In a recent article, Ezra Klein says it like it is regarding why it would be poor business for insurers to compete on value:
1. When we want insurance, we go through an underwriting process. What's really happening here is that the insurer is trying to evaluate the value of "the deal". They want to, like any rationally-operating business, secure profitable clients, and avoid those that are unprofitable.
2. Don't get pissed off. Or do. I don't really care. The issue is that this is what you get when you throw healthcare coverage completely to the private market. It must operate effectively as any other business would in this environment.
3. Good quality in managing chronic diseases may actually end up attracting more of the "less profitable" type of customer--those that use more resources than those that don't have the disease state. Bad business deal.
4. In addition, the more sick people you insure, the more healthy people you need to offset this. But in order to insure these sick people, you also have to raise premiums. Raising premiums will ultimately scare away the healthy and more profitable patients.
In this structure, there isn't a business argument for quality.
Ezra Klein's article also discusses some ways to get around this--avoid risk-pool selection bias, acuity-adjust funding (such as in Medicare Advantage), etc.
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