Insurance Companies aren’t profit mazimizing

Or so says Paul Krugman:

Right now, many people are uninsured because … insurance companies “game the system to cover only healthy people.” So the Edwards plan, like Schwarzenegger’s, imposes “community rating” on insurers, basically requiring them to sell insurance to everyone at the same price…
[M]arketing and underwriting — … screening out high-risk clients — are responsible for two-thirds of insurance companies’ overhead. With insurers selling to government-run Health Markets, not directly to individuals, most of these expenses should go away, making insurance considerably cheaper…
So this is a smart, serious proposal. It addresses both … the uninsured and the waste and inefficiency of our fragmented insurance system.(emph added)

In other words, inefficiency could be reduced, i.e. profits could be higher, if insurance companies didn’t screen the “high risk” clients.

Those Insurance CEOs should be fired and someone who knows how to maximize profits in that market needs to replace them. Perhaps Krugman, or John Edwards, could do a better job?

(h/t MR, my fav econ blog)


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