Comment by thelastgallon
6 months ago
This comment is golden: https://news.ycombinator.com/item?id=39487714
Saving a click:
More people need to realize that utilities are not at all like normal businesses, so to spell it out in more detail for those that don't know:
Normal businesses make more money when they cut costs. Utilities (typically) get to charge a fixed upsell percentage and so they make more money when they increase their costs.
And that’s exactly what the ACA did to health insurance too with its “profit percentage caps”. Your insurer can only make more money if the price of healthcare goes up. And if they are predominantly passing the cost on to you, they pretty much want that to happen.
They got around that rule by buying out pharmacy benefit managers (PBMs), hospitals, doctor's offices, and pharmacies. While the health insurance side of UnitedHealthCare is capped at 20% or 15% overhead, they can realize their earnings by marking up the price of drugs through their pharmacy subsidiary OptumRx. They steer customers toward OptumRx by structuring their health insurance to favor that pharmacy.
CVS bought Aetna [health insurance]. CVS also owns CVS Caremark a PBM. If your employer picked Aetna as your health insurance you must fill your meds at a CVS.
That must be great for pharmaceutical companies/doctors/hospitals/pharmacists since they can just arbitrarily increase prices and charge whatever they want and the managed care organization will pay it.
And MCO’s are incentivized to approve all claims, so doctors and patients won’t complain about denied coverage.
Obamacare/ACA has this too. The "Medical Loss Ratio" or "80/20" rule says that 80% of premiums have to be paid as claims. There's no downward pressure on claims payments because they raise rates and take 20% of a bigger number.
Customers switching between managed care organizations (MCOs) is the downward pressure. Theoretically, there are enough customers for multiple MCOs to choose from, although, the large amounts of people locked up in employer and government subsidized plans prevents this in smaller states.
UNH can’t charge too much more than Elevance/CVS/Cigna/Humama/Centene/Molina/etc.
That cannot happen with a utility like electricity.
You can’t change insurers without changing jobs. The “private market” doesn’t exist because there’s no way to access the premium your employer pays for you to take it somewhere else, and even if you could you have to wait for open enrollment. No such window exists for cost increases in health plans.
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I think that's the idea with deregulated electricity. Where I live (Maryland USA) I can pick who generates my electricity. I have no choice in who delivers it and that is still regulated.
I found that in practice the non-default options do not wind up being any cheaper so after trying it for a few years I switched back to the default option, where the price is not regulated but is set through a prescribed auction process.
I suppose the deregulation might still put downward pressure on prices in theory.
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The market for customers who freely move is very small, as most get their insurance through their employer. Many large companies self fund their own health insurance offerings and just have third party companies administer it.
Everyone else gets stuck with the awful mess of their employer choosing their insurer, switching not more than once a year.
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Everyone already knows they’re not normal businesses when the state grants them a monopoly.