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7 secrets of health insurers
To really understand your coverage, you need to know about a lot more than just your deductibles and copayments.
Health insurance can seem impenetrable. For starters, have you tried reading your policy? It's dense. With different regulations in each state, countless varieties of policies and elusive pricing practices, health insurance can seem downright confounding.
And wrapped up in all this are myths about health insurance that were perhaps once true -- or never were. Here's a look at seven things you probably didn't know about your health insurer.
1. Health insurers' profit is about 3%.
Health insurers rack up revenues of $723 billion a year, according to data from the Centers for Medicare & Medicaid Services. So you might think they make money hand over fist.
But with the costs of health care and prescription drugs rising every year, health insurers generally eke out only about a 3% profit. Health insurers would, in fact, make a bigger profit by selling toys to children.
By comparison, here are profit margins for other businesses, according to Hemscott, an independent financial data provider:
The federal data show that almost 86 cents of every dollar you pay for health insurance premiums goes to pay for medical services such as doctor visits, prescription drugs and hospital costs.
According to a 2006 PricewaterhouseCoopers study conducted for America's Health Insurance Plans, an industry trade group representing about 1,300 companies, the remainder of your premium dollar is spent on the following:
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5 cents for policyholder services such as prevention, disease management, care coordination and investments in health information technology, plus provider support and marketing.
2. Your health insurer regularly pays for unnecessary medical tests.
The cost of medical liability goes beyond legal costs for health insurance companies: About 10 cents of the nearly 86 cents spent on medical services goes to medical liability and the practice of defensive medicine.
 Get your claims paid
Good records, detailed claims and persistence help you get your money faster and avoid problems.
In these litigious times, doctors often feel they must cover all the bases when a patient comes in with a health complaint. That can mean rounds of tests to rule out far-fetched conditions or even prescriptions handed out because patients demand them.
In Pennsylvania, for example, where there is no cap on jury awards, more than 90% of physicians admitted practicing defensive medicine, according to a 2005 study in The Journal of the American Medical Association:
If you buy an individual policy from an agent, he or she generally makes that commission on your initial purchase and every year you renew.
4. You can take your health insurance gripe to an external review panel.
All grievances about your health insurance -- such as coverage denials or other claims problems -- start with a formal complaint directly to your insurer. But if you don't receive satisfaction from your insurer's own complaint-resolution process, you can make your case to an external review panel.
Only six states -- Idaho, Mississippi, Nebraska, North Dakota, South Dakota and Wyoming -- lack laws mandating external grievance panels, according to the Kaiser Family Foundation. Even in states without a law, though, health insurers have a grievance process.
HealthClaimsAppeals.org can guide you through the process of resolving an insurance dispute.
5. Your insurer may provide financial incentives to doctors who give you "best practices" treatment.
Health insurers are increasingly looking for ways to ensure patients receive the most effective care possible, which ultimately reduces health care costs and reduces patients' chances of developing chronic conditions.
Your doctor may have a "pay for performance" agreement with your health insurer, in which he or she gets higher reimbursement rates when prescribing treatments that line up with best-practices guidelines.
6. You might not be able to sue your health insurer.
Only 17 states have laws mandating that you can sue your health insurer in civil court in order to hold it accountable for treatment decisions, according to the Kaiser Family Foundation.
Those states are Arizona, California, Georgia, Illinois, Maine, Minnesota, Missouri, New Hampshire, New Jersey, North Carolina, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Washington and West Virginia.
7. Your health insurer may be entitled to take your auto insurance settlement after an accident.
It's legal in most cases for a health insurer to place a lien on any third-party settlement money you get from an auto insurer after an accident if your health insurer has paid for your treatment from an accident. This practice, known as subrogation, simply means "substituting one for another."
Good records, detailed claims and persistence help you get your money faster and avoid problems.
Health insurers are allowed to recoup the cost of your medical care from the settlement you receive from the person who injured you. For example, if your auto accident medical expenses total $5,000 and you win a $10,000 settlement, your health insurer can take half -- but only if its "rights of recovery" are spelled out in your plan agreement or summary of benefits.
Published Aug. 28, 2008
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Health Insurance Isn't All It's Cracked Up to Be
John Stossel
2006-10-17 |
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Oct. 16, 2006 — I'm appalled reading the results of the ABC News poll on health care:
"Nearly eight in 10 favor a federal requirement that all employers offer insurance to their full-time workers. Nearly two-thirds favor such a requirement for part-time employees as well."
ABC News and USA Today are offering solutions to the health care problems in America during our weeklong series "Prescription for Change." Watch for special reports all week on "Good Morning America," "World News" and "Nightline."
Why on earth would we want mandated insurance from employers?! Do our employers pay for our food, clothing or shelter? If they did, why would that be good? Having my health care tied to my boss invites him to snoop into my private health issues, and if I change jobs I lose coverage. Employer paid health insurance isn't free. It just means we get insurance instead of higher salaries. Companies only provide it because of a World War II-era tax break that never went away.
Anyway, insurance is a terrible way to pay for things. It burdens us with paperwork, invites cheating and, worst of all, creates a moral hazard that distorts incentives. It raises costs by insulating consumers from medicine's real prices.
Suppose you had grocery insurance. With your employer paying 80 percent of the bill, you would fill the cart with lobster and filet mignon. Everything would cost more because supermarkets would stop running sales. Why should they, when their customers barely care about the price?
Suppose everyone had transportation insurance. The roads would be crowded with Mercedes. Why buy a Chevy if your employer pays?
People have gotten so used to having "other" people pay for most of our health care that we routinely ask for insurance with low or no deductibles. This is another bad idea.
Suppose car insurance worked that way. Every time you got a little dent or the paint faded, or every time you buy gas or change the oil, you'd fill out endless forms and wait for reimbursement from your insurance company. Gas prices would quickly rise because service stations would know that you no longer care about the price. You'd become more wasteful: jackrabbit starts, speeding, wasting gas. Who cares? You are only paying 20 percent or less of the bill.
Insurance invites waste. That's a reason health care costs so much, and is often so consumer-unfriendly. In the few areas where there are free markets in health care — such as cosmetic medicine and Lasik eye surgery — customer service is great, and prices continue to drop.
The ABC News poll suggests that people understand that. When asked about "consumer directed plans," "nearly eight in 10 Americans think that allowing people to shop around for their own medical care would be an effective way to control costs." But many people still want a free lunch: "Consumer-driven care looks less popular if it's accompanied by the risk of higher out-of-pocket expenses."
Somehow people seem to believe "insured" means free.
This is not to say that we don't need insurance. We need it to protect us against financial catastrophes that could result from a stroke or heart attack. That's why health savings accounts, which cover smaller out-of-pocket health expenditures, are paired with high-deductible catastrophic insurance. That's a good thing. But today's demand from people that insurance cover everything from pets to dental work puts us on a slide toward bankruptcy.
In other terrifying news from the poll: "Three-quarters like the idea of expanding Medicare, the government program that covers retirees."
Great, let's bankrupt America even faster! Medicare already has an unfunded liability of $32.1 trillion — that's how much more money the politicians have promised versus the amount the Treasury has to pay for it. The Medicare Trust Funds report says expenditures "are expected to increase & at a faster pace than either workers' earnings or the economy overall."
Do you think Social Security is going bankrupt? Well, yes, it is. But the Medicare liability is far greater. As more of us live longer, it will get even bigger. Yet the public wants more, and the politicians will probably vote to give it. As P.J. O'Rourke says, "Think medical care is expensive now? Watch how expensive it gets once it's free."
More bad news from the poll: "As far as the cause of higher health costs, the public's biggest suspicion is profiteering by drug and insurance companies — 50 percent call this one of the single biggest factors. Fraud and waste, the cost of medical malpractice suits and doctors and hospitals making too much money also come in for substantial concern."
Fraud and waste are a concern. When third parties pay, regardless of whether it's government or private insurance, people find it easier and more tempting to cheat. No one spends other people's money as carefully as he spends his own. But "profiteering?" What the heck does that mean? Every company wants to make as much profit as it can. If an insurance company makes "excess" profit, other insurance companies will rush to compete in those areas; therefore prices will fall quickly.
And frankly, I want drug companies to make lots of money. The more they make, the more they invest in drug development that may someday cure my disease or ease my pain.
Finally, the worst news on the poll is that "56 percent support a shift to universal coverage."
Universal coverage sounds so nice — no worries, no paperwork. Mommy and Daddy, usually in the form of government as single payer and manager, just take care of everything. Universal coverage in Canada and Europe is popular because no one has to worry about paying directly or filling out forms. But like all well-intended schemes of collectivists, it is becoming a cold, bureaucratized machine that does not serve people well.
It takes time for this to happen. At first, the eager government workers are the best and brightest — they hire medical elites to guide people to the best care. But then civil service arteriolosclerosis sets in. It happens gradually, so people don't immediately notice what they are missing, (it took 70 years for the Soviet Union to fall).
A first sign: the waiting lines. Already, some people in England pull their own teeth because they can't stand the pain while waiting to see a dentist. "The problem is, I cannot suddenly just produce more dentists," said Prime Minister Tony Blair, when he was confronted by an elderly lady who'd pulled out seven of her teeth herself. In Canada, says David Gratzer, author of "The Cure: How Capitalism Can Save American Health Care," "1.2 million Canadians are actively looking for a family doctor but can't get one because of the chronic shortages. A couple of towns hold annual lotteries with the winners getting to see doctors."
The American public seems to understand that care deteriorates under government control. The ABC poll says that while most people want universal coverage, "far fewer, ranging from 15 to 26 percent, think such coverage would actually improve the quality or cost of their own care, the availability of treatment, or their choice of doctors or hospitals. Indeed by 2-1, people think universal coverage would make the quality of their own care worse, and by better than 2-1 think it would worsen their choice of doctors or hospitals."
It would! It would! The poll writers call the public's attitudes "altruistic." "In a show of altruism, universal coverage is supported by a quarter of those who think the quality of their care and the availability of treatments would worsen."
Is that altruism? I call it an irrational and self-destructive fear of markets and competition.
For-profit medicine has given us vaccines and antibiotics that have extended our lives by decades. I want more! More pills to ease pain, more metal joints to keep me playing sports, more treatments for cancer and cures for heart disease. Socialized medicine slows heath care innovation to a crawl.
Capitalism isn't perfect. It allows inequalities, many of which seem unfair. And capitalism's uncertainties create anxiety. But universal care " creates its own anxieties and inequalities. Perfect isn't one of the choices. Foolish pursuit of free care is the enemy of good care.
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