If the insurer is doing the insuring, there is some added risk of actual payouts being higher or lower, and this is in part offset by a return on investing the fees. (Premiums are paid up front and expenses paid later.) If 6% of premiums is profit, I would expect the return on capital to be much higher than 6%, since the capital is associated with the 15% administration cost, and not the total premium amount. (Note: The medical providers’ profits are already included in that 85%.)

This reminds me of Enron claiming billions of dollars in revenues for trades that they administered, when their actual revenues were just a few percent of those billions of dollars of trades.

As for the relationship between regulation and entry, think Medicare Part D. Very regulated. 50+ plans per market.

But your points are well taken. My meta-point, mostly, is that there is a big picture and provider concentration relative to that of insurers matters. Health care costs are (mostly) not a health insurer issue.

You also have to consider that corporate taxes are included in insurer’s 15 percent SGA&Profit number. Futhermore, i don’t know how policy maker think that the can impose regulation to micromanage a market at expect more insurers to enter it. I would think that deregulating the market and allow more to happen across state lines would increase competition. There are enormous costs to insurer to be licensed and meet all the different state requirements. Additionally many politicians get confused between the effects of competition and increasing the size of risk pool for the individual and small business market.

I would be much more concerned about saving in the 85% provider area. As far as I can see, in the cities that I have visited lately, there are lots of new or newly renovated shiny hospitals and outpatient surgery centers. Most doctors in private practice who perform surgery and other medically intensive procedures at hospitals can charge monopoly rents for their service while using hospital resources for free. Doctors also get together and build outpatient surgery centers and that undercut the local hospitals but use the local hospitals emergency rooms as backup if something goes wrong. It is generally accepted that reduced reimbursements for doctors is a bad thing but maybe it is a good thing for the public. Primary care is the only area where there is any significant competition among the physician credentialing organizations. Isn’t this what competition is supposed to do?

My direct experience in the information systems world is that most doctors do not have any incentives to implement new technologies or processes to improve care unless that investment can be directly tied to a billable procedure, i.e. a sonogram machine. Doctors do not invest in technology that would allow them to offer a coordinated care approach that would do the most to increase efficiency and improve quality and outcomes. They have no economic incentive to do so. Furthermore, most private practices are single specialty practices with each doctor operating relatively independently in terms of patient care decision-making. This doesn’t lend itself to coordinated and efficient care of the larger clinical models like Mayo. I, as a consumer, would pay a premium to go to a practice that truly offers a coordinate care approach. But then consumer information about physician rates and quality outcomes is extremely difficult to come by.

I recently jumped up and down and started yelling Hallelujah when my new primary doctor entered a prescription and electronically transmitted it to my pharmacy. He thought I was going crazy until I told him that this was the first time any doctor had done so for me. Most of the large auto body shops have much more sophisticated management and records systems than doctors do. How will a public option that reimburses provider at close to Medicare rates make it easier for private insurers to impose lower rates and more efficiency upon providers? I don’t get it.