The Ugly Face of Corporate Health Insurance

Suppose you were travelling out of state and you had a skiing accident. You sustain a deep compression fracture across half the plateau on the top of the primary lower leg bone that supports your knee, and you break off part of that bone as well. You most probably have ligament damage. This is a very painful outcome that causes you to not be able to walk.

You are carried off the mountain in a sled and taken to the emergency clinic near the base lodge. It is the end of the day. It has been snowing since the day before, and visibility is poor. You are at the end of a long canyon where avalanches are commonplace, and access is by a two-lane road. After viewing x-rays, the clinic doctor says you have had a major accident and that you should see a surgeon.

A member of his staff calls ahead and gets you squeezed in for an appointment at a nearby hospital medical office for 7:15 the next morning, and the doctor whom you will be seeing instructs you to go to the emergency room for a CT scan immediately so he can diagnose you when he sees you. You are driven by a family member to your CT scan. You consult with the surgeon the following day, who says optimally you should have surgery soon, best within ten days.

Is your condition urgent? Now in a drug haze but nonetheless still experiencing searing pain, for this you turn to your insurance manual.

Question: I will be travelling out of town. What coverage will I have?
Answer: When you are outside the service area, benefits are available for emergency or urgent care only.

CareFirst BlueChoice, Inc. BlueChoice HMO Open Access Your Member Handbook, Page 2.

You breathe a sigh of relief: Yes, your insurer covers both emergency and "urgent" care. Moreover, they have explicitly stated that there is a difference. But maybe, you wonder: What is urgent?

"An 'Urgent Condition' is a condition that is not a threat to life or limb, but does require prompt medical attention."

CareFirst BlueChoice, Inc. BlueChoice HMO Open Access Your Member Handbook, Page 13.

Gee, sounds like you're covered, right? Wrong.

You call the insurance company. You read the definition of urgent care from its manual to the representative. She says, "Don't refer to that in the manual. Your policy doesn't cover it, because you did not go to an emergency facility."

"But I did!" you say.

No, you didn't. The clinic at the bottom of the slope is just a clinic. "Yes, but they referred me to the surgeon at the hospital, who directed me to his emergency department!" Still, the insurance company representative says that doesn't count. You left the hospital's emergency room and stayed at your brother's house.

"But I am travelling with small children and my wife isn't here! What else was I going to do? If I had been admitted into the hospital, my treatment schedule would have been identical." Irrelevant; it wasn't an emergency.

"But the manual says there is a difference between emergency and urgent; let me read that section of your manual to you!" "No, don't," counsels the agent. "What matters is that the policy you bought doesn't cover it. Your employer doesn't want this covered."

"You mean the manual is wrong?" You ask, "Where in the manual is the criterion you are telling me about now spelled out?"

"I had no part in writing the manual. My job is to tell you what your policy covers, and that was decided by your employer."

Are you sure my employer doesn't want this covered? Is that really the truth? "Yes."

"Ma'am, what if I told you I am the founder and president of the company? So, if you are telling me the truth that it is the employer which directs this, then I hereby order the insurance company to cover this out-of-state surgery." No coherent answer. She is caught in a lie. You wonder, as an employer, whether the insurance company has fomented this anti-employer hatred among your workers by passing along this incendiary tidbit, a gambit to deflect outrage over the insurance company's misrepresenting coverage in its manual.

"What if I told you that the surgeon here has agreed to perform the operation at the same cost as what you would pay in my home state?" Answer: "That doesn't matter, what matters is the policy that you bought doesn't cover it." I might as well have heard a recording.

"So even though there is no difference in cost to the insurance company to do the surgery here, and it would spare me extreme pain for a week to ten days, and keep me from working, the insurance company would not consider it?" Same answer: the policy stipulations govern the situation - even if what she is saying seems specifically contradicted by the manual.

"Ma'am, what if I have a serious repercussion, such as a stroke, from blood clots forming and migrating? My knee has swollen bigger than a large grapefruit and smaller than a basketball. My family would most definitely hold your company responsible." Silence.

The insurance company representative is losing patience. You think to yourself: "Well, the surgeon has prescribed a blood thinner that I must self inject from now until several days after my plane flight; it should be a small risk, so I can hope it won't come to that."

Maybe a closing soliloquy:

"You know, off the record, ma'am, knowing that it is completely unnecessary to deny this from a cost savings perspective, and that I will be needlessly bearing pain and losing work for at least an extra week, not to mention that there could be clinical implications even if these are recognized to be unlikely...

You drone on, "And you know the manual makes no mention of your actual criteria for determining eligibility - in fact it seems to intentionally mislead policy holders. I would never have purchased this policy if I thought broken bones and inability to walk would not be covered when travelling."

It isn't working, so in exasperation you ask, "Will you be able to sleep at night when you go home? Do you feel your company is morally and ethically responsible?" She responds: "All I care about is whether, when I go home tonight, my son and I have a roof over our heads."

"Are you serious? Do you mean that you don't care about your customers?"

"No, I did not say that. You have not treated me like a human being by going the direction you did. I said nothing offensive to you."

"Nor did I. Excuse me, but what direction, what did I say that was disrespectful?" Absolutely no reply. You can tell she just wants to get you off the phone. You can't use logic; you can't quote the document that supposedly defines your relationship with the company; you can't appeal to her ethical sense. There is no point in talking anymore.

Your matter might be resolved by dispute resolution, but that is an involved process, one that takes you at best to the end of the 10-day window inside which surgery is strongly suggested. You have already begun your appeal, but you must pursue an alternative course now. To commit upon a vague chance that the insurance company would reverse itself would make it impossible to get the proper care in a timely manner back home.

You are uncertain, because your body is changing by the day, healing "as is," whereas you want it to heal with the fractures lined up, the bone graft inserted inside the void created by the compression, the plate screwed in so the loose bone that fractured off does not migrate. You want fewer days during which things are unstable and blood clots may form. You call your friend, who heads an emergency room, who says, "Well, I hear you, but it really should be stabilized..."

An hour or so before this call with your insurer, you had checked in for surgery as scheduled on the first available time at the hospital where you got your CT scan. But just after your IV needles were inserted, someone clarified that the result of the staff's checking with your insurance company was that your coverage was denied. The lead nurse assigned to you in pre-op tells you she has never in her career, since 1981, seen anything like this. You line up appointments back home so you might get surgery within the 10-day window. The coordinator there says we ought to have national health care. Others who work in the hospital say that, too.

But, you think to yourself: If you had retained control over the roughly $10,000 you shell out to this insurance company annually, then you could have chosen when and where to do your surgery, based upon the clinical outcome and any other factors, such as cost, down time at work, etc. Instead, your money went to pay a bureaucracy to review your case, to deny it, and to put up roadblocks. All of which makes the incident more expensive to them and arguably inferior in outcome. You will probably get dinged for huge bills by these out-of-state health care providers that were denied to you because your condition was not "urgent."

By declining to do the surgery out of state, you save yourself somewhere around $10,000. You will pay just $30 in co-pay when you are operated upon at home. Great deal! But in the end, you would have preferred to save for a rainy day and use insurance for what it is designed - truly huge economic hardships. Have you really gotten back hundreds of thousands of dollars in benefits all these years?

Is there such a policy available, with the ultra-high deductible? No, it is illegal to offer super high deductibles in most states. Why? Politicians want to buy votes by making health coverage a form of social insurance, an entitlement. And, the big insurance companies want to place their hands on the maximal amount of money flowing through the system. They have lobbied both major parties to ensure everyone stays in the pool. In fact, some insurance industry executives are reassuring their shareholders they see earnings growth potential from national healthcare, just as long as it isn't single-payer. So they support legislation that mandates coverage - with them!

What about the Republican perspective? Republicans say that allowing consumers or businesses to cross state lines to buy policies would fix for our nation's dysfunctional health system. That might help, but it would preserve the same relationships that are causing your problem now. They are too timid to consider something that would truly undermine the insurance industry structure as we know it today.

At least now we still have choice, right? So, you call your broker. You don't have to reward this insurance company with your company's business. But the insurance company by far has the widest and deepest network assembled in your state. Maybe it is not a monopoly, but it may as well be. So much for a free market.

Polls say that a slight majority of Americans like their health insurance and don't want to be part of a government system. But Medicare recipients love its free care. Health & Human Services drives a hard bargain with providers, but that leaves the rest of us who aren't seniors to divvy up the rest of the cost pie. That's why WellPoint drops a bomb that it will raise rates some 39% in California during 2010, but Medicare will grow in single digits, despite demographics making seniors a rising percentage of the population.

You know as an employer that this has been the drill for years and years. It has caused you to raise your company's deductibles, cut your drug reimbursement, and finally give up full PPO insurance in favor of "open access" HMO coverage. Even after taking the meat axe to what you give your employees, your costs have been growing at over 20% annually almost since you started it over a decade ago.

Now your decisions have come home to roost, but they weren't decisions at all, they were rational responses to economic pressures. You were squeezed out. Like the appointment coordinator who told you she wanted national health care, you start to yearn for it as well. Not because you really want to completely lose control over who decides what happens in a situation like this, but because you just aren't presented with economical alternatives. You've been tear-gassed out of your foxhole.

Then you think. What would that new world look like? Would there even be that gleaming, high tech orthopedic hospital thirty minutes from the ski resort? Would there be the clinic at the bottom? Or, like the policy dictated, would there be a holding pen for you to be shipped off somewhere else, back home, to wait in queue for when and where "they" want to fix you.

Would that administrator at the insurance company with her son over whom she wants to maintain a roof still be essential, once the "fat" is stripped out of the private insurance business model? The coordinator with whom you spoke who wanted national health care - would her job be necessary, or would her task be outsourced to a giant call center in Omaha or Mumbai? Or would it just become a web site with a software backend that orders you to your place of repair? Sort of like state auto inspections or emissions checks?

You are being treated like a number. The system is stacked against you. It would be OK if it were just about money, but in this case it is your health, and your ability to get back to work. Surely a jury of your peers would read the manual and resoundingly agree that being in pain, plugged into a wall socket that powers your ice water circulation machine, loaded up with narcotics for a week, would concur your condition was urgent.

But you have no such rights in the contract with your insurer, at least while your body is aching, unstable, and knitting itself into a position in which you don't want it to form. Your jurist was a low-paid administrator trained to repeat, "Your policy does not cover it." And to add insult to injury, literally, she declares you dehumanized her. Says she: you had no business not sticking to business, if only in a weak moment you asked her about her human feelings. In the brave new world, if you ignore her robotic mission, her carefully proscribed script, no matter how respectfully you ask the question, you have dared to ask what should never be asked. Immorality is redefined; it is a polite challenge to the corporate Leviathan.

Corporate health insurance is getting an uglier face as it comes under greater stress from being one half of a hybrid between government and private industry. In many states one or two suppliers dominate. Atlas held the heavens in punishment for being on the losing end of a titanic struggle. Likewise, the private sector has lost control in the battle for scarce resources with Medicare, and giant HMOs might not stand under the weight of runaway inflation caused by cost shifting and infinite demand stimulated by the social insurance model. Medicare has assumed so much liability that the present value of its future obligations above its payroll tax collections now is about three times our national income.

WellPoint raising rates by 39% may be a death rattle, the last stand of an animal wounded and outmatched by its larger opponent that has been stalking it for a season. How much more malformed can the system get before it blows up? What if, as economics professor and now health care expert Paul Krugman suggests, we mandate "comprehensive, guaranteed coverage," as if it were air or water, free to flow through our communities, yet it would continue to be purveyed through a largely monopolistic corporation? Would the problem be fixed, or would it just get slightly larger, waiting to collapse with even heavier damage?

Mortgage finance, once heralded as an innovation that would fuse the best of the public and private sector, became a two-headed monster. The arrangement allowed private greed and accommodative but ever more widely rooted regulation to join hands and squeeze the middle class. Main Street may have bailed out Wall Street, but that task is not done. Similarly, in health care we are witnessing the implosion of an ill crafted structure, maybe just a step behind the financial debacle.

At this stage of the struggle, you can turn to government for protection against the wounded animal. And strangely, for someone who has been conservative or libertarian, you receive satisfaction from that quarter and nowhere else. Here the Democratic brand has shown its effectiveness. You can call someone in power, and you get to talk to the ombudsman you so desperately need. The state, you find, has an entire section of one of its departments devoted to warring with the corporate health insurer, whose most abominable breeches against citizens open it up to prosecution. Even if the state's intervention cannot benefit you in time, it is satisfying to know that meting retribution through someone in power with whom you hold some electoral sway can alter the sad lapse in corporate ethics so characteristic of our depraved society. This is the argument for increasing regulation.

The Republican brand, however, has self-immolated. It has backed corporatism, thinking that protecting big insurers would provide some utopia of free market, low-cost health care. It also supports shielding your aggressive profit-driven insurance company from taxes. The insurer's web site
proudly states that it had net income of $180 million on $6 billion of sales in 2007. How does a non-profit have profits? (It doesn't seem fair. Your company's owners remit nearly half of what their enterprise earns to the state and federal governments.) The Republicans listen to pollsters that tell them most people like their health insurance and don't want Obamacare. What the GOP doesn't know is that these respondents probably like their health insurance only while they are well. But when they become victims of mindless rule-following that unnecessarily causes pain and suffering, lost work, and increased costs borne by both the insurer and the insured, some cross over and consider "change" simply for the sake of change, no matter where their political sympathies may have been before.

Either way, is the situation stable? Can we expect a band-aid to work every time? Or are we evolving to the public single payer? Here the ombudsman and insurer would be one and the same. Maybe it works. But after your recent experience, you know now how you can be dehumanized. And ironically, you were persecuted by your administrative jurist for being inhuman, having asked her if deep down inside she could live with the moral and ethical lapses of her formulary she robotically dispenses.

William Baker, CFA is the author of Endless Money: The Moral Hazards of Socialism (John Wiley, 2010) and the Editor of

Disclosures: Long and short equities. Long gold, gold derivatives, and gold equities. No position is held in WellPoint or any other medical insurance companies, but at any point in the future a short or long position may be taken. A short position in Administaff, a PEO and HR outsourcing firm that insures employees for health in the small business sector is held.