It seems that there has been an increasing buzz in the media concerning health reform. The Washington Post writes: "Obama Signals Willingness to Compromise on Health Reform". What I think is interesting is that health insurance industry may be starting the same downward spiral that the US automakers have taken. Like the automotive industry new economic realities are emerging that may, in the end, put the health insurance industry as we know it out-of-business in a relative sense.
First, the original intent of insurance, especially health insurance, was to provide medical coverage for catastrophic events. Overtime, the health insurance industry has morphed into an industry that is providing routine coverage (such as well health examines), and other supportive services such as smoking cessation. Nothing wrong with doing that, but the costs of providing all these services has to be paid for out of the employees and companies health care premiums. This would be similar, but in a reverse sense, to the automotive industry failing to curb union wages.
Second, the health insurance companies have become bloated inefficient bureaucracies with overpaid executives like the automobile companies. These companies are now managed based on accounting not the delivery of goods and services to the consumer (patient).
Third, when you buy insurance you are, in a sense gambling. Will I get sick or not???? The insurance companies of course hope that you never get sick. In the old days, before we had medical testing, it was pretty much a random event as to whether you unfortunately won by being sick/dying or the insurance company wins by you being healthy. In the old days the insurance companies could not really test risk-factors, such as genetic diseases, that we can today.
Today the operating environment is quite different and in a sense favors the insurance companies. Individuals can now be tested for a wide variety of risk factors, such as cancer, which in theory would allow the insurance companies to better allocate their customers premiums. The insurance companies also have significant potential liabilities associated with medical care. You get injured but don't really die and have to spend years in the intensive care ward. Health care today because of the ability to test risk factors, the ability to predict susceptiblity, the availability of exotic expensive treatments, and the ability to keep people alive makes medicine today - expensive. Few people would advocate cutting costs by pulling the plug on a patient.
Fourth, the increasing cost of medical insurance has become a national issue. Like the automotive industry, the health insurance industry has simply continued to raise the price of its products and continued with this tired old business model. As with the automotive industry, the politicians are now beginning to see/taste/smell "votes" for stepping in and supposedly solving this growing concern. Clearly the hand writing is on the wall that some structural changes will be forced on the health care industry like the automotive by our non-representing politicians to save us.