Why don’t insurers always fight like hell to avoid paying expensive claims? In the health insurance market, it sure seems like a big part of the insurer’s strategy is to delay, deny and confuse.
But generally people don’t have these complaints with other forms of insurance, such as car or life insurance. Insurers typically want customers and showing that they’ll make good on claims is a way to attract customers.
Indeed, as Bryan Caplan points out, in the past the zeal of an insurer to protect its reputation by paying out a claim is downright bizarre. During the holocaust, after Kristallnacht (the night when the German government famously destroyed all manner of Jewish-owned property), many Aryan-owned insurers ended up being on the hook for the insurance claim.
It turns out, the insurers had to beg the government for the right to pay out the claims (the government wanted no aid to the Jews), on the grounds that failure to do so would damage their reputation with overseas customers. In the end, they agreed on a scheme whereby the insurers would pay out the claims, though that money was confiscated by the government.
Caplan insists that this story is important for understanding the healthcare debate — contrary to critics who say insurance companies would never have the incentive to pay out claims.
But we think Caplan is overstating his case (by at least a little) and why opponents of healthcare reform still aren’t on the right side. The thing is, we don’t have much choice when it comes to health insurance. It’s hard to get on the private market (as an individual) and one doesn’t typically have much choice with an employer — and it’d be very rare for an individual to decide which employer to go with based on which health plan they like best, though that could happen.
Even if you wanted to comparison shop for health insurance, how would you? Does anyone know of a reliable, human readable way of comparing the customer-service and willingness to pay out claims among various insurers? We have no idea.
Dr. Jay Parkinson points to this chart showing that health insurance is basically an oligopoly in many states
It’s possible that there could be a market an actual market in health insurance, and that if there were one, these companies would compete on customer service, statement clarity and willingness to pay. But at the moment we get none.
And to opponents of reform who keep talking about wanting to preserve “choice” and plans people like, you’ve got your talking points all messed up.
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