My Turn: Don't Blame the Health Insurers!

During a recent appointment to ease a little back pain, my masseuse started criticizing the health-insurance companies. "Isn't it terrible that insurance doesn't cover massage?" she asked. It wasn't the first time I'd heard this—and, as usual, I was exasperated. Why would she think that insurance should cover a massage? Insurance is supposed to be for that which you can't budget. And every time massage, acupuncture, or chiropractic care is added to the list of covered treatments, premiums go up. People may think they're getting a freebie, but we all pay.

As a longtime insurance-company CEO, I get frustrated with the insistence that health insurers are to blame for our problems. Nobody expects to have car insurance that covers an oil change. But when it comes to medical insurance, everybody thinks that, no matter how minor something is, insurers should pay. I don't like the status quo any better than the president, but I don't like being vilified either.

Recently I looked at the annual reports of the 10 largest health insurers and saw that average profits were about 3 percent of premiums in 2008. That's hardly excessive. Premiums need to reflect costs—and costs, which include about $150 billion for tort litigation, defensive medicine, and malpractice premiums, are out of control. The villain here is not the insurance companies; it's the toxic brew of misguided regulatory policies that prevent health insurers from acting the way companies in any other business model do.

In every other category, prices reflect risk: smokers pay more for life insurance, people living near the beach pay more for flood insurance. But most states require that everyone in a community pay the same health-insurance premium, regardless of age, which means that young people pay excessive premiums to subsidize their elders, who typically earn more money. So young people, often quite sensibly, elect not to buy health insurance. (Health insurers have been excoriated for excluding people with preexisting conditions, but imagine the alternate reality: no reasonable people would buy insurance until they got sick.)

Also, state legislators often mandate "Cadillac" policies, which cover every conceivable medical benefit. If health insurers could offer "Honda" policies, and adjust premiums to reflect risks, they could provide affordable coverage—and incentives for healthy lifestyles and preventive care. My company does exactly that in our workers'-compensation business. By charging less to employers with good safety practices, we provide incentives beneficial to employer and employee alike.

The proposed reform legislation makes scapegoats of insurers but does almost nothing to address runaway costs. President Obama says he wants to increase competition; allowing health insurers to compete nationally is a great place to start. He has concern for the uninsured; why not eliminate the barriers to affordable insurance for young people and extend Medicaid to the uninsurable? He wants to reduce waste; let's rein in tort lawyers and "cover your rear" care. And please, let's stop blaming the insurers.