
The health insurance industry ought to be nonprofit
The recent killing of Brian Thompson, the CEO of United HealthCare, a major insurance industry player, has stunned Rochesterians and, more generally, Americans in two ways. First, there is the immediate shock about the brazenness with which the unidentified killer hunted and ultimately killed Mr. Thompson in broad daylight, apparently a clear case of a targeted assassination. Second, there is the shock about the fact that so many Americans seemingly sympathize with the killer’s motive—even though this is presently unknown—which must have, or so many believe, something to do with prior shabby treatment by United HealthCare and possibly other health insurance companies as well.


This unfortunate incident reminds us that the health insurance industry plays a crucial role in, inter alia, ensuring access to medical care. Yet its for-profit nature raises serious ethical and practical concerns. Even though the health insurance industry is highly concentrated, which is generally bad for consumers, it is also true that no single proposed solution can address the myriad policy challenges it presently confronts. Even so, it is worth considering whether making this industry nonprofit might be a desirable step in not only altering the mindset of this industry but also in addressing the frustrations and even the horror stories that so many Rochesterians and, indeed, Americans standardly encounter when dealing with health insurance providers.
Transforming the health insurance industry into a nonprofit model would mean that this industry would have to think of itself as not solely focused on revenues and costs but, more importantly, as an entity with the social purpose of keeping Americans healthy to the extent possible. After all, we all benefit when our neighbors and fellow employees are healthy, and, more generally, America benefits when its overall workforce is healthy because this means that we will spend less than the more than $4 trillion we spent on health care in 2022. Some savings can be used for other worthwhile projects, such as infrastructure improvement.
Here are four reasons for wanting the health insurance industry to be nonprofit in nature.
■ First, consider the focus on patient care rather than profits. The primary mission of health insurance should be to provide access to quality health care. However, in a for-profit model, companies are incentivized to prioritize financial gains over patient welfare. This can result in practices such as denying coverage, limiting benefits, or increasing premiums to boost shareholder returns. A nonprofit structure would eliminate the profit motive, allowing insurers to allocate resources toward improving patient care, expanding coverage, and reducing out-of-pocket costs for policyholders.
■ Second, there is the matter of lower administrative costs. For-profit health insurance companies often allocate a significant portion of their revenue to marketing, executive salaries, and shareholder dividends. According to studies, administrative costs in the U.S. health care system far exceed those in countries with non-profit or publicly-funded insurance systems. A non-profit model would streamline administrative expenses, directing more funds toward actual health care services. The savings from reduced overhead could be used to lower premiums, expand coverage, or invest in preventive care programs.
■ Third, ponder the issue of enhanced equity and access to health care. A for-profit system often exacerbates health care inequities, as companies focus on serving wealthier customers who can afford high premiums. This leaves low-income individuals and vulnerable populations with limited options or no coverage at all. A nonprofit health insurance system, free from the pressure to generate profits, could prioritize universal access to health care. By focusing on inclusivity rather than profitability, the system would ensure that everyone, regardless of income or employment status, has access to essential medical services.
■ Finally, think about the alignment with public health goals. Public health goals, such as reducing chronic disease rates and improving health outcomes, often conflict with the profit-driven objectives of for-profit insurers. Non-profit health insurance organizations could focus on long-term public health initiatives, such as funding preventive care programs, addressing the social determinants of health, and promoting healthier lifestyles. By aligning their mission with community well-being rather than profit margins, nonprofits can contribute to a healthier society.
In conclusion, transforming the health insurance industry into a nonprofit model is not just a moral imperative but also a practical necessity for improving health care outcomes and equity. By deemphasizing, if not eliminating, the profit motive, the industry could focus on what I have argued ought to be its basic raison d’etre: ensuring all individuals have access to affordable, high-quality medical care.
Amitrajeet A.Batabyal is a Distinguished Professor, the Arthur J. Gosnell professor of economics, and the Head of the Sustainability Department, all at RIT, but these views are his own.
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