Insurance companies want health expenses to increase, not decrease.

What? They want their bottom line to decrease, not increase. The fastest way to increase their bottom line is to cut costs.

From what I'm seeing, insurance companies have multiple internal groups, at least one that want to reduce expenses and at least one that wants to increase revenues. Each is motivated independently of the other.

Insurance tends to have maximum profit percentages mandated, at least in the US. I'm not an expert in this, but I assume that this results in a bit of a perverse incentive where the only way to increase your profit is to increase your costs.

If that was the case expenses would never be rejected. The truth is more complicated than that.

No, because their income as capped at the premiums collected. They want to spend 80% on expenses, but not more than that. But they also want projected expenses for next year to go up.

Why is that so rarely mentioned in discussions of high healthcare costs in the US? It seems like it could explain everything!

Insurance can only have a fixed percentage profit mandated by US law.

Decreasing the bottomline would literally decrease their profits.

I think the main argument is that the insurance companies, in particular in the US, wants a certain percentage discount with the health care providers. The easiest way to provide substantial discount to an insurance company is by increasing the general price.

This is not the case in most European countries that they use a mostly publicly funded system.

Germany has free health care, so it's in the insurance's best interest to keep the cost low.

In the same way that it's in the bureaucracy's best interest to be lean and efficient and serve the citizens, because they're funded by taxes. And we all know how that goes.

Public insurance companies in Germany are motivated not to deviate too much from the average results of other public insurance companies, but they don't have any incentive (besides the same one that applies to the state in general) to lower the costs.

Not really. Public insurance in Germany was explicitly designed to have independent governing bodies, which is why you get to vote on certain decisions. Few people do, but it's one of the examples of non-state democratic governance that is a success story (another being cooperatives...)

That must be why they're cost-efficient, lean machines and not bloated bureaucracies.

Having dealt with the AOK on behalf of a neighbor to get a wheel chair since he cannot walk, I couldn't tell them apart from the welfare office with regards to processes and motivation of employees. Contrasting that with a private insurance (or a housing cooperative, as you mentioned them) is day and night.

In the end, they are dependent on federal policies and subsidies, so yes, they are technically not part of the state, but for all intents and purposes, they are: funding is decided on by the state, the covered procedures are decided on by a state-created and -controlled almost-but-not-quite-state-office (Gemeinsamer Bundesausschuß, which was created by the Ministry of Health but is nominally independent-ish, yet still needs to have its decisions reviewed by the ministry, and is able to set standards and guidelines which have the characters of a law). And like all bureaucracies, they are steadily growing and require frequent budget-increases.

There is nothing free in Germany. I see every month ~800€ leaving my account. It’s on par to Swiss one and as I heard not far from the one in USA. And it’s not good!!! This free health care pays only for basic and/or old treatments.

With what income, which insurance and what type of issue? German public healthcare is pretty comprehensive and cheap (one of the few things I miss) and definitely not on par in terms of price with Switzerland which is even further away from the US nightmare

Nice that you call 800€/month cheap. You are probably seriously rich.

Public health insurance cost is ~proportional to income up to a cap of about 800€ per month. So GP is reaching the cap, for which, by the way, you don't need to be seriously rich. It's IIRC 80k€ or so before taxes per year.

Not in Germany, they don't. Barmer is a "gesetzliche Krankenkasse"/public insurance, which means most of their members' premiums are legally limited to a certain percentage of their members' income, and while they can and do raise their premiums occasionally, that's always a topic of political debate and needs a better justification than "a very small percentage of our members need expensive exo-skeletons now."

They have no ability to raise premiums on specific members with high healthcare costs.

This must be wrong because US health insurance is evil /s

I was talking about US insurance where profit percentage is fixed, hence reducing bottomline reduces profits.

Well the article is a about German health insurance so without mentioning it explicitly it's not clear that you were talking about the US system :P

There's more to the world than the parochial ways of central north america so such locale specific observations deserve to be qualified for the benefit of the wider HN readership.

If they are private, yes. But in countries like France, they don't try to make money on health, and the goal is to get less people sick, not to milk them.

I think all insurance companies care about is being able to price out the risk of fat tail events.

It’s not clear that higher overall costs are always beneficial to insurance companies, because rising premiums might reduce demand for their products. This would depend a lot on the regulatory framework (ie.: which country or laws apply).

Insurance companies want expenses to be predictable first and foremost, given the fixed nature of premiums.