Wednesday, 24 April, 2024

The Labyrinth of Insurance

Reading Time: 8 minutes


(The following is an excerpt from the book How to Avoid Being a Victim of the American Healthcare System by Dr. David Wilcox with minor changes to reflect the current state of affairs)

Insurance companies serve as the middlemen between you and the health care organizations, doctor’s office, and pharmacies with whom you choose to do business. Before the Affordable Care Act (ACA) America’s healthcare system ranked last in affordability and patient access in the world. More people in America were denied benefits based on preexisting conditions for things such as cancer, pregnancy, asthma, and high blood pressure. Can you imagine the advantage of having a business in which you could provide services to people who really didn’t need them but refuse services, or not take on any risk, for people who did require services?

Insurance companies make money by taking in revenue and finding ways not to pay for health care. Just ask anyone who has wrestled with attempting to get reimbursed by their insurance company. The longer the insurance company can avoid reimbursing you, the more interest they are making on your money. They hope that you will get frustrated and stop submitting your claim so they can keep the profit. Just like the pharmaceutical companies, they are beholden to their shareholders, as they are a business and not really in the “caring for others” mindset that your nurse or doctor is. Insurance companies or payors as we call them in the medical community, understand that health care reimbursement is complex and they do nothing to ease the burden of the layman who has to deal with them. In fact, they actually have protocols that make it more complex for you to be reimbursed.

I had a dear sweet aunt of mine pass away from cancer. My aunt had no children and I was the son she never had. When she finally passed away she left me the job of settling her estate. Most of it was pretty straightforward until I had to settle some insurance claims. My aunt’s insurance company began denying reimbursement for intravenous (IV) supplies that she had needed to be treated for her illness. It was a significant amount of money and I attempted to work with them. I was able to locate the doctor’s orders for the supplies from the home care agency that had cared for my aunt. I submitted them to the insurance company and heard nothing back from them for over two weeks. When I called to inquire, I was told that the person who handled this type of claim was on vacation and to try back the following week, which I did.

It took this person another week before they returned my call, at which point I was told that they didn’t cover IV supplies for the type of intravenous procedure my aunt had needed. Being a nurse, I stated that in order to do an intravenous procedure, you need IV supplies and this was not an acceptable answer. I asked to speak to a supervisor and was routed to phone call hell, waited over 45 minutes for a supervisor, and was subsequently disconnected.

It was becoming apparent I was not going to reach someone who could settle my aunt’s estate’s insurance claim. The insurance company was using the oldest trick in the book and was banking on me getting so frustrated with them that I would give up. I began to explore other ways to settle this claim.

One of my friends who is a medical doctor suggested I call her elected official’s office and explain the situation, as they had been able to help a patient of theirs in the past. Since I was desperate and willing to try anything at this point, I called my aunt’s federal Senator’s office. Much to my surprise I was placed on a brief hold and connected with an aide for the Senator. When I explained what was going on, the aide said they have had problems with this insurance company in the past. They had someone who could address this by the end of the week. Within three days I had a call from the insurance company stating the expenses would be covered in full. Within a week I had a check for the full reimbursed amount.

Why did I have to appeal to a Senator’s office to resolve the claim? You won’t find that move in any of the handbooks, except this one. If you are having this kind of experience while trying to process a claim, remember that these elected officials do work for you.

While reimbursement is one thing, insurance companies have also been known to actively intervene/interfere with a member’s care, as the example below shows.

While my wife was working as a hospice home care nurse she had a patient who had insurance from a company that is widely advertised. This patient was on end of life care, and her job was to make this patient’s last days as comfortable as possible. After talking with the patient and their family, my wife learned that when the patient was first diagnosed with cancer, the patient was prescribed chemotherapy, which would have allowed her a fighting chance—only to be denied the treatment by her insurance company because the cost was too high. It was more cost advantageous to the insurance company to place this patient on end of life care to manage their symptoms instead of paying for expensive chemo drugs. The patient’s insurance company even refused to cover the cost of pain medications essential to keeping this patient comfortable.

Insurance companies get away with this stuff all of the time. The medical community can get so frustrated with the payors (insurance companies) because they do not make it easy to collect reimbursement. The insurance company decided that to save costs, this patient would be denied a chance at life.

If an insurance company is refusing to pay for your care, read your policy to become educated on their reason for denial. Call your doctor’s office/hospital to make sure the claim was properly submitted. You can also check with your state insurance department. If all else fails, you can appeal the claim denial, because many times these are settled in the patient’s favor. You can also contact your local news media, as insurance companies hate negative publicity and often times quickly settle. Do not take no as an answer!

Insurance companies are essentially middlemen. In a disruptive model which is occurring more and more often, companies choose to self-insure. During the implementation of Obamacare, I had the luxury to work at such a company. We were rewarded for staying at a healthy weight, getting proactive care such as drug therapy for high cholesterol, and increasing our activity. While the rest of America was hit with very high insurance premiums, the company that I worked for was rewarding us for good behaviors and actually decreasing the amount of money they paid for our health care.

This is a new concept for many Americans. The choices that I was making, such as choosing to eat a burger or a salad at lunch and whether to be inactive all day or to walk 10,000 steps a day, was lowering the amount of money that I was paying toward my insurance premium. If you were obese or had poor health, you paid more than the person maintaining a healthy lifestyle. If you have a chance to work for a company that self-insures and removes the insurance middleman, you will undoubtedly pay less for your insurance.

Many in health care believe that insurance companies have too much power. If patients were allowed to pick the doctors and hospitals that they wanted, they would have better outcomes. The problem is the patients are not the ones paying. What you have is a model in which the insurance company that is paying are trying to decrease the bottom line while the patient who isn’t paying has to play by their rules. The insurance companies don’t want you to know about companies that self-insure because that will put them out of business.

About 30 percent of every dollar you spend goes to the administrative branch of health care. That’s a whopping 30 cents on every dollar. That’s roughly $569 billion a year. Much of this amount goes to billing and insurance related costs. The evidence shows that the American Healthcare System is spending about twice as much on administrative costs as other country providing world class health care. For example, Duke University’s hospital system has 957 beds and nearly 1,600 billing clerks. In Canada, which has a one-payor system, a hospital of this size typically has a handful of billing clerks. That’s because there are so many different payors in the American Healthcare System, meaning there are many different billing and reimbursement practices depending on the payor.

An additional cost goes to overhead. In the insurance business, 80 percent of every insurance dollar is considered the Medical Loss Ratio (MLR). This means the insurance companies “lose” this money to the hospitals, providers, and other entities that cover health care. The Affordable Care Act (ACA) has a mandate that larger insurance companies have to spend 85 percent and smaller insurance companies 80 percent on health care, leaving 15 to 20 percent left for the insurance companies to keep. Before this ACA mandate insurance companies only had to have a medical loss ratio of 55 to 65 percent.

Part of that 15-20 percent cut of your health care dollars goes toward the Chief Executive Officers’ (CEOs) salaries. For example, United Healthcare Group’s CEO made $18.1 million in 2018. This is 316 times the companies median employee salary, and with stock and stock options his salary was boosted to $21.5 million. All combined, the CEOs of eight of the largest publicly traded insurance companies made $143.5 million in total compensation in 2018, up 14.4 percent. These companies recorded a combined $21.9 billion in profits in 2018 on revenue of $718 billion.

My wife in one of her home care positions had the mother of a Chief Financial Officer (CFO) for a larger well known insurance company as a patient. The wife of this CFO didn’t want the mother living with them when she became ill, so the CFO had a wing built onto his house to accommodate the needs of his mother. He hired private duty nurses to care for his mother 24 hours a day 7 days a week. His teenage children both drove new BMWs and had manicures and pedicures weekly and wore designer clothes. She would remark that she saw many patients during her week on home visits but nothing as elaborate as how this patient was taken care of. I have no issue with people succeeding and having a nice lifestyle but having dealt with an insurance company for my aunt’s estate and knowing how hard they worked to attempt to deny her estate reimbursement, I couldn’t help but wonder how much of the CFO’s income could be due to the bad practices of his company.

The enormous salaries of these insurance company executives did not go unnoticed. During the 2020 presidential primaries, Senator Bernie Sanders pointed to this excess as a good reason to promote Medicare for all as a universal payment system. He cited that we could wipe out all these third-party payors to simplify and drive down costs. What he failed to mention is that Medicare only pays 80 percent reimbursement to hospitals and doctors. The healthcare system relies on third-party insurers or individual patients paying out of pocket to make up this gap. At the same time, many hospitals run on a one to three percent profit margin. Anyone who understands basic math understands that those numbers don’t add up. Rural hospitals would not be able to continue to operate under this model. Many people would be denied health care under a Medicare for all model due to small hospitals failing to be reimbursed adequately and closing their doors.


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You can purchase Dr. David Wilcox’s book How to Avoid Being a Victim of the American Healthcare System: A Patient’s Handbook for Survival on Amazon at the following link 

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