The health insurance system in the
I’ve gotten to learn a great deal about the insurance system over the last few years as a result of having a family member with a chronic health condition. The basic story is that however bad the system might look on paper – we pay twice as much per person as people do in other wealthy countries, yet have worse health outcomes, and still have 47 million people without insurance – it is much worse in practice.
Let’s start at the most basic level. You go to the doctor, paying directly, and then send your bill to the insurance company for reimbursement. The insurance company sends you a form letter rejecting the claim. It happens all the time.
Persistent people call their insurer and demand to know the reason the claim was rejected. The insurer gives you a form that your doctor must fill out. After the doctor returns the form, the insurer still has not paid the bill.
Very persistent people call the insurer and demand to know the reason the claim was rejected. The insurer tells you that they never received the form from the doctor. Under protest, the doctor is persuaded to fill out the form again, but the bill is still not paid.
Extremely persistent people call the insurer and demand to know the reason the claim was rejected. The insurer tells you that the doctor filled out the wrong form.
O.K., we actually enjoyed this set of exchanges with our insurer. At the end of the day, we got them the form they wanted and were reimbursed as provided under our plan. But, we are extremely persistent well-educated people who know our rights under the insurance contract.
Suppose the denial had gone to someone who is not very well-educated, speaks poor English or does not have the physical or mental wherewithal to fight back? That person might just have assumed the insurance company was right to turn down their claim and not contested the issue. Or, if they contested it once, they might have let it drop after the first round or the second.
From the standpoint of the insurance company, the denial of a claim is almost a no-brainer. For the price of a letter, they can save themselves reimbursements that can run into the thousands of dollars. In the worst case, they encounter persistent people who demand that the company honor its contract. In that case, they only end up paying what they would have shelled out in the first place and make money on the float until they do. They don’t face any fines or penalties for wrongly denying claims.
On what basis do insurers deny claims? You can’t get that information. How often do insurers deny claims? You generally can’t get that information, it’s a trade secret. How can a person intelligently decide between insurers if they don’t even know how likely they are to see a claim denied?
This is not the only information that you won’t get from your insurer. In most plans, when people go "out of network," insurers reimburse an amount that is 70 percent to 80 percent of the "reasonable and customary" rate. Typically, your insurer will not disclose in advance their customary and usual rate, so patients will not know how much a trip to the doctor will actually cost them until after the doctor submits the claim. And, of course, the insurer is free to change their reimbursement rate at its own discretion. It can also, at its own discretion, change what procedures are and are not covered.
The current law basically gives insurers a free hand to abuse patients. It is equivalent to handing over a $12,000 check to a contractor to repair the plumbing and electric in your house, and then leaving it to the contractor to decide which repairs they want to do. A contractor that fixed a few pipes and then skipped out would be prosecuted for fraud. An insurance company that effectively did the same thing by denying care to policyholders would be paying big bonuses to the CEO.
The next president must have health care reform at the top of the domestic agenda. Reform should guarantee good, affordable health care to everyone, protecting them from financial risk if they need costly care. At the very least, it should offer a public insurance option modeled on Medicare that everyone can buy into. Unlike private insurance, the public Medicare plan has predictable costs and benefits. You can see virtually any doctor and Medicare reimburses the doctor directly, protecting you from needing to pay upfront. In fact, if your claim is denied, it is your doctor who is financially liable unless you are warned in advance that Medicare will not pay.
Reform should also include more balanced regulation of the private insurance system. Insurers should be forced to disclose the treatments they cover and under what circumstances, as well as their full schedule of fees. They should be limited in their ability to change the terms of their coverage, and they should be publicly accountable for the conditions under which and the frequency with which they deny claims.
Most businesses don’t get to write their own rules. There is no reason to make an exception for insurers, especially since they typically are dealing with people with serious health problems, the most vulnerable segment of the population.