UnitedHealth Can't Compete

Obamacare is back in the news today, after UnitedHealth Group announced that it's getting out of insurance exchanges in many states.

Opponents of the health care exchange will point to this as a major failure. However, this isn't a failure of Obamacare, it's a failure of UnitedHealth's business model.

UnitedHealth is not a health care provider. It's a useless, money-sucking middleman. It grew to be the country's biggest health insurance provider with a very inefficient business model. This consists of insurance company A taking money from employer B to pay health care provider C to provide health care for employee D who works for employer B.

This is inherently inefficient. There are four parties involved in a transaction that should be conducted solely between health care provider C and patient D. Every time you add another party to a transaction the costs go up: everyone has to take their cut.

UnitedHealth doesn't make money by providing health care, it makes money by denying it. They are gambling that they'll be able to charge corporations for more health care than their employees will use.

They can do this because their customer is the employer, and not the employee actually receiving the health care. That means they can provide a much lower level of service than they can for customers who directly pay for their health care. They do this by denying coverage.

That's how health insurance companies make money: they insure healthy people, then they make using health care a hassle, hoping that patients will just cave when coverage is denied and pay for it themselves, or not bother to see the doctor at all.

UnitedHealth is a very profitable company, but it is a leech on the system. It can only be profitable by charging people for health care they don't use. Since they do not provide health care, they are incapable of effecting changes in the system itself to make it more efficient: all they can do is demand providers charge less, but since providers have a monopoly on health care, middlemen insurance companies have no real leverage.

But UnitedHealth has found that its business model can't stand up to competition on the exchanges. They're too inefficient. Companies that actually provide health care -- not the middlemen -- are the only ones that can really bring down the price of health care.

The American model for health care makes no sense. Health care is as essential to modern American life as food, clothing and shelter. Employers don't feed, or clothe or house us. Why should they pay for our health care?

Every American should pay for their own health care and employers should get out of the health insurance business altogether. They should give their employees raises equal to what they spend on health care.

This would level the playing field for American companies, who have to compete with foreign companies who aren't saddled with that burden. The same thing goes for cities, counties, states and the federal government.

The incentives in the health care system are completely skewed. Until the people who actually use it are the ones paying for it, and the people making money from it are the ones who provide it, the cost cost of health care in America will continue to spiral out of control.