The issue isn’t that insurance companies are evil. It’s that they need to be profitable. They have a fiduciary responsibility to maximize profit for shareholders. And as Potter explains, he’s watched an insurer’s stock price fall by more than 20 percent in a single day because the first-quarter medical-loss ratio had increased from 77.9 percent to 79.4 percent.
The reason we generally like markets is that the profit incentive spurs useful innovations. But in some markets, that’s not the case. We don’t allow a bustling market in heroin, for instance, because we don’t want a lot of innovation in heroin creation, packaging and advertising. Are we really sure we want a bustling market in how to cleverly revoke the insurance of people who prove to be sickly?
And the point could arguably be made about socialist and communist economic systems as well (not that companies have responsibilities to their shareholders, but that there are aspects of the system that don’t necessarily jive with the moral imperatives of the society in which they operate). What it obviates, in my view, is the need to course-correct the system to move closer to — not perfect — moral imperatives through some form of regulation. In the case of health care, the Hippocratic Oath is a professional or even social regulation intended to guide and course-correct new technologies and procedures that threaten to imbalance moral precepts. In education, there are rules of conduct and professional practices that do this.
And of course, we have our various levels of government: federal, state, local. With regard to the insurance industry — whose core service is to alleviate fear of the future — as Klein points out, these companies aren’t evil. However, the relationship between profit, efficiency, and that alleviation of fear produces what many would call “evils” in the sense that it encourages industry professionals to recognize and still disregard the direct harm they dispense upon their clients. (I love/hate the collective response to the question about voluntarily ending rescission.)
I used to deeply despise insurance companies of all stripes at a fundamental level, and I still see a strong need to for significant reform. But Klein’s point is one I have come to accept in recent years as it more accurately addresses the core issue of incompatibility of ideas in the industry (instead of moral bankrupcy).