollee, it makes more and more sense just to have the government insure everyone.
I can't see what argument the private insurers have in their favor.
It is more nuanced, for example Medicare Advantage(Part C) is paid by Medicare money but it is profitable private operators who provide the plans and service it a fast growing part of Medicare .
John Oliver had an excellent segment coincidentally yesterday on this topic.
While the government pays for it, it is not managed or run by them so how to classify the program as public or private ?
Why does saying "AI did it" make it legal, if the outcome is the same?