To the editor:

Neither side got the economics of health insurance profits quite right (Public Forum, Oct. 28 and 30). Yes, profits are only 2-4 percent of cost. Yes, executive salaries are bloated, but they’re only a tiny share of costs. And yet, the profit system really is the problem. Here’s why.

What truly makes private insurance wasteful is administrative overhead, not profits. An army of private bureaucrats burns 15 percent to 40 percent of your money as it passes through insurance companies on its way to doctors and hospitals. (Government-provided Medicare spends only 3-5 percent).

So what exactly are those bureaucrats doing? Basically, rejecting your claims and preventing sick people from being covered. That means underwriting, denials of coverage, pre-existing conditions, rescissions, “experimental procedures,” exclusions, annual and lifetime maximums, copays, arcane policy terms, murky claim rejections, and all the rest.

They do it to maximize profits. Successful insurance companies will fully insure only healthy people who don’t really need much insurance. It’s called cherry picking or cream skimming. Economists call it “adverse selection.”

Competition between insurance companies just makes things worse. They get into what’s called a “race to the bottom.”

The U.S. is the only industrialized country in the world with this problem. Everywhere else they get cost-effective universal health coverage in one of two ways: 1) a government “single payer” or “Medicare for all” system, or 2) regulating the heck out of private insurance companies until they act like a unified single payer, with no cherry picking and no bloated executive salaries.