The Problem With Health Insurance 

The US Census bureau says 45.7 million Americans were without health insurance in 2007, so that leaves about 260 million of us covered under some sort of plan - employer sponsored, government provided, or private.  So those of us with insurance should all be happy, right?  Well, yes and no. 

Think for a moment about your conversations with friends and co-workers, at your kids’ soccer or baseball game, around the water cooler or coffee pot, or wherever.  When was the last time you heard someone complain about having to wait too long to visit a doctor, get an MRI or CT scan to diagnose a painful joint or a lump in a breast, or schedule that dreaded colonoscopy?  The answer is probably never.  In America we receive services in weeks, days, or even same-day, that citizens in Europe and Canada wait months, and even years to receive. 

Now think, though, about what happened when your doctor prescribed a new drug for your persistent heartburn (GERD), or a new, powerful antibiotic for that stubborn sinus infection, or physical therapy for that nerve pain in your shoulder.  More than likely when you went to the pharmacy or physical therapist with your prescription, you were told that your insurance company doesn’t have that drug in their formulary (which means you have to pay your co-pay plus any difference in cost over an equivalent generic, if one exists), or the therapist told you that you needed pre-authorization.  What happened?  Your insurance company has just questioned, and perhaps countermanded, your doctor’s advice and prescription. 

Or, your son twists his knee in football practice and is in a lot of pain.  You take him to the emergency room at the local hospital, and after an MRI to diagnose his condition, he ends up having a laparoscopic procedure to remove some torn cartilage.  Everything ends well for him, but then you start receiving the bills in the mail.  Your insurance company paid the hospital and you owe your co-pay; OK, you expected that.  But a radiologist who you never met, the surgeon who fixed his knee, and the anesthesiologist who sedated him all send separate bills, and you owe them thousands of dollars!  What happened? 

How can they do this?  The health insurance policy that covers you isn’t really a contract between you and the insurance company.  The contract is between your employer and the insurance company, and a lot of the fine print and exceptions that end up limiting your choices or your doctor’s ability to prescribe the most appropriate medication for you are placed in the contract to control your employer’s cost and to limit the insurance company’s financial liability. 

• The new heartburn medication and the new antibiotic are expensive, and the insurance company has placed them in a category that is “non-formulary”, meaning they will only pay what they would pay for an “equivalent” generic. Note that this is equivalent per their definition, not your doctor’s. You are on the hook for any difference. Look it up. It’s in the fine print of the health insurance document your employer gave you, which most people never read.
• The physical therapy that your doctor prescribed will be approved, but only after you and your doctor jump through some insurance company hoops to convince them that you really need it, and your number of visits will be limited. Again, it’s there, in the fine print.
• To understand what happened with your son’s knee surgery, you really have to read that fine print. The insurance company doesn’t pay the same for all providers. The numbers that are in the big print in their brochures are the amounts they pay to providers that they have a contract with, the ones they call “in network”. Everyone else is “out of network”. As it turns out, the hospital is “in network” with your insurance company, but the radiologist, surgeon, and anesthesiologist are not. 

Using some hypothetical numbers, it works like this:  the hospital bill was $10,000, but there is a “contract adjustment” of $6,500, leaving $3,500.  The insurance company paid the hospital $3,150 (90 percent), and you owe $350 (your 10 percent co-pay).  So far, so good. 

The radiologist, surgeon, and anesthesiologist, who are out of network, are paid differently.  Their charges are $1,600, $5,000, and $2,500, respectively, for their services.  The “reasonable and customary” amounts for these services, according to the insurance company, are $900, $2,500, and $1,100.  Since these providers are out of network the insurance company pays 70 percent of the reasonable and customary, or $630, $1,750, and $770.  

So your insurance paid the hospital $3,150 and the out of network providers $3,150, for a total of $6,300.  Your share is a whopping $5,950, a real budget-buster for most families.  What happened to your 10 percent co-pay? 

To add insult to injury, when you call your insurance company to complain about the huge share you’re saddled with, you are told that this is you fault for “choosing” out of network providers.  Like you had a choice.  You chose the hospital; everything else was chosen for you. 

The problem is, we don’t really have a choice when it comes to health insurance.  Our choice boils down to whether or not we will accept the insurance provider and plan that has been chosen for us by our employer.  Once we sign on with that plan, most other choices are made for us. 

What if you disagree with the insurance company, for example with their denial of coverage for the out of formulary prescription?  You can try to enlist the help of your company’s HR department - fat chance there.  You can also appeal the decision through the insurance company’s appeals process - again, fat chance; you’re asking the same people who made the decision to reverse the decision. 

Can you sue the insurance company?  In CIGNA HealthCare of Texas, Inc. v. Calad et al., together with Aetna Health Inc. v. Davila, the Supreme Court ruled that “equitable remedies available under ERISA § 1132 must be the exclusive remedies available” to redress damage alleged to be suffered as a result of these utilization review decisions.  In other words, no.

Is it really that bad? 

The answer to this question depends on your definition of bad. 

Those of us in America with access to health insurance, and who take personal responsibility for our own health, enjoy the best healthcare in the world.  We receive services in weeks, days, or even same-day, that citizens in Europe and Canada wait months, and even years to receive.  No one without a political agenda can deny that our healthcare system stands alone as the best.  In this respect the answer to our question is absolutely not. 

But for those of us who value personal choice, the answer is yes. 

We have a situation where the federal government encourages companies, through the tax code and employment law, to provide health insurance to their employees.  The structure for doing this is spelled out in the Employee Retirement Income Security Act (ERISA) of 1974.  The US Department of Labor’s web site lists the following participant rights: “disclosure of important plan information, a timely and fair process for benefit claims, elect to temporarily continue group health coverage after losing coverage, a certificate evidencing health coverage under a plan, and recover benefits due under the plan.”  Nowhere is there any mention of participant (employee) choice, other than how and when an employee may choose to opt in or out of the plan. 

The Obama plan would essentially maintain this structure, with two huge changes:

1. It would add the federal government as an additional insurer to compete with the commercial plans.
2. It would enable the insurance companies, through a new federal review board, to control costs by much more aggressively intervening in the doctor-patient relationship; limiting the doctor’s choices for treatment, rationing services, and restricting patient access to specialists. 

If you’re still with us, congratulations and thanks for your perseverance.  This topic is hard to follow.  We have much more to say about it, but this article is already growing long.  Tomorrow’s post will continue with the health insurance topic. 

Please send this on to everyone you know.  This is an issue that no American can afford to ignore.  This year Congress will enact, and the President will sign, legislation to dramatically change health care delivery in the America.  With all of its shortcomings, American health care is still the best in the world.  Let’s not let them take it down to the Canadian and European “ideal”.