Creating Incentives

Reuters reports on the latest Government intrusion into the efficient processes of profits, pricing and capitalism (emphasis mine):

WASHINGTON (Reuters) – For-profit insurance companies use a smaller amount of premium dollars on medical claims than consumers are being told, according to a Senate analysis of data filed with insurance regulators.

The analysis was released late on Monday by a top Democratic senator who has been pressing Cigna Corp and 14 other large health insurance companies for information about how much of premiums go toward medical care.

Senate Commerce, Science and Transportation Committee Chairman John Rockefeller, in a letter to Cigna, demanded that the company immediately clarify the amount of premiums it receives and the amount of the claims it pays for group health insurance products.

Private (“for profit”) organizations offer us life-improving goods and services (like health insurance) because they make a profit on the exchange. Without that profit, there’d be absolutely no incentive for those companies to invest billions of dollars to bring us those goods and services. Without those goods and services, we all suffer.

How much profit a company makes is directly related to what it costs that company to bring their particular goods and services to market. In a free market, if a company is charging “too much” for their product, their competitors will quickly let them know by offering that same product to the public at cheaper prices. The chief beneficiary of this market efficiency is of course the consumer, who ends up receiving the best possible products at the least possible prices. Companies that continue to take “too much” profit expire from inefficiency.

So what’s Senator Rockefeller doing?

Consider this recent study by the AP:

Health insurance profit margins typically run about 6 percent, give or take a point or two. That’s anemic compared with other forms of insurance and a broad array of industries, even some beleaguered ones.

If health insurers are making “too much” profit, the quickest way for Senator Rockefeller to “correct” that would be for him to remove the federal and state restrictions which prohibit free competition among health insurers. He should permit these companies to compete across state lines and remove state mandates on coverage that bloat premiums excessively. The result would be to force these companies to offer us the best products at the best prices.

Instead, he seeks to remove the already small incentive that private health insurers have for bringing us quality products at affordable prices by penalizing profits. Doesn’t he realize that this will drive insurers from the market and ultimately HARM consumers?

Of course he does. And he can’t wait for it to happen.

Obama and his Liberal pals are not dumb. They know their plans won’t “work” (if by “work” you mean to “fix” in any real sense). Their real goal is for it all to fail and for them to come in and soak up the mess with a big government mop.

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