Health Insurance "Undisclosed Conflict of Interest" Part 1 of Special Report
Health insurance today can be traced to what a wise Jewish Rabbi once pointed out what seems on reflection to be stunningly obvious: “No one can serve two masters, for either he will hate the one and love the other, or he will be devoted to the one and despise the other.” [i] Yet for years public health insurance companies have convinced Americans that Jesus was simply wrong. You can have your cake and eat it, too. You can have it both ways. And yes, Virginia, you can deliver quality, affordable health care to the consumer while generating a profit for your shareholders.
The American health insurance industry may well have accomplished one of the greatest triumphs of rhetoric over common sense in recorded history. They have successfully convinced the public, and perhaps even themselves, that not even the people’s own government cares about their health as much as they do. At the same time, they express openly in the strongest terms their commitment to deliver increasing value to their shareholders.  They believe – and want America to believe – that they can serve two masters, and do so with integrity.
But the reality of this impossible task is finally catching up with the industry. One of the tools public insurance companies use to hide the depth of their corporate split personality crumbled under the weight of a significant Supreme Court ruling several years ago.  Now the Securities and Exchange Commission (SEC) rules created by the Sarbanes-Oxley Act of 2002 are forcing insurance companies to lay their cards on the table, as it were, and openly admit what common sense should have made obvious: they have been attempting for years to serve two masters. Like Archie in the classic comic book series, they must now choose between Veronica and Betty. The days of “playing the field” are coming to an end. The wife is about to meet the mistress.
The Fiduciary Duty of a Health Insurance Company
The trouble for health insurance companies begins with the very essence of what it means to offer “insurance.” When most people think of a business, they picture in their mind a company offering a good or service who, if they are innovative enough and committed enough, will outsell their competition. Such a company cannot rest on their past accomplishment in a capitalistic system, however. There is always another company that may be building a better product, or offering a better service for less, who may ultimately put them out of business. Such a system thrives on competition, encourages innovation, and offers good choices to the consuming public.
It is tempting to view insurance as just another good or service to be provided in the marketplace. Do insurance companies really need their own special set of rules under which they must conduct business? Why not allow insurance companies to freely compete under the same rules that apply to, say, lawnmower manufacturers? Competition between lawnmower manufacturers gives the consumer more choices and in theory encourages the manufacture of better lawnmowers; would not competition between insurance providers give consumers the same variety of choices and encourage better protection for the insured?
The analogy is flawed, however, because there is a fundamental difference between lawnmowers and insurance. The difference becomes most apparent when you consider what happens when something goes wrong with the lawnmower. Suppose you bring it home, and within days discover the engine is faulty, that the wheels fall off continually, or that the blade is about as sharp as the edge of a 2 by 4. What remedies can you pursue? You can return the machine to the store and demand a refund, or an exchange on another machine. Either way, you are out no more money than you were before you made the purchase. You may have lost some time and suffered some aggravation, but little else.
What happens, however, if you find that you have purchased faulty insurance? What if the insurance company, for example, is not willing to fulfill the terms of the policy you purchased? You may have lost your automobile, your house, or be facing an expensive surgical procedure. You do not have the option of returning your insurance policy for a “refund.” You have done more than given them a check for $200 in return for the promise, with a little effort on your part, of a mowed lawn. You have entrusted the insurance company with money up front so that, if the unfortunate should happen, they will be there to back you up.
By Chris Ryan and Charles St.Onge