> Increasingly health insurance companies and healthcare providers are intertwined.

Kaiser is an HMO. They are the insurer and try to have their employees, such as these nursing lines, perform almost all of their care. Shifting from one line of business to another is purely internal and can't game Medical Loss Ratio like your scenario.

> they don’t have much incentive to lower total cost because 20% of a larger number means more total profit

There is some bad incentive here for sure. That being said, insurers do compete on price so they lose customers if they charge more than other insurers. Also, regulatory rate review can decide whether they can raise premiums a given amount.

I’m not talking about Kaiser. I’m talking about companies like UnitedHealth Group Incorporated who own UnitedHealthcare the insurance company and Optum the healthcare provider.

> That being said, insurers do compete on price so they lose customers if they charge more than other insurers.

Yeah but that’s a second order effect. Most companies are incentivized to cut costs because they will directly realize the profit. Insurance companies are incentives to cut costs only to grow market share.

I understand the point of the profit limits, but I don’t think it works very well in practice. I think it would probably be better to just have private companies without that profit cap and add a government insurer to compete with them.