Tuesday, September 11, 2012

The Big Lie About Heartless, Greedy, Eeeeeeevil Health Insurers

A couple of posts back I did a brief series on some big lies related to executive salaries and taxes. A recent post on Facebook elicited a response from an old friend that highlights another "big lie" I believe needs debunking - that of the heartless, greedy, eeeeevil insurance company that only cares about its bottom line and its shareholders.

Let's start with the post and my friend's response. I posted the following quote "diagnosing" ObamaCare from a Dr. Barbara Bellar, who is running for the IL state Senate:
So, let me get this straight. This is a long sentence. We’re going to be gifted with a healthcare plan that we’re forced to purchase and fined if we don’t, which purportedly covers at least 10 million more people without adding a single doctor but provides for 16,000 new IRS agents, written by a committee whose chairman says he doesn’t understand it, passed by a Congress that didn’t read it but exempted themselves from it, and signed by a President who smokes, with funding administered by a Treasury chief who didn’t pay his taxes, for which we will be taxed for four years before any benefits take effect, by a government that has already bankrupted Social Security and Medicare, all to be overseen by a Surgeon General who is obese, and finally, financed by a country that’s broke.
I got this response from a high school friend in which he offers a "defense", of ObamaCare, I think, based on an apparent disdain for those heartless, greedy insurance companies:
The only thing I can offer in defense is that it is recklessly foolish, naive, and dangerous to assume that any privately owned or publicly held insurance corporation would ever have your best interests in mind when it comes to your health, your ability to pay, or your circumstances. They exist purely to service their shareholders and their corporate officers. I, for one, have no desire to see my health, my life, and the lives of my children in the care of companies that behave little better than sociopaths.
Ouch! Considering I work for the country's largest, and therefore I assume most heartless, greedy, and eeeeeeevil, health insurer, I felt quite taken aback (ok - not really, but still, I think a response is necessary). I would like to assure my friend that he is quite wrong, and even more importantly, the alternative is significantly worse. So here goes.

Starting at the end, my friend says: "I, for one, have no desire to see my health, my life, and the lives of my children in the care of companies that behave little better than sociopaths". Putting aside actual health insurer behavior for the moment, let's consider the alternative. Would you rather put your and your family's health and life in the hands of a bureaucracy that views healthcare as simply a line item on a budget - easily discarded or cut if the cost of that care goes into the red? (Note - there is a significant difference between insurance and government run healthcare(1)). I can't think of anything more heartless than that. Granted, insurance companies may have conflicting priorities when it comes to their money (we shall soon see), but can a person really claim that government is more warm and caring? That certainly isn't my experience or anyone's I know.

Whose "care" do you put your health and life in anyway? People seem to have a mixed up view of who does what in the health care industry. There are providers and there are payors. The insurance company doesn't "provide" your healthcare, they simply pay for it. While they do exercise some control over what they are going to pay for, and how much, that is outlined in your policy and known (if you bother to read it) up front before you buy their product. The horror stories that people tell are very rare exceptions (and in virtually all cases, explainable and/or avoidable if one understands their policy). Bottom line, your health and life are not "in the care of" the insurance company, they are in the care of your doctor. The insurance company simply pays your doctor for that care according to your policy.

Now let's talk about accountability? Certainly insurance companies are accountable to their stockholders but it doesn't end there(2). They are also accountable to state insurance and health departments which require proof of financial responsibility and customer satisfaction on a yearly basis in order to retain their license to sell their products. And, as a provider of a service, they are also accountable to their customers. That may not translate directly into care, but it ultimately leads to that as customer satisfaction is directly related to the patient experience. If you don't provide good service for your customers, you won't have any customers.

Conversely, how accountable is government? Ever heard of anyone getting a complaint resolved when it comes to their Medicare or Medicaid coverage? I haven't. You are a captive audience with no choices when it comes to government run health care. If you don't like it, you can't simply change carriers as you can in the private sector. You are stuck and if the government fails to "have your best interests in mind when it comes to your health, your ability to pay, or your circumstances", it's tough luck.

So now we return to, and address, the beginning of my friend's "defense" of ObamaCare - cold, uncaring, greedy corporations. To refresh, he claims that insurers do not "have your best interests in mind when it comes to your health, your ability to pay, or your circumstances. They exist purely to service their shareholders and their corporate officers." Do insurance companies want to make money? Of course they do. So do doctors and hospitals and so do the patients who are seen by them. This is, after all, a capitalist nation. Does a profit motive, though, make an insurer "little better than sociopaths"? I don't know - does it make your doctor that? Does it make you that? Just because a company, any company, designs products to make themselves money doesn't mean that they don't care about the customers who consume those products. It would be suicidal to have such an attitude. So let's take a look at how profit motives and consumer "best interests" are BOTH "in mind" to a health insurance company.

Do insurance companies have your best interests in mind when it comes to your health? From a certain perspective, it can be argued that your health is the insurers primary concern. Why? Because an unhealthy customer is a less (or non) profitable customer and a dead customer is a lost customer. I will grant that a profitable bottom line is the end result of a healthy customer base, but to say that patient health is not in the best interests of the insurer is actually the more naive belief. Why else would health insurers in the 80's and 90's begin introducing concepts like preventative care benefits for adults and best practice guidelines? Why else would HMO's have designed the gatekeeper model of health plan to better triage and direct patients to the most appropriate level of care? All of these innovations and many more have been born out of, and continue primarily to be driven by, the payor side of the industry. Insurers are VERY interested in their customers' health and finding ways to improve it. One can cynically say that a profit motive underlies all of those efforts, but that doesn't change the fact that consumers are better off, health-wise, because of it.

Even today, the payor side of the industry leads the way in innovation. My employer, and many other insurance and managed care companies across the country, are continually working with providers, states, and local communities to better ensure that the right care is delivered at the right time in the right setting by the right provider at the right price. We work with Medicaid plans in a number of states to create community health centers that cater to local needs, even going as far as putting "boots on the ground". We are developing pilot projects with large provider contingencies in several states on a new "collaborative care model" which better coordinates care and communication between local providers and hospitals. The payor side of the world will ALWAYS be on the forefront of improving patient health because, frankly, it is in the best interests of both us and our customers to do so.

Do insurance companies have your best interests in mind when it comes to your ability to pay? My first question back would be "pay what"? If the issue is your ability to pay for your health care, then, I would answer that that is in fact the purpose of insurance. It insures you against unforeseen costs. It ensures your ability to pay for health care services that would normally be beyond your means. So, obviously, your best interests related to ability to pay for your health care is the essence of the insurer's product and therefore certainly "in mind" to the insurer (unless you think insurers design their products mindlessly).

Or is the issue your ability to pay for the insurance itself? That is a bit trickier, but the answer is still that the consumer's best interests are in mind. Put simply, if an insurer can't create affordable products, they won't be in business very long. I don't believe people know how very competitive this industry is. I also don't think people realize how low the profit margins are in health insurance. (see my first "Big Lies" post for more info.) Insurers are constantly striving for ways to reduce both their administrative costs and their claims costs, as well as design more tailored products, so that they can offer more competitive pricing. ObamaCare, actually, will curtail these efforts (don't believe the hype about lowering the cost curve) by mandating "one size fits all" insurance products and implementing counterproductive cost controls (counterproductive because they will drive providers out of the industry, creating lower supply and higher demand, and therefore driving costs up). There are free market ways to make insurance even more affordable. The key to implementing them is not to heap more government regulation on an already overregulated industry, but to get government out of the way to let the innovators and entrepreneurs lead.

Do insurance companies have your best interests in mind when it comes to your circumstances? I'm going to assume that this has something to do with covering pre-existing conditions. That does pose a dilemma for the insurer, but it is no different than the problem "pre-existing conditions" pose for any type of insurance. The thing to keep in mind is that this is insurance. The insurer takes risk based on certain underwriting assumptions about the costs a certain person or population will present. The more costly the insured, the higher the risk, the more expensive the insurance product.

Let me illustrate with an example that people might be far more familiar with: car insurance. Should a car insurer be forced to sell an insurance policy at the same price to two individuals, one who has a perfect driving record and another who has had several accidents and DUI's? Even with a rudimentary understanding of insurance, I would hope that the common sense answer from anyone would be "no - obviously they should be able to sell the product at higher premium to the driver who poses the higher "risk" of incurring a claim." Insurance 101.

The same principal holds true for health insurance. The solution in the insurance world is "risk pooling". You put together a group of people, some who are high risk and some who are low. They "average out" to a risk level that allows pricing that is somewhat higher for some people and somewhat (sometimes significantly) lower for others. Overall, if designed right, it should be "affordable" for everyone. ObamaCare attempts to force this scheme on the industry by means of the individual mandate. If everyone has to have insurance, insurers can spread their risk and collect premiums across a greater pool of consumers and therefore be able to offer plans to people with pre-existing conditions at an affordable cost. This is actually true. Of course, most people weren't told that ObamaCare was essentially a subsidy to the insurance industry. What? You thought ObamaCare was designed to punish those greedy insurers for their draconian practices? Buwahahahahaha! Not!

Anyway, although the individual mandate is one way of spreading risk and bringing about more affordable insurance for everyone, it is certainly not the only way. Again, free market approaches could have been applied to accomplish the same goals without government intervention and without forcing you, the consumer, to buy a product you may not want or need and penalize....oops, sorry...tax you if you don't.

In the end, I can say without reservation, working in the industry, that insurance companies really do have their customer's best interests in mind when it comes to their health, ability to pay, and circumstance. There may be a profit motive behind that, to be sure, but profit is not bad. More importantly, a healthier, more prosperous America is very good. ObamaCare will not bring about a healthier or more prosperous America. All it will do - and here is another long sentence - is force people to buy a product they don't want, with benefits they don't need, at an ever increasing cost, brought about by greater demand for services, due to an increased patient pool, coupled with a shrinking supply of providers, due to doctors leaving the market because of reduced reimbursements, resulting in the wrong care, at the wrong time (if you get it at all), in the wrong setting, by the wrong provider, at the wrong price.


1. The important distinction between insurance and a government run program is that the insurance company has to pay for their liability, regardless of whether they have the money in revenues to cover the cost (that is why insurers are required to have "reserves" - money held back to cover excess costs). That is the "risk" that the insurance company bears. The government, on the other hand, simply rations care if there is not enough in the "budget" to cover care. Need your gallbladder out? If there is no money in the budget for it this year, you go on a waiting list. And heaven forbid you get too old to make that surgery cost effective. "Here's another pain pill - live long and prosper".

2. It should be noted that not all health care payors are out for profit. For example, in my (and my friend's) home state, HMO's must be non-profit.

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