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Politifact: No one does for-profit health insurance like the U.S. does

The statement

"We are the only industrialized nation that relies heavily on a for-profit medical insurance industry to provide basic health care."

Sen. Dianne Feinstein, D-Calif., March 8, in a New York Times article

The ruling

Some other countries do have private, for-profit insurance companies operating in their health care sector, and there are some indications that this sector is growing. But the business, legal and regulatory environment in which they operate is different than it is in the United States.

In Switzerland, for example, any profit that insurers make on basic services must be plowed back into reducing premiums.

The Netherlands has nonprofit and for-profit plans, as in the United States. But children are covered using public funds, and adult premiums are set at 50 percent of the expected costs, with the remainder paid through a national "risk equalization fund" — essentially funds collected from the public at large. So Dutch insurers aren't really able to compete for adult customers on price, and by law they must accept all applicants and offer a basic package of services.

In contrast, U.S. insurers may reject applicants in the individual market if they have pre-existing conditions, and they offer a panoply of plans with different premium levels and benefits.

In many European countries with for-profit health insurance, companies make their profits not on the basic health care Feinstein referred to, but by upselling customers on supplemental coverage such as dental care, eyeglasses, more luxurious hospital rooms or other product lines altogether, such as life insurance.

"There's no developed country where insurers can make a profit on basic coverage," said T.R. Reid, author of The Healing of America: A Global Quest for Better, Cheaper, and Fairer Health Care. "Their mission is to pay for health care, not to pay investors."

There is no official definition of "basic health care" in the U.S. system, so it is hard to calculate exactly how much profit American insurers are making off basic services. Whatever it is, most experts expect that it is higher than the margins being made on basic health care by for-profit insurers in other countries.

We believe Feinstein is right that the U.S. for-profit insurance industry's role in basic health care is fundamentally different than that in other countries. This outweighs her technical error in saying that no other country relies heavily on for-profit medical insurance for basic health care. We rate her statement Mostly True.

Louis Jacobson, Times staff writer. This ruling has been edited for print. For the full ruling — and others — go to PolitiFact.com.

Politifact: No one does for-profit health insurance like the U.S. does 03/12/10 [Last modified: Friday, March 12, 2010 9:40pm]
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