The “Top Ten” Misconceptions About Health Insurers
The insurance industry has long supported comprehensive health care reform and has helped set the bar for many of the changes Congress is currently considering. Public perception, however, can often be quite different.
Here are 10 common misperceptions about health insurance companies. These are supported by the facts, developed in part by the Blue Cross Blue Shield Association (BCBSA), which represents health plans that cover one in three Americans.
A government plan would be just as effective as private insurers in keeping people healthy and lowering costs.
Medicare, the best example of a government-run health plan, does little more than pay claims. In fact, beneficiaries who choose private insurance, or Medicare Advantage plans, receive many health benefits not available to people with a traditional Medicare plan.
In addition, for decades, health plans have been at the forefront of creating innovative programs to help members become and stay healthy and reduce costs. Health plans cover coordinating care for patients after they leave the hospital, monitoring care for people with chronic illnesses to stay well and avoid hospitalization, and implementation and advancement of health information technology like electronic medical records that will improve the quality and safety of care patients receive. Health plans also provide a myriad of healthy lifestyle programs to encourage people to lose weight, exercise, and stop smoking, not offered by Medicare or Medicaid.
Too much of our premium dollars go towards private plans’ administrative costs.
Private health plans’ administrative expenses are much lower than commonly perceived. Based on 2007 data from Sherlock Co., a financial research and benchmarking firm, administrative expenses for Blue Cross Blue Shield plans actually decreased from the previous year and represent about 9% of premiums. Independence Blue Cross’s administrative costs in 2008 were 8.5%.
People can’t take their coverage when they leave a job.
A federal regulation called COBRA requires most employers with more than 20 employees to allow people to take their coverage with them when they leave their job. Many states apply these same rules to smaller employers.
Insurers will benefit from reform by gaining millions of new customers.
It may seem that expanding health coverage to millions of uninsured Americans will substantially increase business for health plans. However, the opposite may actually occur if reform legislation includes a government-run plan. 
The Lewin Group, nationally renowned health care policy analysts, estimates that more than 119 million people – or 2 out of 5 with employer-based coverage – would actually drop their private insurance plans and shift to a new government plan because their employers could no longer afford private insurance.
There’s inadequate competition in health insurance.
There is significant competition in local health insurance markets. There is a median of 27 carriers serving the small group market in each state, with a range varying from four insurers in Hawaii to over 300 in Indiana.
Insurers can drop you from your plan or raise your premium whenever you get sick.
Federal law prohibits insurers from dropping people when they get sick. Insurers are required by federal and state laws to issue coverage on a “guaranteed renewable” basis – meaning the decision to renew is made by the individual and not the insurer. These rules apply to all coverage sold to individuals, small employers, and large employers. In addition, federal and state laws prevent employers or health insurers from charging an employee in a group health plan a higher premium based on their health or claims status.
Insurers need a government plan to keep them “honest.”
Health insurance is one of the most heavily regulated industries today. This regulation occurs at the state level. IBC and other Blue health insurers support new federal laws to assure everyone has access to coverage regardless of preexisting conditions. A government-run program would have huge market advantages by underpaying providers and by imposing taxes and penalties on individuals and employers with private coverage.
Insurance companies are the reason why our nation’s high health care costs are too high.
A 2008 national study by PricewaterhouseCoopers analyzed the rising cost of health care services and of premiums, and noted that “health insurance premiums generally track the underlying growth of the cost of health services.” This study outlines the major drivers of rising health care costs and does not link rising costs to health insurance companies.
The reason health insurance is so expensive is because insurer profits are too high.
For every dollar our nation spends on health care, less than three cents goes towards health plan profits. According to Fortune Magazine’s most recent ranking of industries by profitability, health plans had an average profit margin of 2.2% in 2008 and ranked 35th on the list, far below the following industries:
- Network communications equipment – 20.4 %
- Internet services – 19.4%
- Pharmaceutical companies – 16.3%
Health insurers oppose reform.
The health insurance industry strongly supports enactment of health care reform. It supports new federal rules to require insurers to offer coverage to everyone – regardless of pre-existing medical conditions – coupled with an individual responsibility requirement and federal subsidies to make health coverage affordable. The industry was among the first to meet with President Obama this year to discuss health care reform, and Americas Health Insurance Plans (AHIP), which represents more than 3,000 health insurers in all 50 states, developed a detailed plan for reform nearly three years ago.
