You are a medical insurance company expanding into a new state. How many customers are you competing for? Millions? No. More like thousands. You could select the 1,000 largest businesses in the state and hire a sales force to schmooze them. You can’t build relationships with millions of customers, but you can with 1,000. You can work to differentiate your product, to make it less of a commodity and to make it less price driven.
Individual consumers should be the true customers of medical insurance companies, but they are not. Medical insurance companies are not trying to keep you happy, they are just trying to keep the businesses happy.
As for the other end …
You are a hospital. In the course of a year how many patients do you treat? Thousands? No. More like 15 to 25. Patients are not the customers, insurance companies are. Healthcare providers model their business to please insurance companies. As a result they collude on pricing. Network pricing is not a discount, it is price collusion.
What to do about it …
Require all healthcare providers to publicly provide a price list of all services and products, from open heart surgery down to a box of tissues. Every patient pays the same price, regardless of medical insurance.
Businesses need to get out of the business of providing health benefits to employees. Tax health benefits as income. Each company is required to show how much it spends per employee on health benefits, and that amount is taxed as income. If a benefit eligible employee opts out, then that employee gets 80% of the per employee health benefit expenditure. If a business decides to no longer provide healthcare benefits then all benefit eligible employees get a one-time pay raise, equivalent to 80% of the per employee health benefit expenditure.
This second part is the key. Once individuals are responsible for finding and paying for medical insurance they will become more invested in how much it costs, thus driving down both insurance pricing and healthcare pricing as both markets compete for the multitude of customers. The healthcare markets need to be open and competitive at both ends. Medical insurance companies need to compete for families and individuals. Healthcare providers need to model their businesses to compete for and please patients.