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Your friend is esaetnislly correct.Insurance companies make money when they collect premiumsInsurance companies lose money when they pay for servicesTherefore, insurance companies maximize profit when they are able to collect the most amount of money from premiums, but pay out the least in services.Those who argue the competition rhetoric would prevent this, actually get their rhetoric to fall flat on their face making them wrong. Here's why:Insurance company A is located in say North Dakota, to cover basic services mandated by the state (make this variable A) it cost X dollarsInsurance company B is located in say South Dakota, to cover basic services mandated by the state (make this variable B) it cost X dollarsSince insurance company A is mandated by their state to cover a greater number of basic health services then (cost of A > cost of B)Using the formula (profit = revenue expense), insurance company B located in South Dakota makes more money than insurance company A located in North Dakota, and can therefore reduce its price to gain a greater market share, thereby taking away business from insurance company A.In order for insurance company A to stay competitive it either has to:1) Move to South Dakota2) Compete in terms of quality by offering higher premiums for more services.

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