Why Would Health Insurers Want Us Sick?

I'm not sure I get the logic in this Consumerist article: Health Insurers Own Tobacco Stocks Worth Nearly $4.5 Billion. Briefly, it goes:

Major health insurance companies own nearly $4.5 billion worth of stock in tobacco companies, according to a Harvard University study. It kinda makes sense: health insurers know tobacco sickens people, and so as long as people are smoking, why not profit from the killer?

From the Scientific American article:

But with $4.5 billion still invested in Big Tobacco, many insurers are reaping profits from a cancer-causing industry. As Himmelstein puts it, "Is this who we want running our healthcare system?"

Ahh yes, those evil health insurance companies! But can someone tell me, in simple terms, why an insurance company profits from making us sick? I can clearly see why pharmaceuticals would, because then they sell more drugs. But when an insured person gets sick, the company has to pay for part/all of the treatment. And the effects of smoking have very long term health results.

The way I see it, health insurance companies possibly make money two ways. One, by collecting more money from premiums than they pay out in claims. Two, by making a profit off all the paperwork from claims. So maybe it's possible that by increasing claims they are increasing profits, but the most logical way to run an insurance business is to increase premiums while decreasing claims.

That just doesn't jive with knowingly hoping the tobacco industry sickens as many people as possible. It would be like Liberty Mutual going out and setting wild fires in California. Or State Farm sabotaging levees in New Orleans. What insurance company actively tries to increase the number of claims?

It seems to me that the most profitable strategy for health insurance companies is to lobby against anything and everything that might make people sick. That way they get to keep taking our money while making sure we're all in the best health possible.

Now, perhaps these companies do invest in tobacco. But I think it's more a "the right hand doesn't know what the left hand is doing" situation (you see a lot of this in large corporations) than some nefarious plot to screw the American people over.

Comments

I agree it does not make sense that health insurance companies would want their costumers smoking and increasing the chance of getting sick and filing a claim. My understanding is that smokers who disclose they smoke pay higher premiums, maybe that offsets the costs to provide health care for the smoker. But I doubt it since every smoker I know does not disclose the fact too the insurance company anyway. But I did not read the article as saying that health insurance companies where investing in the tobacco industry because it was good for the health care providing side of their business.

“It’s the combined taxidermist and veterinarian approach: either way you get your dog back,”

(What happened to the little tools to add quotes and links?)

My understanding is that health insurance companies should be sitting on large sums of money, making money is all about investing that properly. Buying stock in the tobacco industry looks like a good investment.

I agree with your final statement, the ones collecting the premiums and handling claims in the company are probably fairly disconnected from the investors, and the investors are not thinking about how their investments might affect the industry the money is coming from. But I still like the what if no one got sick anymore, we would not need health care conspiracy.