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Peter J. Ognibene Headshot

Your Health Insurer Will Screw You

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Got health insurance? Think you're sitting pretty? Think again.

Health insurance companies fatten their bottom line not by helping people but by screwing them.

For-profit companies make money three ways:
First, they use medical underwriting, which is industry shorthand for finding ways to reject those applicants most likely to need care. Not only people with serious illness are denied insurance; so are individuals who may be 20 pounds overweight as well as those with acne or an old athletic injury.

Second, health insurers routinely weasel out of, or delay for months -- even years -- making payments for valid medical and hospital claims.

Third, they look for plausible reasons to reverse payments they have already made on your behalf. These reversals can occur one or more years after you thought your bill had been paid. And when a physician or hospital has to refund a payment, guess who gets the bill. You.
And it doesn't stop there. Investigative units routinely look at individuals who have been seriously ill to see if there's anything in their medical or prescription history they can use as a pretext to terminate their insurance. The industry term is "rescission."

Many large organizations -- municipal agencies, major corporations and labor unions -- have the negotiating power to eliminate exclusions of so-called pre-existing conditions from their employees' health insurance policies.

Small companies often do not. Worse still, individuals who lack the negotiating leverage that organizations exercise on behalf of their members wind up paying the highest rates for coverage and then are left to hope they won't get trapped by one of their policy's many exclusions or loopholes. When such individuals have the audacity to incur a major illness, you can bet the companies will look for ways to screw them -- with delays, payment reversals or outright rescission of their insurance.

Many who work for health insurers quickly learn that the surest way to get ahead is to screw as many policyholders as they can.

Recent documents obtained by the House Committee on Energy and Commerce indicated, for example, that Blue Cross of California awarded a perfect evaluation score to an employee whose efforts to rescind the insurance of thousands of policyholders saved the company nearly $10 million that would otherwise have paid their doctor and hospital bills.

This is no isolated case. If you get cancer or need expensive surgery, your insurance company is likely to investigate every medical claim ever filed on your behalf, the prescriptions you have taken at various points in your life and any lifestyle elements that might give them a pretext to reverse a payment or rescind your insurance.

In recent testimony before the same House committee, Karen Pollitz, Research Professor at Georgetown University Health Policy Institute, pointed out:

Representatives of the insurance industry have testified that rescission is rare and occurs in less than one percent of policies. Even if this estimate is accurate, it is not necessarily comforting. One percent of the population accounts for one-quarter of all medical bills. The sickest individuals may be small in number, but they are the most vulnerable and most in need of coverage.

Most individuals who have a job get health insurance through their employer. Yet, employer-based health insurance makes no sense in the modern world. It is an artifact of World War II when companies were desperate to attract and hire workers but were bound by federal wage and price controls from writing higher paychecks. So, companies competed for workers in other ways, including health insurance.

Two years ago, the Congressional Research Service issued a report, "U.S. Health Care Spending: Comparison with Other OECD Countries," which found:

The United States spends more money on health care than any other country in the Organization for Economic Cooperation and Development (OECD). The OECD consists of 30 democracies, most of which are considered the most economically advanced countries in the world. According to OECD data, the United States spent $6,102 per capita on health care in 2004 -- more than double the OECD average and 19.9% more than Luxembourg, the second-highest spending country. In 2004, 15.3% of the U.S. economy was devoted to health care, compared with 8.9% in the average OECD country and 11.6% in second-placed Switzerland.
In assessing what drives the difference between U.S. health care spending and the rest of the world, some leading health economists responded this way: "It's the prices, stupid." Put more formally, a report from the OECD declared that "there is no doubt that U.S. prices for medical care commodities and services are significantly higher than in other countries and serve as a key determinant of higher overall spending."

Though Americans are paying ever higher premiums, they are not getting better health care for their dollar. Current projections suggest that the average annual cost for employer-sponsored health insurance for a family of four will rise from $13,000 to nearly $25,000 by 2018.

Appearing recently on Morning Joe, Rep. Anthony Weiner (D, NY), a leading advocate in the House for publicly financed health care, made these observations:

I have heard people say, repeatedly, 'well, if the public option is too muscular, the insurance companies won't be able to compete.' Well, if they can't compete, then they're not gonna get customers. They're not gonna get patients coming to them. Isn't that what we want? To give people that choice?

The problem that we have here is we're trying to jerry-rig this system so that insurance companies still continue to make healthy profits. Why? [They] don't do a single checkup; they don't do a single exam; they don't perform an operation.

Medicare has a four-percent overhead rate. The insurance companies take about $230 billion out of the system every year in profits and overhead. The real question is: why we have a private plan?

These costs drive up the insurance premiums of everyone with private health insurance. With universal health care, these costs will disappear. Even the insurance industry knows that.
In recent testimony before the House Committee on Energy and Commerce about the rescission of individual health insurance policies, Don Hamm, the president of Assurant Health, admitted: "If a system can be created where coverage is available to everyone and all Americans are required to participate - the process we are addressing today -- rescission -- becomes unnecessary because risk is shared among all."

Exactly.