The growing frustration people feel about their healthcare costs and coverage was put in sharp focus by the assassination of UnitedHealthcare CEO Brian Thompson over two weeks ago. That people across social media appear to be celebrating the brazen killing of a man who ran a health insurer underscores the fact that many people have little idea what health insurers do or why healthcare is expensive. Put simply, insurers are just about the only brake on healthcare costs that exist today.
Doctors want to heal their patients, but they have no incentive to think about the costs they are imposing on the system when they prescribe a treatment or a test: In fact, they often have an incentive to pursue marginal options because they make them more money.
Health insurers try to guard against such things. Their primary task is to manage costs and treatment options, which keeps premiums paid by patients and employers in check. It is a task that opens them up to criticism from a variety of entities: patients, who want more access; employers, who always want to pay lower premiums; and politicians, who hear complaints from their constituents about high prices and a lack of patient access to treatments.
Despite their best efforts, the odds are stacked against insurers as they try to constrain the rise in healthcare costs. For instance, hospital service costs have grown more than three times the total rate of inflation since 2000.
The passage of the Affordable Care Act in 2010 has done little to slow the rate of inflation in healthcare, and the enhanced regulatory burden it created for healthcare providers contributed to a consolidation trend in the industry that has reduced consumer choice and competition and increased prices in many communities. There were 65 hospital mergers in 2023, a 23% increase from 2022, many of which occurred in smaller, rural locales.
Many people fail to see the government’s role in exacerbating the cost pressures affecting healthcare costs and instead focus on the role insurers play in cost containment. Sadly, that was the case in the shooting of Thompson, whom the alleged killer sought out not because his firm had a role in any decision regarding the alleged murderer’s back malady, but because he was the head of the largest health insurer in the country.
I felt the tragedy of Thompson’s death quite keenly as he and I had similar upbringings: We both grew up in small farming communities in the Midwest roughly 100 miles apart, played sports, performed in the marching band, and worked in the local grain elevators that employed our fathers before attending public universities and pursuing careers in industries we knew little about growing up.
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That Thompson was killed in the name of justice for the working class by the scion of a wealthy East Coast family who attended an Ivy League school is not only an ironic coda to a tragic personal story. It is also emblematic of the coarsening state of debate today and the increasing desire of people dissatisfied with the status quo to seek bogeymen in industries and scapegoat people who don’t merit such treatment in the slightest.
We can, and should, take steps to improve healthcare and reduce the growth of costs, but blanket-blaming insurers completely misdiagnoses what ails the healthcare system.
Jim Allen is a native of Princeville, Illinois, and was the head of Americas Capital Markets Policy Group at the CFA Institute.