KUFM Commentaries 2009
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Health Insurance Money Machine (August 4, 2009)
Just like Terry Kendrick a couple of weeks ago, I wanted my commentary today to be about anything other than health care. But, as the disinformation campaign continues to ramp up, I want to make a couple more observations about the health care insurance money machine.
One of the curious arguments is that health insurers are in the business of assuring we have access to health care. The bottom line is that health insurers are in the business of making money - even those “in name only” non-profits like Blue Cross. There is one inescapable fact - each dollar insurers make is a dollar that DOES NOT go towards health care.
When the big HMO, private insurance market really got going in the early 1990's, health insurers were paying out around 95 cents from each premium dollar for health care. Over the years with so many dollars to be made, health insurers have kept more and more of the premium dollar they bring in, now paying out only about 80 cents per dollar on actual health care, some only 70.
If 15 cents per dollar is no longer going to health care, where is it going? It goes to pay insurance executives lavish salaries and bonuses that can reach hundreds of millions of dollars per executive. It goes to pay stockholders. For non-profits some goes to purchase for profit companies.
What happens when insurers report that the amount they pay out for actual health care increases in a quarter from say 80 cents to 81 cents per dollar? Well, unless the entire industry reports similar increases, the stock price usually goes down – meaning less salary and less bonus money for insurance executives and lower returns for stockholders. And, the reverse is true, if an insurer reports that they have decreased the amount of premium dollar spent on actual health care, stock prices go up, and executives and stockholders reap the rewards.
Another cost of the insurance industry profit making is the increased cost of administration costs for health care providers - from single physician clinics to the largest hospitals, more and more money is spent on people and systems to play the “insurance reimbursement game” with insurance administrators. The number of doctors and nurses have increased about two and a half to three times what it was thirty years ago, close in proportion to the population increase. The number of administrators has increased an amazing THIRTY times what it was 30 years ago. These administrators do not provide health care, and in the case of insurance administrators, they spend a lot of their efforts on denying health care.
And that leads to one of the ways that health insurers make their money - lots of money, billions of dollars. First, health insurers are able to cherry pick the people who they insure. The optimum is to have all healthy policy holders who pay premiums and never make a claim for some of the benefits they have been paying for over the years. But, the real money is in denying claims. All insurers play this money making game. They know statistically that enough people will not pursue or will give up on pursuing their legitimate claims, that a simple NO is a money maker. The no’s come in a variety of ways, but one of the most used is the denial of a claim because of a pre-existing condition or failure to disclose some prior medical history that may not even have anything to do with the medical problem at issue.
Let me tell you a personal story of how this works. In the winter of 2007 I began having stiffness in an arm, tingling and some numbness in a hand. My astute chiropractor, Nick Smith of Helena, examined me and told me to get an MRI. The MRI showed I had a tumor in my spinal column that was pinching off about half of my spinal cord in my neck. A neuro surgeon recommended surgery ASAP. I contacted my health insurer to get pre-approval, because failure to get such approval is another justification for denying care.
One of my trial lawyer members told me to contact him when the insurer denied my claim - not if, when - because he would just love to take on an insurer for me. I’m not naive about insurance companies, but I thanked him and said I doubt I’d need his help.
Well, the first thing the insurer did was to deny me because I had a three year old injury to my lower back, at L-5, that I had reported in my application for insurance. Well my problem was at C-5, a long way from and totally unrelated to my herniated disc. A phone call to an administrator got that one taken care of. Several days later I was denied again. This time because I had reported in my application that I had sought treatment from an acupuncturist for stiffness in my neck. I got on the phone with another administrator, explained that the acupuncture had relieved the stiffness, and I had followed advice and made sure that I got up from in front of the computer on a regular basis, rolled my shoulders and did other stretches, and I had not had another recurrence of that problem. Continued denial while they reviewed further.
By that time my gait was severely affected, all four extremities had numbness, and I had a surgery date I couldn’t delay. I called back one more time and identified who I worked for, let them know that Montana has pretty good insurance bad faith laws, and that now several members of my Board would like nothing better than to take my case and sue them.
My claim was finally approved and I am fine. But, only because I was lucky to have the knowledge and friends to take on the insurer. Too many Americans have suffered denied care, life long disabilities and death, simply because health insurers make money from denying legitimate claims.
If you haven’t seen the Bill Moyers Journal piece on former health insurance executive Wendell Potter or the piece with Dr. Sidney Wolfe, I urge you to view them or read the transcripts at pbs.org if you want to know what the health insurance debate is really all about.
This is Al Smith for the Montana Trial Lawyers Association.