We are the only industrialized nation that relies heavily on a for-profit medical insurance industry to provide basic health care.
In February, amid the heated debate over health care reform, Sen. Dianne Feinstein, D-Calif., introduced legislation to bar insurance companies from implementing "unfair" hikes in health plan premiums. In a March 8, 2010, New York Times story, Feinstein explained why she cares so much about the issue. "We are the only industrialized nation that relies heavily on a for-profit medical insurance industry to provide basic health care," Feinstein said. "I believe, fundamentally, that all medical insurance should be not-for-profit." We thought it would be worthwhile checking if Feinstein was right that no other nation "relies heavily on a for-profit medical insurance industry to provide basic health care." As it turns out, some other countries do have private, for-profit insurance companies operating in their health care sector, and there are some indications that this sector is growing. But the business, legal and regulatory environment in which they operate is quite different than it is in the United States. A good example is the Netherlands. Dutch plans may be either non-profit or for-profit, as in the U.S. But children are fully covered using public funds, and premiums for adults are set at 50 percent of the expected costs, with the remainder paid through a national "risk equalization fund" -- essentially funds collected from the public at large. As a result, health insurers in the Netherlands aren't really able to compete for adult customers on price. By law, insurers must accept and renew all applicants, and a basic package of services must be offered. By contrast, U.S. insurers are free (for now, at least) to reject applicants on the individual market if they have pre-existing conditions, and insurers offer a panoply of plans with different premium levels and benefit packages. So, in the Netherlands, even the for-profit insurers don't typically make much of a profit on their basic health care lines. Meanwhile, in Switzerland, any profit that insurers make on basic services must be plowed back into reducing premiums. So why even call these companies for-profit? In many of the European countries with a for-profit health insurance sector, the companies make their profits not on basic health care -- the kind that Feinstein specifically referred to -- but by up-selling their health care customers on supplemental health coverage, such as dental care, eyeglasses, cosmetic surgery or more luxurious hospital rooms, or other product lines altogether, such as life or homeowner's insurance. "There's no developed country where insurers can make a profit on basic coverage," said T.R. Reid, the author of The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care. "Their mission is to pay for health care, not to pay investors." Maggie Mahar, a fellow who specializes in international health care policy at the Century Foundation, agrees. "I usually say that the U.S. is the only country in the developed world that has chosen to turn health care into largely unregulated, for-profit enterprise," she said. Technically, for-profit companies do provide basic medical care in countries such as the Netherlands, and there's enough of it going on to say that such countries "rely" on those insurers to serve that need. But the profit these companies make -- or at least the vast majority of it -- is made from lines of business other than basic health care. Because there is no official definition of "basic health care" in the U.S. system, it is hard to calculate exactly how much profit American insurers are making off basic services. But whatever it is, most experts expect that it is higher than the margins being made on basic health care by for-profit insurers in other countries. We believe that Feinstein is right that the U.S. for-profit insurance industry's role in basic health care is fundamentally different than what goes on in other countries, and that this outweighs her technical error in saying that no other country relies heavily on a for-profit medical insurance industry to provide basic health care. So we rate Feinstein's statement Mostly True.
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