Progressives Suddenly Support Health Insurance Marketing

For years Progressives, led by President Obama during the legislative process for the PPACA, have attacked health insurance companies for their profits and overhead.  I never understood the former -- at generally 5% of revenues or less, even wiping health insurance profits out altogether would offset less than a year's worth of health care inflation.  The Progressive hatred for health insurance overhead was actually built into the PPACA, with limits on non-care expenses as a percent of premiums.

Progressive's justification for this was to compare health insurer's overhead against Medicare, which appears to have lower overhead as a percentage of revenues.  This is problematic, because lots of things that private insurers have to pay for actually still are paid for by the Federal government, but just don't hit Medicare's books due to funky government accounting.  Other private costs, particularly claims management, are areas that likely have a real return in fraud reduction.  In this case, Medicare's decision not to invest in claims management overhead shows up as costs elsewhere, specifically in fraudulent billings.

None of these areas of costs make for particularly fertile ground for demagoguing, so the Progressive argument against health insurance overhead usually boils down to marketing.  This argument makes a nice fit with progressive orthodoxy, which has always hated advertising as manipulative.  But health insurance marketing expenses mainly consist of

  1. Funding commissions to brokers, who actually sell the product, and
  2. Funding people to go to company open enrollments and explain health care options to participants

Suddenly, now that Progressives have taken over health care via the PPACA and federal exchanges, their tune has changed.  They seem to have a near infinite appetite for marketing money to support construction of the exchanges (which serve the role of the broker, though less well because there is no support)  and information about options to potential participants.  That these are exactly the kinds of expenses they have railed against for years in the private world seems to elicit no irony.  Via Cato

Now we learn, from the Washington Post’s Sara Kliff, “Sebelius has, over the past three months, made multiple phone calls to health industry executives, community organizations and church groups and directly asked that they contribute to non-profits that are working to enroll uninsured Americans and increase awareness of the law.”

This follows on from revelations in California (revelations that occurred before a new California law that makes PPACA costs double-secret).

[California] will also spend $250 million on a two-year marketing campaign [for its health insurance exchange]. By comparison California Senator Barbara Boxer spent $28 million on her 2010 statewide reelection campaign while her challenger spent another $22 million.

The most recent installment of the $910 million in federal money was a $674 million grant. The exchange's executive director noted that was less than the $706 million he had asked for. "The feds reduced the 2014 potential payment for outreach and enrollment by about $30 million," he said. "But we think we have enough resources on hand to do the biggest outreach that I have ever seen." ...

The California Exchange officials also say they need 20,000 part time enrollers to get everybody signed up––paying them $58 for each application. Having that many people out in the market creates quality control issues particularly when these people will be handling personal information like address, birth date, and social security number. California Blue Shield, by comparison has 5,000 employees serving 3.5 million members.

New York is off to a similar start. New York has received two grants totaling $340 million again just to set up an enrollment and eligibility process.

These are EXACTLY the same sorts of marketing costs progressives have railed on for years in the private world.


  1. dc:

    as usual, "its not a problem if we're the ones doing it"

  2. AA:

    Question: how reasonable is it for California to spend $300m plus on the it solution for the exchange? Having a good understanding of developing applications, I find that to be about an order of magnitude higher than expected given the task seems relatively straightforward and "dumb" as far as systems go.

  3. obloodyhell:

    }}} funky government accounting


    I'm utterly confused.


    Is there another kind?

  4. MingoV:

    The VA spent $487,000,000 acquiring a hospital billing system (instead of buying one from the private sector). The VA's system didn't work, and the project was scrapped.

    The US Navy spent over $500,000,000 developing its own electronic medical record system (instead of using the VA's, which was good, or the Army's, which was adequate). The Navy's EMR system didn't work, and the project was scrapped.

    The federal government is extremely good at pissing away hundreds of millions of dollars on health-related information systems. Since many states refused to set up their own exchanges, I expect huge expenses (but no success) when the feds try to create their own.

  5. Sam L.:

    So, were they lying, or were they stupid? Both.

  6. Matthew Slyfield:

    There is funky government accounting and then there is funky government accounting with "real" money. :)

  7. Matthew Slyfield:

    D) All of the above.

  8. marque2:

    I thought the VA system was actually the base for many of the private hospitals.

  9. Joe_Da:

    One of the many claims that progressives made was that because private health insurance was for profit, then the denial of claims went directly to profit.
    This argument was was invalid for several reasons.
    1) health insurance companies have strong disincentives against denial of valid claims due to threat of suit, whereas, government death panels have sovereign immunity from suit.
    2) The easiest way to increase Health insurance companies profits is to increase market share. With more market share, they are able to spread the risk and they are better able to dictate prices in markets. Same as hospitals are better able to dictate prices in markets where the hospital chain has greater market share. If the health insurance company begins to deny claims, especially in the group plans, the agents and large employers in a market begin to seek alternative plans.

    While insurance companies do deny legitimate claims, there is strong disincentives to go overboard.

  10. mesocyclone:

    Larger companies, self insured under some federal reg, are, I believe, immune to these suits.

  11. mahtso:

    Maybe someone can jog my memory: are the Progressives typically part of the Coke Party or the Pepsi Party? Of course, there both the same anyway, right?

  12. bannedforselfcensorship:

    Most of the money for marketing goes to....non-profit political groups who do the outreach.

    This is simply a way to convert private sector politically neutral marketing, to pro-Democrat publicly funded marketing efforts, which can garner votes while doing outreach, keep foot-soldiers and activists employed, and launder some of the funds back as political donations.