It's Not the Profits, It's What You Do to Maximize Them

When profit is the ultimate goal of any endeavor -- as it is for all commercial ventures -- the last step that directly leads to profit becomes the main focus. Let's look at insurance, for example. With car insurance, the insurer takes in money in the form of premiums, and pays out money in the form of settlements. It is obviously to the insurer's advantage to limit settlements in order to maximize profits. But since most settlements are paid when drivers have accidents, the company's focus becomes reducing the number of accidents -- and this is accomplished by incentivizing drivers to take safety courses by giving them a discount, as well as penalizing them for traffic infractions. In other words, a carrot and a stick. So the desire to maximize profits for the insurer leads to safer driving on the part of the insured. Double win.

Health insurance is different. Again, the insurer collects premiums, and pays out claims. Again, profits are maximized by limiting how much is paid in claims. But insurers have much less ability to influence how healthy or sick their customers are. Sure, they can penalize people for smoking or not getting an annual physical, but people still get sick through circumstances beyond their control. So the only way to reliably maximize profits is to limit access to care. And that translates to denying payment for treatments that the company deems too expensive, even if the doctor says they're necessary. A win for the insurer, but a loss for the patient, the doctor, and possibly the pharmacy too.

A more extreme example is the new trend toward for-profit prisons. Profits are maximized when prisons are full. Prisons are full when crime is high and/or sentences are stiff. So the owners of for-profit prisons are going to lobby for severe punishment rather than rehabilitation, which not only keeps more people incarcerated longer, but leads to more recidivism. This, in turn, drives up demand for more prison space, further increasing profits. A win for the prison operators -- but a big loss for the convicted, and for society in general.