The growing frustration people feel over their healthcare costs and coverage were brought into sharp focus by assassination by UnitedHealthcare CEO Brian Thompson over two weeks ago. That people over social media seems to be celebrating the brazen killing of a man who ran a health insurance company underscores the fact that many people have no idea what health insurance companies do or why health care is expensive. Simply put, insurance companies are almost the only brake on healthcare costs that exists today.
Doctors want to cure their patients, but they have no incentive to think about the costs they impose 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 insurance companies try to guard against such. Their primary job is to manage costs and treatment options, keeping premiums paid by patients and employers in check. It’s a task that opens up 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 lack of patient access to treatments.
Despite their best efforts, the odds are stacked against insurance companies as they try to contain the rise in health care costs. For example, hospital costs have increased more than three times the overall rate of inflation since 2000.
The passage of the Affordable Care Act of 2010 has done little to slow the rate of health care inflation, and the increased regulatory burden it created for health care 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 areas.
Many people fail to see the government’s role in exacerbating cost pressures affecting health care costs and instead focus on the role insurance companies play in cost containment. Unfortunately, that was the case in the shooting of Thompson, as the alleged killer sought out not because his company had a role in any decision about the alleged killer’s back condition, but because he was the head of the nation’s largest health insurer.
I felt the tragedy of Thompson’s death quite keenly because he and I had similar upbringings: we both grew up in small farming communities in the Midwest about 100 miles apart, played sports, performed in the marching band, and worked in the local grain elevators that employed our fathers before they passed at public universities and pursued careers in industries we knew little about growing up.
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That Thompson was killed in the name of working-class justice by a scion of a wealthy East Coast family who attended an Ivy League school is not just an ironic coda to a tragic personal story. It is also emblematic of today’s coarser state of debate and the increasing desire of people dissatisfied with the status quo to look for bogeymen in industries and scapegoat people who do not deserve such treatment in the least.
We can, and should, take steps to improve care and reduce cost increases, but the insurance companies who blame it completely misdiagnose what ails healthcare.
Jim Allen is a native of Princeville, Illinois, and was director of the Americas Capital Markets Policy Group at the CFA Institute.
