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HOW HEALTH INSURANCE BECAME A BOON FOR BUSINESS  
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Juan Cruz Ferre, Left Voice.
December 9, 2024
Popular Resistance
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_ Health insurance companies are a center-piece in a deeply corrupt,
inhumane, and deleterious health system that allows business people to
reap lofty profits even if it brings premature death, disability, and
pain onto millions of families every day. _

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UnitedHealth CEO Brian Thompson was killed
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targeted shooting outside a Hilton hotel in Midtown Manhattan on
December 4, 2024, when he was about to speak at an investor
conference. While mourning and preoccupation spread among economic and
political elites, a mix of celebration and snark dominated social
media commentary
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There has been an outpouring of empathy for the perpetrator, shirts
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murder scene printed on it, and even a UnitedHealth CEO shooter
look-alike contest [[link removed]]
in Washington Square Park. When a community of internet sleuths was
asked to collaborate with the police to find him, they reportedly
responded
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“Absolutely the F– not”. This reaction brings to light a
widespread and deep-seated contempt for health insurance companies,
who are single-handedly responsible for hundreds of thousands of cases
of premature death, disability, and bankruptcy a year.

A Profit-Driven Health System

It is well known that the U.S. healthcare system is the most
dysfunctional among high-income countries. Not only do the outcomes
pale in comparison to countries with similar levels of economic
development (and many less-developed countries), but most notably, the
U.S. spends twice as much
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on healthcare. It is important to note, however, that it is _private_
spending that makes the difference: premiums, copays, deductibles, and
other out-of-pocket costs. A study by Papanicolas and colleagues
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that, whereas public health spending in Germany, France, or the UK in
2016 were comparable to that in the United States, their private
health spending was only about 30 percent of their public spending. In
the United States, in contrast, private spending was as high as public
spending. At the same time, the U.S. had worse outcomes than any of
the other 10 OCDE countries in life expectancy, maternal mortality,
infant mortality, uncontrolled asthma, and more.

Why does healthcare in the United States consume so many resources and
deliver such ghastly results? The same study points to a unique
characteristic of U.S. healthcare: it is the only system where the
main source of basic care is private insurance, whether through
employer-based or individual plans. This is key to understanding the
paradox between poor outcomes and extraordinary spending. If anything
characterizes U.S. healthcare, it is extreme commodification: at every
step of the way, there is a private actor making a profit. It
resembles a government-sponsored hunting reserve, where a number of
predatory industries (private hospitals, Big Pharma, and pharmacy
benefit managers) prey on defenseless individuals. Each of these
predatory industries takes a cut, inflating the final bill, and at the
very center are private health insurance companies, connecting
patients with all other players in the health system.

How Did Insurance Companies Become So Big?

The reason why private health insurance plays such a central role in
our healthcare system is government policy. It is only because the
state does not provide direct access to healthcare, as it does in
every other industrialized country, that private companies can play
this role. And the reason why this is the case in the U.S. is the
relative weakness of the working class at the time when social welfare
policy was consolidated.

When President Franklin Delano Roosevelt rolled out Social Security,
unemployment insurance, and massive public works programs as part of
the New Deal, a public health insurance program was left out of the
final bill, largely acquiescing to resistance from the American
Medical Association (AMA). Notably, however, the AFL and later the
AFL-CIO historically refused to fight for government-sponsored
healthcare. AFL national secretary Samuel Gompers had explicitly
opposed it in the early 20th century on the grounds that
union-negotiated benefits were a major incentive for workers to join a
union. A similar logic drove national union leaders to give only
formal support to a universal health system in the 1940s but do little
to wrest that right against the organized opposition of the AMA, the
American Hospitals Association, and a small but growing new actor:
insurance companies.

Without a labor party that could represent the interests of the
working class (however distorted this translation might have been in
other countries), and with a labor movement that was quickly embracing
“business unionism” (treating unions as service providers rather
than fighting organizations), the prospects of winning universal
healthcare looked grim. These were the social and political forces
behind the push for universal healthcare in European countries. As a
result, a new proposal that would have introduced public universal
health insurance, the Wagner-Murray-Dingell bill, was defeated in
Congress in 1945.

In the meantime, a tectonic shift was taking place. Since the National
War Labor Board froze wages during the Second World War, companies
began to offer health insurance as a tactic to attract employees. In
1954, a change in the tax code made employers’ health insurance
contributions tax-deductible (a provision that is still in place
today) further establishing private insurance’s prominent role in
the health system. Between 1940 and 1960, the percentage of people
covered by private health insurance skyrocketed from 10 percent to 70
percent.

The Making of a Monster

At the beginning, however, the health insurance market was dominated
by not-for-profit companies: Blue Cross and Blue Shield, With the
former covering hospital services, and the latter physician care. The
“Blues” were born out of rising healthcare costs as medical care
became more complex and successful in dealing with health problems and
became extremely popular, for good reason. The Blues were organized on
a principle of solidarity: they accepted everyone, and they charged
the same premiums to all individuals, no matter how sick or how old.

The increasing need for health insurance and the tax benefits provided
by the government with little regulation created fertile ground for
profit-making. For-profit insurance companies, such as Cigna and
Aetna, grew rapidly in the 1970s and 1980s through aggressive
marketing and leveraging their close ties with businesses. The lack of
regulation allowed them to deny coverage to high-risk individuals and
focus on healthier people, and this in turn allowed them to charge
lower premiums while still maintaining high profits. It didn’t take
long until the Blues, burdened with the most sick and still committed
to inclusion and solidarity principles were driven out of business.

When the Blues went bankrupt, private insurance companies cannibalized
them They bought their state brands (e.g. Texas Blue Cross) and kept
their name with the hope of squeezing some gains from the good
reputation attached to them. With the conversion of the Blues into
for-profit corporations, a large share of the premiums went into
executives’ and investors’ pockets: the percentage of revenues
allocated to paying for medical care fell from 95 percent of premiums
to 80 percent.

The Business of Denying healthcare

Health insurance’s business model is straightforward: given an
agreed upon premium, all medical expenses they cover represent a loss
for the company. In fact, the percentage spent on healthcare is
explicitly called the “medical loss ratio.” In order to reduce
this cost, they have engineered a number of strategies. Up until the
early 2000s, they continued to deny insurance to high-risk
individuals: anyone with “pre-existing conditions” such as
diabetes or a kidney disease, could be rejected. Although outright
insurance denial is no longer allowed since the passage of the
Affordable Care Act (ACA), the next favorite strategy is very much in
place today: coverage denial.

Michael Moore’s documentary _Sicko _made a splash in 2007 by
exposing health insurance companies’ modus operandi. When a
beneficiary incurs costly treatments, like cancer therapies or
surgery, an army of bureaucrats is ready to scrutinize the case and
find causes for denial — sometimes before, but oftentimes after care
was provided. The film shows how medical reviewers working for the
company, in charge of ultimately approving or denying care, were given
bonuses if they reached high denial rates. Dr. Linda Peeno, former
medical reviewer at Humana, is featured giving testimony before
Congress in 1996 where she explains that she “denied a man a
necessary operation that would have saved his life and thus caused his
death.” By doing this, Peeno saved the company half a million
dollars, and was promoted to medical executive, securing a six-figure
salary.

Another former insurance company employee explains, “It’s not
unintentional, it’s not a mistake, it’s not an oversight. You’re
not slipping through the cracks. Somebody made that crack and swept
you towards it. And the intent is to maximize profits.” That is the
bottom line: To maximize profits, health insurance companies do
anything they can to deny care. But this is only the most brazen
tactic in a vast repertoire.

Health insurance companies have an even more insidious way to reduce
healthcare costs: discouraging insurance holders from seeking care.
The most effective way to do this is to penalize them every time they
do. Copays, coinsurance, deductibles — these are all cost-sharing
mechanisms justified as necessary provisions to avoid “overuse.”
Yet “overuse” is a marginal problem in any healthcare system and
it is overblown both by the health insurance industry and by
pro-market research groups like the RAND Corporation to justify
market-friendly restrictions.

The main reason these cost-sharing mechanisms exist is to discourage
individuals from seeking care. The second reason is to unload part of
the cost on the patient. There is overwhelming evidence that when
people face copays and coinsurance, they forgo medical visits even if
they dearly need them. Of course, lower-income families are hurt the
most. Many of them are forced to seek care only when they think it’s
a potentially serious condition — the problem is that, in most
cases, it is the healthcare professional who can tell whether a
situation is severe, life-threatening, or nothing to worry about.
This, along with the millions of people who are still uninsured, is a
key explanation for embarrassing U.S. health indicators.

Another way health insurance companies cut costs is by restricting the
network of providers under coverage. Out-of-network care may be
outright denied, or may be subject to steep copayments. In certain
specialties, such as mental health, finding an in-network provider may
prove nearly impossible. This is because insurance companies have
recently resorted to “ghost networks
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where most of the professionals listed in their directories are no
longer taking patients, have dropped the insurance years ago, or
don’t even exist.

It is worth noting that, despite the overwhelming evidence showing the
bankruptcy of our health system, up to these days, the AMA has not
endorsed any form of universal healthcare, whether under the label of
a single-payer national program or Medicare for All. Most tragically,
the AFL-CIO and most major national unions have refused to endorse,
much less push for, universal healthcare. This is a great gift to
employers, who love to have the power to give or take away workers’
insurance. They leverage this power by threatening to fire (and thus
leave uninsured) employees involved in union drives, and they
effectively use this power when they suspend health insurance to
striking workers, as Boeing
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did this year.

Integration and Consolidation: The Age of Monopolies

The ACA was an attempt to tweak the healthcare system to address its
most dystopian aspects (like those featured in Moore’s film) without
changing any of the fundamental problems. With regards to health
insurance, it introduced minor regulations in exchange for a big
boost. The regulations were simple: insurance companies could no
longer deny care based on preexisting conditions, and they were also
prevented from charging an outrageous amount on premiums based on the
individual’s risk (which is almost equivalent to denying insurance).
Why did they accept this change? Because they were given two generous
gifts. The most obvious one was the “individual mandate,” a
provision by which every adult individual was required to buy health
insurance, or they would face a penalty. This was a boon for insurance
companies, since most people who choose to be uninsured are young and
healthy. The second gift were the premium subsidies, which were
presented as a benefit for individuals buying health insurance
directly in the marketplace (as opposed to having it through their
jobs), but which were in fact a direct flow of federal cash to the
insurance industry.

There is a less-known provision in the ACA that had unintended
consequences. In an effort to reduce overhead costs, the bill mandated
that 80 to 85 percent of premiums be spent on medical care,
effectively capping profits rates for the health insurance industry.
This pushed insurance companies to “vertically integrate,” that
is, acquire clinics, doctors’ practices, and other providers to
increase their profit margins. If the insurance part of a health
conglomerate can’t collect more than a 20 percent in profits, now
they can pay themselves handsomely for the services _they_ cover, and
reap the profits at the end of the pipeline.

This change accelerated a trend of mergers and consolidations that was
already underway. UnitedHealth Group has been a pioneer in this
practice. Over the past decade, its prescription and medical services
arm, Optum, has steadily increased its share of revenue and now
accounts for more than half
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of the company’s earnings. Apart from being one of the largest
pharmacy benefit managers, Optum owns or has a direct relationship
with over 90,000 doctors’ offices across the country. Other
insurance companies and pharmacies have followed suit, in a frenzy of
consolidations that has few precedents.

The result is a higher consolidation of a handful of monopolistic
health conglomerates that colonize new spheres of healthcare, set
prices, restrict coverage, and render the whole system more opaque to
increase their profits at the expense of our health.

To say that U.S. healthcare is in crisis would be a serious
understatement. The American people have learned to naturalize a
deeply corrupt, inhumane, and deleterious system that allows business
people to reap lofty profits even if it brings death, disability, and
pain onto millions of families every day. This is why the murder of
Brian Thompson is being read by so many as an act of social justice,
or revenge of the oppressed. The incident, and the massive display of
support for the shooter, are forcing the country to reckon with one of
the worst aspects of American capitalism.

Our best hope is that this conversation spreads among union members
and labor activists. The bureaucratic union leadership will not
willingly take up this demand, but the rank and file can organize to
force this onto the agenda, vote on a concrete plan of action, and
build coordination with other unions. The only chance to overcome the
powerful lobby of the medical industrial complex is if the demand for
universal healthcare is taken up by a revitalized and militant labor
movement, one that can set the record straight, refuse to settle for
employer-based benefits, and shows the hegemonic potential of the
working class by securing free healthcare for all.

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* US Health Care; Insurance Companies; Health Profiteers:
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