What about shareholders? One of the biggest problem I have with insurance companies as for-profit enterprises is the inherent conflict of interest that comes from trying to service claims and customers as best as possible and turning a profit for shareholders.
I've always felt that insurance companies should be run as not-for-profits, or at the very least co-ops..
Don't get me wrong here, still pay the employees and the executives competitively (you want things to run efficiently and by talented teams so you need to attract top talent), but otherwise the whole enterprise should be working hard to make sure every other dollar goes to helping the customers who pay the premiums, and that's it.
I am not a fan of general health insurance. I think the government should provide universal basic health care and there should be health insurance for emergencies and the like.
I don't think it matters so much whether it is a for profit business or a not-for-profit or a co-op. It will basically come down to: Are they actually ethical? Are they actually talented at what they do? Is the model of policy any good?
Those will be problems regardless of the form of the organization.
(Background: I worked for a big insurance company for over 5 years. As an employee there, I was sent by my employer to a local technical college to get training to do my entry level job. At least while there, this training entitled me to the spiffy title of "Certified Life and Health Insurance Specialist.")
I think the way to fix this is similar to what you said. Primary care should be provided for everyone and the way you drive that cost down is by using more PAs, CRNP/other nurses and having only one actual Dr. for oversight and tougher cases. There are huge system costs that can be removed just by focusing on things like treatment compliance, pre-habilitation, healthy lifestyle, good mental health, etc.
Direct Primary Care is on the rise in the U.S. It is a saner solution than Obamacare, which forces premiums up crazily for everyone and is a terrible model. If we, as a nation, want to insist on market based solutions instead of the government playing a more central role, then Direct Primary Care is a far saner answer. You pay for basic care out of pocket in a way that helps keep costs down and you get insurance for actual unexpected emergencies and major health events.
The other problem with health insurance is that it doesn't serve the preventive role that car insurance serves. Car insurance is required by the state you live in and the details vary by state, but if you get too many tickets or have too many accidents, your premiums go up. So, it serves as a deterrent to bad driving behaviors. Furthermore, it doesn't just cover your losses. It covers damages done to other people. If you get in an accident and are found to be at fault, your insurance pays for their repairs.
Unlike car insurance, health insurance does not play a real role in pressuring people to behave more responsibly. So far, we have found no means to really do that effectively. Health issues are far more complicated than safe driving issues. You don't drive 24/7, but being alive 24/7 impacts our health for good for ill and in ways we don't completely understand. So it is a very hard problem to solve.
What we do know is that when people do not have access to basic health care in an affordable manner, health outcomes are worse and, thus, more expensive. So we need to find a means to get health access to more people in a way that is preventative. Direct Primary Care and government funded services seem to do that. Health insurance really does not.
I think the only way to handle the the deterrent/incentive piece is to find a metric that can be used. BMI is worthless as people vary too much. The best thing in my opinion is HA1C levels, but use it as a discount on your premium. You can't cheat A1C and most of our chronic diseases and inflammation causes are caused by poor diet. This forces people away from that if they want the discount. The only problem is high carb diets are cheap (rice/pasta) and healthy diets are expensive (lean protein/vegetables).
The biggest thing we need to change is to remove all the middlemen from the system. Each takes a cut and adds to the cost without having value. The biggest problem with health insurance is it isn't event driven like death or a crash. How do we stop everyone from being on the cheap plan for emergencies and then switching to the best if they get cancer? (Although one piece may be in the incentivizing better diet reducing cancer risk). I do keep wondering if it makes sense to flip it and make that the emergency part is tax based and mostly free to the person. You can then make the deductible based on the person maintaining healthy stats. Never go to the doctor and eat junk? You pay 25% of the total cost. Eat healthy and go for routine check ups? You pay 5% of the cost. Tough to know without running numbers.
All tough questions with no easy answers.
There is no reason for private insurance to be more expensive if they have non-profit competitor. If this competitor was to disappear, on the other hand, the costs would probably sky-rocket.
That's just looking at the premiums though, there's no way to see any potential refunds and take those into account.
I pay 758 SEK per month now and with Länsförsäkringar I'd end up paying 968 SEK for the same coverage. I do have a 10% discount on my current insurance due to having several policies at the same company. That's still less than the difference though, so Länsförsäkringar would have to refund me around 1200 SEK per year to break even.
That would be around 10-15% of the entire yearly cost, and I don't think they can promise those kinds of refunds year over year.
But you cannot just compare for price; you also have to compare for cover and självrisk etc.
Pretty much all insurers bend over backwards to avoid paying out. I have no idea if Länsförsäkringar is particularly good or bad in this regard.
There has to be since no shareholders are involved assuming the rest of the setup is the same. If they are not cheaper then it's more likely that the coop is badly run which sadly is not uncommon.
Monies move toward local, low cost and essential spending as opposed to remote, high cost and luxury spending that one would expect to dominate with dividends paid out by for profit businesses.
Probably the biggest consumer-owned business we have today would be Vanguard, when it comes to investment funds, but for a variety of reasons most industries have shifted to the corporate model.
There are a number of very large and successful mutual insurance companies - take a look at USAA. They also happen to enjoy some of the highest customer satisfaction ratings in all of financial services.
Suppose we take two situations:
#1 As described in the article, between the premium and the actual claims pool there's 50% lost to all the entities involved -- from brokers up through reinsurance companies and back down to the entity that actually cuts the claim check. But further suppose that all these companies happen to be co-ops and so no dollars are lost to passive investors.
#2 There's a vertically integrated insurance company that is highly efficient. It only sells directly and doesn't use commissioned salespeople. It has overhead of only 25% and pays a 10% of revenue dividend to its shareholders, leaving 65% of premiums to pay claims. This enables the company to offer lower premiums for the same coverage.
Is #1 somehow morally superior to #2? Do you think it is impossible for #2 to exist?
Investors reward behaviors that maximize revenues be it through cost-cutting, premium hikes, or benefit reductions (or potentially the opposite assuming sales increase enough.) Granted, some of the more negative actions might cause customers to move from one provider to the next because of free markets and whatnot, and theoretically, the market should reward the company that provides the best balance for customers... except that almost all insurance companies are owned by investors, and over the long run, these investors incentivized to maximize revenue in prisoner's-dilemma-like fashion.
So... I'd argue introducing investors over the short term is a fantastic idea, but at some point, it's probably wisest give them a heap of profits, and turn off the tap. Otherwise, the company will turn into yet another publicly-traded monstrosity with a mechanical conscience.
To stay at that level, I would say that while there's nothing inherently bad about #2 it would be better if 75% remained to pay claims, and then they would not only offer lower premiums but better coverage.
And as someone else said, this isn't about morals, it's about priorities.. An insurance company should exist primarily to protect it's customers.
That said, if investors were contractually bound to accept only a fixed return over a period of time (almost like a bond or a GIC or something?) and had no voting power or influence in the direction of the company, that could work?
My issue is less about "investors" and more about focus and priorities I suppose..
The competition is convents around the country that have traditionally supplied them to parish churches. Here you have organizations that are as non-profit as they come -- convents aren't like many hospitals where the CEO and other high level employees are raking off a huge salaries as quasi-profit. And the motives and priorities couldn't be any purer, their work is essentially in the service of what they consider the glorification of God.
Yet they are being out-competed by a for-profit company that explicitly tries to make on every sale in order to compensate the owners.
How do you explain this if you view profit as deadweight loss that can only be at the expense of customers?
*The bread that is used during Catholic masses.
Secondly, I don't really think I need to disprove your anecdotal scenarios (which aren't really apples to apples anyways) in order to stand behind my statements..
I will say this: I did originally say that executives and employees should be well-compensated and that the company, while not profit-driven, should still be making enough money to attract top talent and be competitive in the market.
My idea was never about running an insurance company like a charity or a tiny unsophisticated business (as in your host example), it was just about not prioritizing shareholder profits over the core business service provided to the customer (i.e. providing coverage and paying claims), which is what many publicly-traded insurance companies do today.
not the OP but, in the long term, yes, I do believe a for profit entity is at odds with that. Shareholders clamor for more profit and will not be content with no growth.
They also limit net income to 2% of revenue and refund anything more.
Think of it this way, a not-for-profit insurance company has to pay its executives, staff, and so forth, while a for-profit insurance company has to do all of that and show a return for its investors.
When an exec makes 22 million at a for-profit company which produces dividends that might make its way into your 401k people have a hissy fit.
When a not-for-profit company pays their execs that much, those same people don't even know, because it's "not-for-profit" they assume it's more charitable somehow.
I don't think it was the reality that the prior comment lamented, but people's perception of it.
There have been moments in my life where I've wanted to smack smug idiots who, when asked what the do, say "I work for a non-profit doing X." As if that makes them better than the rest of us.
The difference is that what is seen as cost, private company often see the product they deliver as a cost.
We earn a flat fee every time we settle a claim for members of our community - they provide the funds to cover for each other.
No conflict of interest, fair pricing, everything instant.
Have a look. insureathing.com
Overall I think this is a nice briefing on the state of the insurance market in the modern economic landscape. It is extensively regulated with rates set and various nuances. All of this, of course, comprises part of a grand "data set" that looks quite appealing to modernization.
Unfortunately, I think there should be a strong expectation that the market (industry) will both be openly hostile to "disruption" oriented attitudes a la Uber, but laugh at any ability to raise capital to compete at any meangingful level.
I applaud your interest in perhaps improving a legally sanctioned form of graft (I prefer Mutual Organizations myself). Conversely, my experience leads me to laugh a little because I've seen the numbers and the complexity behind the scenes. I've got no interest in the industry beyond the paycheck it provided, but it is quite fascinating in numerous respects. Just the naming conventions alone once you get to Bermuda is a trip. Good luck.
Some of the more forward thinking companies are actively investing in new models and companies. I think that's going to accelerate.
Even without that, over time, new models and companies will succeed. Some of these are going to look like stock insurance, some will look like Mutuals and reciprocals, and some will solve insurance like problems in new ways.
Best of luck!
You're definitely right that there are privacy issues to be answered but we try to be as transparent as possible about what we're doing with customer's data, and by being stringent about who has access to sensor data.
1. Sensors dramatically increase the acquisition cost for a policy.
2. It is unproven that sensors will mitigate losses. We all see the potential but there just isn't data there to tell us that.
If I could prove #2 then #1 becomes simple math, if the CBA is there then incumbent carriers will adopt it. It's just not there yet to justify doing outside of startups and market tests.
3. When carriers pick a partner and get into the preventative game then there's some liability that opens up if things go wrong. One could argue that the carrier is already covering the risk - this just means the preventative offering has to line up with coverage being bought.
4. Last but not least, the biggest source of losses is CAT related in property. Sensors will get at the second tier water and fire - again loss avoidance has to justify the sensors unless the preventative side is an ongoing fee service.
As for proving that sensors mitigate losses, even in our initial beta period we've seen a couple of potentially large escape of water claims avoided by early detection of a leak, and that's before we start introducing truly preventative measures as opposed to just detection. We're very focused initially on escape of water because those are in fact the largest source of losses in the industry - fire is fairly rare, theft tends to be pretty cheap to handle claims for, but a leaking dishwasher left while someone is at work for the day can easily require replacing everything on the ground floor of a small house.
But when the premium came out at over 4x my existing renewal quote I became less enthused.
And then I saw the Excess Charge (for making a claim) was £1,000 vs the £250 norm, I ran away to the nearest comparison site to find vanilla home insurance.
I think the conversion process might need looking at to make the benefits less nakedly focused on cost.
We're now in the final stages of rolling out our own policies which are much more competitive - quoting on my own house has our policies coming out cheaper than my current home insurance policy, with much better service.
Do actually observe a different risk profile in the type of customer willing to pay for a proactive service?
As in, there are already block-chain based deployments going for portions of the industry. That's some pretty aggressive shit in my opinion. These are also industries with loads and loads of proprietary data that simply can not afford to play fast-and-loose with integrity.
That's why Cyber Insurance now exists. Even the Industry itself knows how to layer risk models.
Hey though, if somebody wants to march into Stalingrad in the Winter and prove me wrong, they can reap the rewards. Full stop.
Having said that, there are a great many advantage to doing greenfield development in an industry full of entrenched companies who've been around for a long time, mostly around the level of complexity. We can get away with much simpler solutions because we're currently super focused on home insurance so don't need to deal with all the edge cases around providing fifteen different types of cover.
At least in the case of the company I'm at the details of the policies we write, and what feeds into the pricing, is worked out in conjunction with the reinsurer. They then agree to buy any risk we take based on that model. It is definitely a case of the reinsurer buying that risk from us though, the best way to think of it is that if a reinsurer believes the model is correct they also believe that on average they'll end up making a profit on the risks they buy, and indeed that if we didn't sell the risk to them that we would make that profit directly.
Essentially, the moment a customer becomes more trouble than they are worth, they are dropped. This is true with other types of industries, but if your health insurance drops you when you get cancer, you can't get more health insurance, and you die.
Same with house insurance, car insurance, ect...
And it causes death or financial disaster all too often.
Some would argue that "this doesn't happen" or "it's illegal".
1) It happens ALL THE TIME.
2) It's illegal, but if you don't have the means or education to fight it. You are pretty much done.
It's the fundamental nature of insurance companies to milk healthy customers while dropping unhealthy customers. It's just too tempting and they are too protected by our legal system for them to not do it.
I know this is pessimistic, but as long as you realize this fundamental imbalance in the relationship with you and your insurance companies, you can mitigate it to a certain extent.
But, really, the only way to completely mitigate it is to be so rich that you don't even need insurance.
I do think that this increasing preference for the rule of power over the rule of law is pretty disturbing, and makes a mockery out of the claim that we live in a democracy. Sure we do...if you have leverage over the companies that would violate your rights. But that's the very definition of corruption, when you need to rely on inside information, relationships, or other proprietary tools to get people to do what you want, rather than your rights as a citizen.
This is definitely true, and it seems like social media and sites like this or Reddit have the potential to bring this power to many more people. Companies behaving badly stokes online lynch mobs like nothing else, just look any recent stories of Uber on HN or United on Reddit.
Just look at the recent Monsanto news, where they knew that Roundup causes cancer, sold it anyway, and paid off the EPA to bury the investigation. There've been news stories, but no major social media outrage. Probably we've just been conditioned to expect no better of Monsanto.
The advantage of a real legal system that's accessible to all is that there're procedures for finding out the truth of any accusation, and then if it is true, there's enforcement teeth behind it. (Or used to be, at least; I think many companies are now using the bankruptcy/reorg shield to avoid court judgments.) Mobs are a poor substitute for that.
I don't have a solution other than don't get sick or have a car accident.
It's not a trivial problem, but it's also largely a solved one. The US just hasn't implemented any of the models that work elsewhere.
I'm not aware of a general solution that covers all cases, but in auto insurance we found that the model of replacing underwriters with crowdfunded groups works.
Would you rather live in a society where everyone has a right to medical care regardless of their social standing or financial wherewithal, but some people will die because of bureaucratic incompetence or because the person who could've saved them has no incentive to? Or would you rather live in a society where medicine can work miracles, even the most debilitating ailments can be cured, but only if you happen to be rich?
The former is (to a first approximation) what you get with European-style single payer. The latter seems to be where American health care is headed. There's no situation where everybody can be saved, simply because we're all going to die in the end anyway, but the distribution of who dies and from what can be changed by different policies.
Is this honestly a question?
There are way more non-rich people who need health insurance than there are people who may die because of "bureaucratic incompetence" or lack of incentive(what? do people really need money to not let someone die?).
The way you phased it the former is obviously(to me at least) better than the latter one.
It also sounds like you think medical research advances only in countries with the latter style of health insurance. Do you really think medical advances happen only in America?
Copied from earlier comments by me:
let's go through a quick run-down of the 'major' pharmaceutical companies of the world, and where they are headquartered.
Company Revenue (USD) Headquarters
Novartis 53.6 Bn Switzerland
Roche 47.8 Bn Switzerland
Sanofi 36.9 Bn France
GSK 34.9 Bn UK
AstraZeneca 26 Bn UK/Sweden
Bayer 43.4 bn Germany
Baxter 15.3bn US
Pfizer 49 Bn US
Merck 42.23 Bn US
BMS 18.8 bn US
So, 4 of the top 10 pharmaceutical companies by revenue are headquartered in the US. By Revenue, those 4 account for 125.3 Bn out of a pie of 367.9 Bn; or 34%.
It is not easy to get a list of the number of drugs under clinical trial, or the number of drugs that were recently brought to market by various manufacturers; and, as a side matter, a number of the more innovative drugs brought to market recently were all developed by small pharmaceutical companies (Boceprevir, Telaprevir, Imatinib, Ipilumimab) that were later acquired by the big boys.
So a small pharma company did the innovating, usually funded by a university or the product of particuarly profound insights by PhD students; turned into successful drugs; run through to the stage 3 trial stage and then, once all the development costs are done and dusted, acquired for a discount price of the predicted future revenue stream
So tell me, where are all the drugs being developed by america? I would say the rest of the world is more than pulling it's weight.
In fact, given rough population parity between the European first world and the United states, it could in fact be argued that the United states is not pulling it's weight.
Going by where the companies are headquartered is meaningless, because these are all multinational conglomerates. The question is where they procure the funds for their R&D.
As it turns out, not only is 50% of the entire world's medical research actually conducted in the US, but even for research developed outside the US, the US market still serves as the primary driver for the funding, which is pretty easy to see if you bother to dig into their public financial disclosures.
>"In addition to a favorable IP and regulatory environment, U.S. laws allowing direct-to-consumer advertising creates immense demand for specific patented drugs. More importantly, the United States is the world’s largest free-pricing market for pharmaceuticals. As a result, prices are comparatively high to make up for lower profits in other countries and to cover R&D costs.
The United States also has high per capita incomes, unmatched access to healthcare, a large elderly population, a culture of end-of-life prolongation, high rates of chronic diseases and drug consumption and a strong consumer preference for innovative drugs.
All of these factors contribute to it being, by far, the world’s largest pharmaceutical market with $333 billion in sales in 2015, about triple the size of its nearest rival, China.
The United States will remain the world’s most important market for the foreseeable future with healthy growth expected across all product sectors."
That is delusional. As a doctor in a single payer country, I can categorically say that the quality of living of myself and my colleagues is excellent. In fact, for those not from privileged backgrounds (many, as we have relatively affordable tertiary education) not having a quarter to a half a million of debt" graduation actually means we are better off.
So there's that, then there's the fact that I aggregate, the level of care in Australia, or the uk, or Japan, or Germany, is actually substantially better than that I the US.
Inform yourself sir.
The rich will have better health care even in a single-payer system, and I'm fine with that.
The thing I really don't want is the pre-ACA system, where only people with good jobs can get access to health care.
BTW I saw a great Yonatan Zunger blog post on this a while back... ah, here it is: https://healthcareinamerica.us/how-to-ask-good-questions-abo...
Aside from the fact that most European countries - even those with government-mandated healthcare - do not have single-payer insurance, this is a false dichotomy that ignores the global market dynamics.
Just as Medicare in the US could not operate in its current form without the existence of the private market to implicitly subsidize the public system, European countries would have a very different healthcare story in the absence of the US market.
Nobody likes to admit it, but there's a reason that the US is the source of over half of all direct biomedical and pharmaceutical research worldwide, including research conducted by European pharmaceutical companies. These companies use sales on the US market as the source of funds for the research that all countries benefit from, and in the absence of the US market, either those costs would be borne by Europe, or that research would simply not happen. They also pull funding from the US market via other, less direct means.
Yes, the US system has massive problems, and yes, it could and should be cheaper. But you can't analyze these as binary options in isolation, because they're not binary, and they're not operating in isolation either.
 If you want to make the argument that Europe could come up with a system that pays for this research in the absence of the US market, fine, but then you have to explain both why that would not simply recreate the same expenses, and explain the fact that, so far, that system has not been created even by the European pharmaceutical and biomedical companies.
 The UK has four main payers; the Netherlands doesn't even have single-payer at all, and so forth.
The question still stands - would you rather live in the world where everyone has access to medical care but it isn't cutting-edge, or one where the very best in care and the very best in research techniques are available, but only for a price? I'm honestly curious about peoples' answers, because it is a dichotomy. Not necessarily a sharp one - you could imagine several intermediate systems in between - but there's a tradeoff between universal access vs. incentivizing further research and new techniques.
Again, there is no "would you rather". You can't treat these as binary options, and you can't treat these as operating in isolation. They're an array of systems that mutually operate within a global context. There is no answer to that question, because the dichotomy assumes both a binary and isolation.
There is indeed a tradeoff between quality and access, and there's a worthwhile and necessary conversation to be had around that. But that's not the same as the difference between the US and the multitudinous systems within Europe (most of which are not single-payer). And it's not the same as the question you opened with.
There is no dichotomy between universal coverage and cutting edge technology.
If I see someone drowning, I have no financial incentive to go save them. But I will go save them. Financial incentives aren't the only incentives. They aren't even the best incentives.
Why might someone go into medicine and/or research if it didn't pay huge salaries? Maybe because it's meaningful work. Maybe because it brings prestige. Maybe because they enjoy it. Maybe because they care for people.
I contribute to open source software and have never been paid a dime, yet you can hardly say that open source software is inferior to proprietary/for-profit software.
We have unprecedented means to distribute information for "free" (or at least cheaply enough that even homeless people can access insane amounts of information, unlike in the past when a lot of stuff was only accessible to the elite) and diet and lifestyle are cited over and over and over as contributing to deadly conditions. There is lots of room here to do good things for everyone, quite cheaply.
Though I am for the U.S. transitioning to universal basic health coverage for its citizens. The current situation is terribly broken.
And single payer systems mostly don't prevent private treatment - you don't need it because the single payer is good quality and the only benefit you get from private treatment is access to ineffective experimental very expensive treatments and nicer hospital rooms.
Rest easy - you can still buy your way to better care.
Fwiw there is an "Intellectual Care Advantage" in that someone who is articulate and educated (aka well off) has a much better chance of getting good care, through their ability to navigate system, communicate with healthcare professionals, do their own research, be the squeaky wheel. But in my experience that advantage exists equally in both the US private system and in the European socialized system.
Most ailments get 'treated' alright, but the actual help you get isnt statistically better than placebos would've been.
Often, you get better despite of the treatment, not because of it.
Even something as basic as a broken bone just boils down to 'force patient to keep still while nobody does anything for weeks'.
.. heck, the biggest impact on healthcare continues to be personal hygiene. Most of the life expectancy improvements within the last 200 years can be attributed to that.
there are absolutely examples of its success, as you've correctly pointed out! It's still not nearly as amazing as the grand-grandparent made it sound. and my previous statement still stands: personal hygiene continues to save more people than any other treatment. this includes vaccinations and antibiotics (they're both wonderful discoveries that help save a lot of people).
Give them the option, and they'll just make the best walled garden they can and fuck everyone else.
Pure insurance is when a consumer buys a Playstation for $300, and then pays $5 for an extended warranty, or when a company insures their office building against a fire. I don't think your arguments apply to that. In such a case, is there unacceptable social harm if a insurance company determines I'm really bad at taking care of my Playstation, and refuses to insure me? Is a company that badly off if they need to write down the cost of a building if it gets burned down?
Is all insurance a social right? I feel that health insurance has the strongest claim to this, because it's not a pure business transaction and it's about who we're letting die in society.
Insurance is statistical in nature, and contracts should be required to explicitly outline the scope of coverage. If I’m paying $5/m for coverage of manufacturing issues with my Playstation, I expect any manufacturing issues to be covered. I would also expect an extremely unlucky customer to receive multiple device replacements without any change of premium - because the contract and price should reflect the expected failure rate of the device (plus overhead + profit).
In that example, it should be illegal to boot an honest customer after the first failure… the only reason to do so would be because the insurance company set an artificially low rate that doesn’t reflect the ammortized rate of manufacturing issues. In other words: the business is breaching contract by charging me for a different service than I’m getting.
Although, given the clear scope of coverage, proof of malfeasance is justification to both refuse payout and ban the customer.
However, if I’m paying $5/m for unlimited coverage, I expect unlimited coverage. That rate is expected to cover idiots that keep their Playstation on a fireplace, and perfect people that never move the device from a cool location away from vibrations and interference. Again - if I get kicked after the first failure, that’s failse advertising. Of course there are people that will microwave their device for fun and demand a replacement - the rate should include those people, or the contract should not offer unlimited coverage.
Businesses are free to not offer unprofitable coverage, but consumers have an economic right to demand that businesses honor contracts. I’d argue that consumers also have a right to accurate advertising - if the “unlimited coverage” plan has fine text that says “manufacturing issues only”, well, that’s not really above-board.
I saw this every day when I was a catastrophe claims adjuster with Farmers Insurance during Hurricane Ike that demolished a good part of the Texas/Louisiana coast. I actually had a customer threaten to shoot me because I couldn’t write a check for a water damaged wood floor despite writing a big check to replace the roof. The actual source of the water damage wasn’t the roof, it was the floodwater. So while the walls from the roof downward were covered because that damage was from the seepage from the damaged roof, the floor damage was entirely from the flood. (It was a two story house so the water from the roof seeped through the walls from the attic and leached downward into the drywall, while the floor downstairs was covered in a pool of water from the floor.
The point is the homeowner thought he was covered despite there being an extremely clear flood exclusion for that particular policy. I could have been really strict and only covered the walls down to the flood line, but since the walls were a total loss either way, I had the flexibility to cover the walls all the way to the floor.
I saw this misunderstanding again and again when it came to roofs. A 20 year roof that is 10 years old is only covered at a fraction of replacement cost because it only had 10 years of value remaining. Those were uncomfortable situations for me however, the homeowner, when buying them policy could have bought a replacement cost add-on, but they wanted to save money so they got burned when they needed the coverage.
Insurance agents are a HUGE part of the problem – is claims adjusters had to be the “bad guy” and break the news that their policy didn’t cover what they thought it did. I was the one getting harrassee when all I was doing was following the contract. I did my best to lean on the side of the homeowner, but all of my payouts had to be supported by detailed measurements, photographs and Xactimate estimates.
A nasty business that was. I barely lasted a year before I burned out.
I'm a fairly educated person. I understand a lot of complicated things. I can read and comprehend legal statutes, building codes, lease agreements, historical documents, Shakespeare, transcripts of legal proceedings, and lots of hiphop. But I have never been given a policy statement from my insurance agent that was coherent. Or even complete.
This is why the ACA came up with the "Essential Health Benefits" list. There were so many things that, common sense would tell you should be covered, but insurance companies would exclude for no viable reason (making more money or not having to pay out claims are not things I consider "viable reasons" in this context). You'd buy insurance, only to find out it wouldn't actually cover things that people would want to use it for.
The reason for this is because most human settlements are near water. It is not only essential to life, it is a good means of transportation and has been for a long time. So most human settlements are built in flood plains. Thus, sooner or later, most homes will be at risk of flood damage.
Insurance is about risk management. There is no risk to manage here in terms of taking a financial bet. It is all downside for the insurance company. The question is not IF the house will be in danger of flood so much as WHEN. Insurance companies try to avoid such bets, for the most part. (Not counting life insurance.)
Whole life policies make the bet you are describing. They are a lot more expensive than term policies and you can borrow against them because you are basically putting money into a fund in some sense.
The vast majority of life insurance is absolutely a bet. Many, many life insurance policies are only good if you die on this flight to New Zealand or if you die in a car wreck or if you die in the next five years while still quite young. People buy these things because they are cheap as all fuck because they are long shot bets. Most people won't die on their plane flight or in the next five years while in their 20s or 30s.
And the last line in the comment to which you are replying makes it crystal clear that I have, in fact, heard of life insurance.
The point of briandear's example was that wind had damaged the roof and walls, and wind storms were covered by the insurance; whereas flooding had damaged the floors, and flooding was not covered by the insurance.
When you get insurance, it doesn't necessarily cover everything. You might have insurance that will pay for your home if it catches fire and is destroyed accidentally, but will not pay if a person deliberately commits arson. Insurance might pay of your home is destroyed by a storm, but not by a landslide, and so on.
The main problem I heard with briandear's example is that people apparently didn't understand the coverage they had purchased. If I operated an insurance company, I would consider summarizing the policy that people were about to purchase with a simple form showing the most common hazards. Maybe even show them with simple glyphs depicting fire, floods, storms, etc., and indicating whether their plan covers that scenario or not. Ask them to sign or initial that form. It's not a legal form, but you'd present it to them and ask them to confirm they understand it along with the contract text version.
Then, when an event happens and they're asking for an insurance payment, you show them the form that they had initialized, and explain how things were covered or not covered.
I would also want to explain to people that multiple disasters can happen at once, and explain how the insurance company will reason about what's covered, based on the cause of each thing that was damaged or destroyed.
While that's true, a part of the reason is the complexity of policies, and exclusions for situations which people consider "common sense" to be covered. Situations which are medium risk, but part of people's everyday lives.
For example, my travel insurance does not cover accidents which are "a result of drug or alcohol influence". My laptop loss insurance does not cover theft if it is "left unattended in a room with public access".
It might make sense to exclude getting high on unknown drugs in Thailand and stabbing yourself, or leaving your laptop on a truck stop cafe table while going to the toilet.
But at the same time, having a few beers while on holiday, and leaving your laptop on your desk at a startup office are both things which reasonable, responsible people still often do. And would not expect to invalidate their insurance cover.
Unfortunately nobody could explain to me the precise details of these clauses - what counts as a "result of" or "public access".
This is known as insurance fraud.
That means a company has to always keep cash in reserve against the off-chance of its building burning down just because insurance can't be trusted. That's money that can't go into expanding the business and creating additional jobs. Imagine the overhead of this parked money across thousands of businesses. Not to mention a lot of startups or young businesses can't have that sort of cash position, which means it becomes another barrier to starting businesses. It would be a major impediment to the economy.
There is a better way than just purchasing a policy and hoping. E.g. in CA, you can inform yourself about various home insurance companies before you buy. By looking at the data the CA Dept of Insurance publishes, you can see the ratio of claim complaints to policies.
In some lines of insurance like healthcare via employee benefits, you aren't the person deciding on the insurance company - and that definitely leads to problems...
The problem would not exist to this extent if there were lifelong contracts. Even in places where they are common the premiums are not reflecting the cost of the age cohort but have some actuary life insurance component to them. Eventually one has to pay in what one is statistically likely to consume and that is easier when younger. So even in a totally capitalistic system while earning one pays for ones future old age risk. The US system is an outlier as the old age risk is socialized.
Insurance is a business. I don't think any business would want customers that are more trouble than they are worth.
> they are too protected by our legal system for them to not do it.
Solving the risk issue with patients who will never be able to afford their healthcare is not an insurance problem. These people are uninsurable. There's a known cost to pharmaceuticals associated with being a hemophiliac. There's a known cost to the outpatient care associated with kidney disease. There's no "risk" associated with those costs.
We need to re-frame the discussion around socialized healthcare, not health insurance. Health insurance, apart from high-deductible, low-cost plans, doesn't exist. The US already has socialized healthcare, the problem is that it is a split private/public model.
But insurance is precisely the business of taking money from everyone that's exposed to a potential loss (namely the expected value of that loss, plus some more to cover administration cost and profit), and then distributing it to those actually suffering the loss.
If the insurance then turns around and kicks those affected out, it is reneging not only on the spirit of the contract, but on its entire raison d'être.
Agreed, though, on your later point that in the health domain, certain risks, once they've occurred, are so massive that traditional (private market) insurance structures might not be really suited to them, which is why nearly the entire developed world has some sort of public health insurance, fortunately.
It's not reneging, assuming they make you whole on the loss.
If I wreck my car, and I have insurance, I will be reimbursed for my loss. There's no expectation at that point that I will necessarily keep my coverage, or keep it at the same premium, now that I have demonstrated that I am a higher risk.
For health insurance, it's a bit different because some diseases can't be cured, and it's harder to put a dollar amount on the "loss" incurred. For example, if I develop diabetes, that may be something that has to be managed for the rest of my life, and has various other side effects such as circulatory problems. But, we have data; there are lifetime averages for this sort of thing, and they can be computed into the actuarial risk profile. As long as you acquire the insurance before you incur the loss, the model works.
> nearly the entire developed world has some sort of public health insurance
We should not call it insurance when that's not what it is, though. If you have a disease (preexisting) the insurance model doesn't work, any more than it would work to sell homeowners insurance to people whose houses are currently on fire. The risk of loss to the insurer goes from "actuarial probability" to "100%"
This still doesn't allow people who get a condition to upgrade their insurance. Allowing this amounts to socialized health-care. An alternative is to make such coverage part of the mandatory package. This way, it is still insurance. This is only as socialist as insurance inherently is (i.e. the unlucky being covered by the lucky).
The big issue here is 'liberty', but if you hold that no-one should die because they cant access health care, and don't want to make healthcare free, mandated insurance is the only option.
"That 'nearly' is a real killer"
- Somebody from the "nearly"
Limiting your thoughts to make assumptions about the original poster is limiting your potential to see opportunities.
And the principle of "utmost good faith", which insurance companies abuse to remove cover after a claim, unfairly disadvantages many people.
Of course this is sarcastic, but argument about information asymmetry, created by DNA testing, that supposedly threatens the existence of insurance business is quite real.
In healthcare there are many different models, but one popular one is the concept of an ASO. This is the case where a healthcare insurance company (think Anthem) will provide administrative services only (ASO) and not (ultimately) be financially responsible for paying claims. The group responsible, in this ASO relationship, is generally an employer.
This is actually fairly common and in it the insurance company has no incentive to drop a "customer" (member), even if/when they legally could.
There is a lot of "bad" in the health insurance industry, but there is also a lot of "good" - people working from the inside who are trying to make things better for members/individuals. Things like improving quality of care, managing coordinated care models, identifying medical risk (eg. opioid abuse), etc.
I think first people need to better educate themselves on how the industry currently works, where the problems are (there are many), and where the more positive efforts are being made in the industry. Bottom-line - don't write it off, but get better informed and try to contribute.
"get better informed" about what? How insurance companies take advantage of poor people? Even if I know all the laws and regulations and details of my policy, if I don't have the money (hire a lawyer) to fight it, then I am screwed.
And this has happened to me. I was in the right, but my insurance company ruled against me, I complained and they basically told me to hire a lawyer if I didn't like it.
And "contribute"? what is that? Contribute money?
You still don't have a solution for the problem, insurance companies having asymmetric power (via information and money and legal influence) in the customer relationship.
They collude with other insurance companies to create complicated policies that you can't negotiate or understand, but are forced to have legally.
It's billion dollar powerful and well connected corporations vs. one person. Not exactly a fair fight.
Your argument is an emotional one, and that is fine, but it does not help to _realistically_ approach this problem.
Our system is broken. Calling or contacting our representatives is essentially futile.
Honestly, the best way to change anything, would be to get rich and try to buy some influence. Which is exactly what got us here in the first place, rich people buying influence.
Health insurance is a mix of pre-paying for predictable and certain expenses with tax-free dollars, a transfer/entitlement system to ensure that more people can afford insurance (by design, your premium does not match your expected risk--either you are pooled with others at your employer, or your exchange account is subject to rating band requirements which means, for example, that in many states old people can only be charged 3X more than young people even though old people are likely to be much more than 3x more expensive to insure), and actual insurance. I'm not sure what percentage of your premium reflects the cost of actually insuring you against uncertain future health events, but it's far from 100%.
This is an interesting article, and some of it applies to healthcare in the U.S., but much of it does not.
Agreed. If regular, predictable events are covered, it is not insurance. Regular, predictable events are not insurable. Be cause math.
Wellness checkups and scheduled preventative care and yearly mammograms/prostate are all fantastic things ... but they're not insurable. If someone is selling "insurance" for those things, you can be certain that you're paying 100% of the cost somewhere.
The problem in the U.S. is that we have this bizarre system where hospitals charge exorbitant prices and then insurers haggle them down to something halfway sane. So when you're paying for "insurance" you're (ideally) getting both catastrophic coverage (i.e. actual insurance) as well as access to a cartel that negotiates prices down from impossible heights on your behalf -- even for routine care.
Since most people who regularly access medical care do so through these cartels, care providers have no incentive to make care more affordable than what they can get away with -- and insurers have no incentive to allow the price to drop either, since people being able to afford care outside the cartels would ultimately undercut their profits.
This system is fundamentally unworkable. There's really no way to detangle the perverse incentives here in a way that will bring prices down to a level comparable with single payer healthcare.
The malpractice insurance that docs and hospitals need to carry in order to defend themselves should they be sued is passed onto consumers in the form of higher medical costs.
Or at least that's how someone once explained it to me. Is that not also a contributing factor?
One thing I've read is that states with caps on malpractice claims do not have lower medical costs.
Hospital participation in Medicare and Medicaid is voluntary. However, as a condition for
receiving federal tax exemption for providing health care to the community, not-for-profit
hospitals are required to care for Medicare and Medicaid beneficiaries. Also, Medicare and
Medicaid account for more than 60 percent of all care provided by hospitals. Consequently, very
few hospitals can elect not to participate in Medicare and Medicaid."
Source (American Hospital Association, December 2016): http://www.aha.org/content/16/medicaremedicaidunderpmt.pdf
(Sorry it's a PDF)
Edit: updated from 2010 reference to 2016 reference
Hospitals could easily afford to provide care at Medicare/Medicaid rates — if they're willing to have less impressive lobbies, marketing materials, corporate facilities and shareholder profits. Citation: all other first world countries.
Do intelligent people ever go to for-profit hospitals? I'd group those with for-profit universities and for-profit prisons as "nope, not touching that, stay as far away as possible and hope they all disappear".
All the best universities are non-profit, for the obvious reason that it allows them to keep massive endowments, which are spent on better education instead of being paid out to investors.
More info: https://www.cms.gov/Medicare/Medicare-Fee-for-Service-Paymen...
Good commentary about upcoming changes that endanger these programs: http://www.modernhealthcare.com/article/20170626/NEWS/170629...
You have the monopsony that comes from collective buying power on the one hand. (An argument for SINGLE PAYER insurance.)
On the other you have the usual moral hazard which says, if the customer ain't paying, try to charge as much as possible.
So it's this game of bigger and bigger armies. Same as when countries can't make a peace deal where neighborhoods and individuals long ago could have. A single person can torpedo a deal. It's all or nothing.
It's also why some British bureaucrats in the NHS face the choice of dropping coverage for a drug because the company just won't play ball and charge a low enough price. When are you willing to walk away when you represent a lot of people??
Now, the parent comment still is correct that that cost would have to be covered by premiums, but the premiums should still be equal or lower than they were if they didn't provide the checkups.
In effect, in such cases the insurer could market the regular checkup as a benefit, but rationally if they could they'd rather make the checkups a policy obligation to preserve their margins. This is what aligned incentives looks like :)
I'm a member of Kaiser HMO, and they do just that -- they regularly notify me of screening tests I should be doing and they offer several ways to contact my doctor without actually seeing my doctor.
If I'm not sure I need to go in to see him for that lump on my toe, I can call a triage nurse for advice, set up a phone call appointment with my doctor, or do a video chat with him.
For my last annual checkup, my doctor emailed me, asked me to go in for some bloodwork, then a few days later, I went to visit the doctor and we talked over the results while he conducted the physical.
I know some people don't like Kaiser, but I've had only good experiences with the system, and I love their electronic records system - I can view test results online, and if I'm referred to another doctor, the other doctor has instant access to my records.
Preventative health saves more resources than reactive health (i.e. catching cancer early as opposed to when it display symptoms). One of the big problems of healthcare insurance in the U.S. is treating it like car insurance - a numbers game of reactions to accidents.
Some insurance policies cover 100% of annual checkups but it still trains people to avoid going to the hospital.
Ignoring the US specific stuff, there's a reason that my private health insurance basically covers a regular medical screening - and it's not because the cost is in the premium. It's because that preventative strategy allowed them to reduce the size of claims from people who otherwise would find problems later and those would be more expensive.
Imagine, if you will, a car insurer who can't turn around and refuse to pay out on claims where the car hadn't been serviced in 5 years. The tyres are bald, the break pads worn, etc. Now imagine that they offer a yearly basic road-worthiness check for free each year. They'll sell more policies (because it's free stuff, and they care) and have fewer claims caused by poorly maintained cars.
The costs are being paid, clearly, but they come in part from changes in the claim profile that you would be paying for otherwise.
Nope; probably more like 150%. Except I hear that in America, those insurers can get a deal for you for the routine stuff compared to someone un-"insured". Pretty f'ed up.
So you're on insurance A with no pre-existing conditions and get cancer. Next year your employer switches to insurance B. Now you have a "pre-existing condition" - is it fair to suddenly refuse to treat you? If that's the case, what's the point of having "insurance" at all?
Any "new" conditions would be covered by your new insurer B (or not covered, if you didn't get new insurance), and insurer B would have the right to refuse to pay for pre-existing conditions because those would be covered by your old insurance A.
But that isn't to say that if we had "insurance" life would be altogether better. Insurers would increase the premiums of people who beat cancer, because cancer has a habit of coming back. Quite likely anybody who beat cancer would be unable to afford insurance in the future.
If you're talking about the pre-existing condition of fat and family history of heart disease, then I disagree.
A single payer system would remove a lot of the perverse incentives we have with our current model that prioritizes profits over care.
I think insurance is not an accurate word for the health care industry. I, like you, think of that word as coverage for risk, and in fact that is how the industry started in sixteenth century Netherlands (mentioned in that blog post).
But the business of insurance is about defining and measuring risk, and putting people into pools so that you can charge the riskier people more.
I don't think that maps well to health care, especially when you consider how good DNA testing will be in a matter of years. "Yup, your kid is in a high-risk pool for leukemia. You get to pay $50,000 a year for family insurance instead of the normal $19,000." [The first number is made up.]
Also, if you run an insurance business and someone with a pre-existing condition knocks on your door, their "market" rates will be their cost of treatment as their risk has become a certainty.
If you don't think charging people based on your best knowledge of the risk is fair, then it is a government program, a forced redistribution of risk across a larger pool; not insurance.
Also, as far as I know health insurance companies can't charge different rates based on genetic testing. How would this be different, than, say, laws preventing car insurance companies from charging different premiums based on race?
Is it because the insurance coverage algorithms are too complicated? Because the different entities involved in a single treatment plan is too complicated to navigate? Because physicians feel that cost is orthogonal to medicine and they prefer not to be involved/prefer to recommend the ideal treatment based on a predicted outcome? All of the above?
It feels like if there were a particular hospital group / physician group that had this feature, they would attract a lot of attention. Just imagine, "Your initial differential diagnosis will not exceed $150 and we'll discuss treatment options or more conclusive diagnostic tests afterwards."
All I've heard so far are physicians who don't accept insurance but instead have a straightforward "menu" for common items, which is interesting but not what I think most people want.
Here is a simple example that my sister (a nurse) gave me yesterday. Suppose that you go in for an operation at the hospital, spend a week recovering, and develop diarrhea on day 2 while you are there. That diarrhea is a "hospital acquired infection" and insurance won't pay a dime for your operation. Therefore until you've been through the hospital, nobody knows whether you'll get paid.
Oh right, and the possibility of this happening is a reason for the hospital to kick you out of the hospital as quickly as possible. Average patient outcomes may be better if you stay a week, but their odds of getting paid are better if you're kicked out within 48 hours.
This is just the tip of the iceberg. She went on about how broken health care is for an hour...
That's definitely not the case, because they have to know in order to bill you. To get us back on the same page, let's rescope and consider only elective procedures and primary care.
Your example is extraordinary and could be specifically excluded. Even if I got a treatment plan with equivocating language about "risk of procedures / changes / infections / etc" and all that noise at least I could make an informed decision about which treatment plan I think is appropriate.
The guff I was sold when we were shoved to high deductible plans a ~decade or so ago was that we could make decisions about our healthcare. They come up with BS estimates or treatment calculators that are from the insurer and not the provider.
They bill you after the fact, after they know what they did and what insurance paid for. At that point it is easy. But before the operation, nobody knows what they will find or what insurance will decide.
Your example is extraordinary and could be specifically excluded.
On what evidence do you conclude that it is extraordinary?
All evidence that I have, including my conversation last night with a retired head nurse, is that confusion and uncertainty about what will be covered by insurance and what negotiated limits there might be on what can be charged are more the rule than the exception. And if my impression is correct, then what you want is impossible. Because before the fact, nobody really knows.
I went for a routine visit, and paid the $30 copay before the visit.
After the visit, I get a bill for Ridiculous_Number_X - Ridiculous_Number_Y = $30.
The "actual cost" of the visit and the "negotiated discount" are numbers that are obviously pulled out of someone's ass because they magically align so that I have to pay $30.
And since everything was handled by Kaiser, how the hell could they not know before my visit that they would want $30 extra and just charge me $60 beforehand and be done with it?
I'd imagine the reasons for the complexity are the same as an injury.
Edit: Just a thought...
What if enough consumers went line-by-line AFTER the fact and shared what the specific breakdown of every item cost? So then you'd be able to say, okay, at this hospital them giving us an Advil cost $X and them doing this procedure cost $Y.
Some way of making the master price list for how much individual items cost public and grouping together ones that generally appear together...
Crowdsourcing it would make it significantly more transparent, but the problem (to me, at least) is more that submitting that information somewhere is more of a privacy/HIPAA thing than most consumers and companies are willing to handle.
I could definitely envision a government system, like medicare, would hire people to do this, and make the prices more transparent to consumers, but this is the same medicare whose part D cannot negotiate drug prices due to lobbying efforts.
We could call that...oh wait. Nevermind.
Complications and hospital related infections are not extraordinary. For most of the history of healthcare they were the norm.
To me, the actual problem seems to be that they would like to make up the price after the fact, when they have a better idea how much they can charge and get away with. This gives them the unfair advantage of setting their own prices unchecked by market forces, and is frankly a reprehensible business practice.
Is it POSSIBLE to do all of this and give you a proper quote before a visit? Sure, but it requires some fairly complex software to do so and manual input of tons of different data specific to your insurance contract that almost nobody wants to do it (ironically, the billing company I work for DOES this - but since we aren't involved in patient care it's only utilized to ensure we get paid properly by insurance companies).
Can someone quantify the value added by having this complexity baked into the system? Is there any advantage besides the "confusopoly" aspect?
Who is the main benefactor (in $$$) behind the drive for complication of medical billing? Doctors? Medical Office Receptionists? Insurance companies? Other third parties that doctors hire to handle paperwork?
What are the benefits supposed to be over whatever we were using in 1975? If you were founding a clinic on Mars for the first colony, would anyone duplicate our current system of medical billing?
The value added is relatively little, and past comparisons of the cost of healthcare between the US and Canada have identified paperwork as being most of the difference.
But the cost to the one insurer or hospital which DOESN'T participate in adding to the mess is very high. So everyone puts in a lot of energy to wind up in approximately the same place, only with more paperwork. After a few decades of this, well...
A new company will look at healthcare in America and say, "I'll start a company, and we'll fix part of this." And to some extend they succeed, they deal with some of the underlying insanity, and stick a nice API in front of it. But ultimately what they really do is bring in a bunch of people to sap more money out of the healthcare industry. I used to be one of them when I worked for such companies as a developer. Ultimately a small part of your high medical bill ended up in my pocket. One of the companies I worked for had hundreds of employees and could have been entirely replaced with a 50 line Python script and a cron job if only the government would pick a standard CSV format and require states to use it. (There was no patient data we were dealing with.)
It seems to me, that to make healthcare affordable in America a lot of these auxiliary workers are going to have to lose their jobs. They system must be made much smaller.
What they get out of it now are public health statistics. Doctors dont get anything out of this.
Ultimately treating medical coding as the price determination mechanism is the cancer behind all our problems.
We actually don't really get those out of the medical billing situation either.
ICD codes are what's used for public health statistics, whereas CPT codes are used for billing. I mean, we could use that data for public health statistics, but we don't really. And we could still have gotten it without the rest of the sacrifices that have come along with the code-based payment systems that have turned practices into offices for billing, with a marginal medical practice on the side.
Unfortunately, as you said, because Medicare is 40% of the payer market, once they switched to this model, it created the vicious cycle we're now in.
Very roughly (it's more complex, but not worth more detail here) ICD-10-CM diagnosis codes are used for billing, and ICD-10-PCS procedure codes are used for institutional billing, as well. HCPCS (which include CPT) procedure codes are used for professional services billing.
Yeah, this is the rabbit hole I was hoping not to have to go down. :)
All I wanted to illustrate was that the desire for public health statistics could be satisfied without requiring a move to the flaws of the current billing model - they're different systems.
(And historically, the move to the current billing model came about primarily for reasons other than a desire for public health statistics).
If you get a bill from hospital, you can call billing department, ask them if they can try a different code to bill insurance company. And it is possible new code will lower your out of pocket cost. On few occasions I did this, I end up owing nothing out of pocket.
Doctors/Labs are often surprised after the fact by what the insurance company allows, thinks is miscoded, will pay, etc.
My wife has experience of the doctor's office asking insurance company for $X, and the insurance company comes back and say "no, max $Y". So then the final "cost" all of a sudden becomes $Y. Pay attention to the claims that your doctors send to insurance company and you might be able to see that.
So instead of telling you, yes, whatever procedure is definitely just going to cost $Y. They can't tell you how much things are. It depends on maneuvers with other players in the industry.
This is very different than say in Canada. If I want to get a teeth filling in Canada, my dentist straight up tells me how much before the procedure. If I want to price shop that, I can. In the US, nobody is willing to say how much, because "it depends".
It's not because intrinsically there can't be price transparency. It's because of all the messed up incentives that the industry has that causes US health care to be as such.
Other healthcare on the other hand is often a mess, although it is getting better. I've found recently (an MRI in this instance) that I was able to get costs beforehand, and even compare prices. I think the prevalence of HDHP (high deductible health plans) has steered people towards expecting to pay out-of-pocket for care, which has led to a positive change in this area.
My root canal is $325? Cool. I can shop it around or go with it. Same with a pet procedure.
Medical is the crazy town.
 Sure, there are extreme exceptions, since most hospitals have a dentist they can call when an emergency patient is admitted because an abscessed tooth has destroyed their entire body... It takes commitment and/or great misfortune to get to that point.
Essentially, health insurance for the poor isn't formally subsidized well enough to make it actually workable, but doctors have professional ethics that disincentivize them from refusing care. So the system has evolved a clumsy, ad-hoc mechanism for wealthy patients to cross-subsidize poorer ones.
American health insurance sucks.
In other words, if a practice can purchase a vaccine or supplies for a lab test at $100/unit wholesale, Medicare pays the doctor (in the aggregate) $93 for it. That doesn't take into account any overhead or costs of running a practice, of course, such as wages for nurses and administrative staff.
Providers typically make a loss on Medicare patients and then make up the difference by charging private insurers (who are, by law, required to pay more than Medicare does).
Medicare's rates are so notoriously low that for doctors who can't do this - doctors who treat a disproportionate number of Medicare patients - they actually have a separate stipend program to pay them enough to stay in business.
Somehow I came across that G8709 was for prescribing antibiotics. I figure I should be able to plug that into something like:
...but I apparently don't know the proper incantation to get that to work. It would also be interesting is someone had concrete side-by-side examples of what Medicare/Medicaid pay vs. what everyone else pays for several different "common" items.
No payer (including Medicare) pays a single price across the board - even Medicare pays different amounts to different providers in different regions, etc. So there is no one single price for each payer that we could compare, and it'd be hard to find true apples-to-apples comparisons between them, short of polling individual practices and asking them what they received last month (which is hardly rigorous).
Remember that these are often treated as closely guarded secrets - if they were truly public, the AMA couldn't charge for access to CPT codes, and it would be harder for Medicare and private payers to negotiate the minimum rate for each provider. It's the same reason you'd be hard-pressed to ask most companies to make all of their individual salary data public.
The reason we know that Medicare pays so little, though, is that (a) it's no secret - even Medicare doesn't really try to hide it, (b) Medicare has to publish aggregate data, and we know from the aggregate data that they reimburse 7% less than COGS on average, and (c) it's statutorily mandated.
The first column are the number of points a given service is assessed for, the second is what the publicly-mandated insurances that most Germans are covered by will pay, and the third is the private rate: private insurance or straight-up cash. Doctors and other providers can choose to charge higher than the usual 2.3 multiplier for private patients, and they can choose to only accept private patients, but most accept the public insurances, too.
I can confirm that these are the current prices - I'm privately insured with the highest legal annual deductible (1200 EUR) and pay those bills out of pocket.
Result: Visits to my Hausärztin (primary care doctor) are somewhere in the 30-70 EUR range, full price. Just about everything in healthcare is startlingly cheap in Germany compared to the US (dentistry is only somewhat less expensive than in the US). About 10 years ago, I paid less for the same procedure without participation from my insurer than a friend did in the US after her insurance paid its portion - and I had a night in the hospital, while she was an outpatient!
Private insurer rates are definitely not public information, for any definition of "public".
Medicare reimbursement rates are sort of public, but not at the level of granularity you want. And a portion of that is because the question is not easily defined. For a given CPT code, Medicare might pay one of many different rates, depending on factors such as the geographic region, whether the provider operates in a CAH, whether the provider qualifies as a DSH, etc. That level of granularity is not easily accessible, and without it, there's no way to give meaningful example individual comparisons without running the risk of cherry-picking non-representative examples simply due to availability bias.
(Also, Medicare and Medicaid can't be lumped together. Medicare is a single, federal program that is administrated in four parts. Medicaid is a set of 50 different programs run at the state level, each of which can be administrated in more ways than I can count. The one thing that they all have in common here is that, like Medicare, they pay abysmal rates to providers, but the relationships that they have are even more complex - even in a single state, like New York, there are literally hundreds of different ways that Medicaid services can be provided, depending on the type of plan chosen.
Source: founded a company that had to abstract all of this complexity for patients, who were disproportionately on Medicare or Medicaid)
Each year the state publishes the set of hospital rates and intensity weights for each DRG (Diagnosis-Related Group) and severity combo (currently using weights developed in 2014). So a DRG of 460 (Renal Failure) with a severity 2 has a weight of 0.7393. Now the actual cost will depend on which hospital you go to since each hospital has a different base rate. For example each Mount Sinai hospital has a base rate of $8,743.45 while Niagara Falls memorial hospital has a base rate of $5,558.99. Each hospital also has a per discharge rate. To calculate the default rate take the hospital base rate x DRG intensity weight + per discharge rate.
Medicaid is separate state-run programs with different reimbursement policies in each state, and othe common federal rules governing the state programs include provider-specific (both cost and charges to the general public) limits, so, there is no simple “what rate Medicaid pays” for any service.
(And that's even before considering that in some states, a substantial portion of Medicaid is provided by private insurers who are paid capitated rates, not fee-for-sercice, by the states.)
This is confounded a bit because a lot of medicine involves lots of expensive equipment and staff with huge student loans to pay down but low day-to-day operating costs, but for a lot of specialties there exists no set of insurance-independent prices that allow a normal clinic following industry standard practices to operate without losing money.
It's worse than that - it's below COGS (direct materials). So even before you account for rent/utilities/salaries/amortized costs, they're still making a loss, unless they operate in a CAH.
You could have health insurance with transparency, but there is too much profit potential in forcing information asymmetry between all of the parties involved in the system.
Every time that you think...doctors...hospitals...nurses...are up to something, most of the time it can be tracked back to insurance companies and the sway that they hold over congress with their money. I'm not saying that there aren't doctors, nurses, hospitals trying to gouge people. I'm just saying that insurance companies are worse. (With some very rare and egregious exceptions.)
But the end result is that I simply cannot 100% trust any advice I'm given.
But no steak dinners still doesn't mean you won't get this happening, because some docs look at your insurance and figure that for you, your out of pocket will be lower with a coupon than with a generic. Sure the insurance company might pay an arm and a leg - but by and large docs don't care about insurance company profits, and do care about the person in front of them. And thus waste.
Other docs think all generics all the time -- even if the cost to the patient is massively higher. On the opposite side sometimes the expensive drugs just are better (even if just marginally) and most docs don't think about costs at all - as it's very very complex and their lives are busy enough.
It's messed up for a thousand reasons, not for one reason.
There are a lot more that think it's not their job to care about those things. They think they are only responsible for curing the sick regardless of time or money constraints or conflicts of interest.
They say they don't do this, especially in regards to money, but talk to all sorts of docs about how much of their patients' time they waste every day and they get real defensive. They think they are owed anything and everything and fuck running an efficient practice, fuck your time because they're a doctor and they are over in a different room performing miracles.
The egos in medicine do WAY more harm than good.
They actually have a hard time being "efficient" in the sense that you use the word, because if they don't run every possible test when they miss something and get sued they will have to answer for it.
Why are there so many lawsuits? Because the first thing that insurance companies do is lawyer up.
I'm not saying that doctors aren't also bastards sometimes, but Americans also think that doctors should deliver healthcare like a retail service and that's just stupid.
Your whole "in a different room performing miracles" might actually be running late because they are double booked and behind schedule due to trying to be thorough with an old woman who has compounded issues related to multiple diseases. That woman is also a person, just like you and the doctor might be trying to spend some time trying to help them even though insurance and the shitty clinic they work in only want them to spend 10 minutes with any one patient. That may sound efficient until you need to spend 20 minutes to do something right. Then the schedule is effed the rest of the day and people will act like you are trying to do something to them by being late.
Its hard for me to say this, because generally I hate people, but not everything is intended as a slight against you.
Never trust anyone 100%. This is America.
Additionally, if you inform the office you are paying the bill yourself (without insurance) they usually give you a discounted price somewhere between $X and $Y.
In other words, almost nobody is paying the list price of $X. It's not really a meaningful number.
(And, as others have pointed out, the weak US dental insurance market means that actually dentists are pretty up-front about pricing in my experience.)
The reason they do pay for the cleanings is that it's probably cheaper than paying for the increased fillings and root canals that they would incur if people skipped the routine cleanings. So they want to incentivize that, even though it's not really the sort of unexpected ruinous expense risk that insurance is really meant to assume.
They could achieve the same goal by providing a discounted premium with proof of routine cleanings, but that's probably more complicated for both them and their customers.
It's a bundled prepayment model, similar to selling gift certificates/cards or the like. Basically making money on breakage / float.
Real casualty insurance wants to reduce the number/magnitude of casualty losses. So the theft insurer wants you to get good locks and an alarm, the fire insurer wants you to get sprinklers, and they all want nice orderly public services with good response times and suitable building codes. Win-win-win.
Nobody would ever be unhappy if they paid their whole life for fire insurance and their house never burned down.
But health "insurance" can't really reduce the amount they pay out (the "medical losses") because the customer is expecting to consume healthcare. It's also more complicated because one of the best ways to reduce medium term healthcare costs is to spend more on short term healthcare costs.
Can you imagine if the best way to prevent a house fire was to have a little house fire every year? (Well, that's not so crazy in terms of wildfires, perhaps.)
Then, there's the fact that in the very long term, everyone will die and many will get really sick just before that. And the private health "insurance" companies do their damnedest to avoid that group entirely, having effectively shunted them all off onto the commonwealth (Medicare).
Health insurance is not like other insurance and we need a new word for what it really is.
It's not just prepayment, but also a negotiated price that's lower than the average person can negotiate themselves.
Actually, no, they reason they do is because they're usually subsidized by employers providing the plans. In other words, it'd be equivalent to the employer reimbursing a portion of your regular dental care that you pay for out-of-pocket. The expected reduction in cost for the insurer due to routine cleanings is negligible from their perspective.
If you purchase dental insurance individually, these treatments are very rarely covered, or if they are, the price under insurance is usually about the same as the price without insurance. Which makes sense from a risk model - when there is literally no risk at hand, the price under insurance should actually be higher than the uninsured price, by a tiny amount.
"All I've heard so far are physicians who don't accept insurance but instead have a straightforward "menu" for common items, which is interesting but not what I think most people want." - I think people want this but they are scared of going off of insurance in the event they need to see someone who doesn't offer this (chance occurance, expensive disease).
Have a look.
For more complex things, it's usually:
1. Not possible to know in advance everything that will need to be done. Many medical procedures are not things that just go identically every single time, and complications can occur during the procedure. Having to call it off, re-quote, re-schedule, etc. is not optimal.
2. The doctor likely doesn't actually know how the procedure will be billed. Medical billing is done using standardized codes to describe procedures, and the doctor will have someone who knows how to do that, but that person may not even work in the same building as the doctor. And the sets of allowed codes and how to use them can change quarterly, and that's without getting into the arms race of doctors trying to "up-code" (rather than the most obvious code for a procedure, find a way to bill it as multiple procedures or as a plausible but higher-paying code, since doctors and insurance companies are locked in an eternal battle of doctors trying to make as much money as they'd like and insurance companies trying to pay as little money as they'd like).
The safest thing is to refuse to give an answer.
To elaborate on this, I work for a company that offers health insurance. One of the nice features of our plans is that although it's PPO with a network of contracted providers, the co-pay for someone on the plan is the same whether a doctor is in- or out-of-network. But how do you advertise that? Saying "see any doctor you want" is a non-starter, because someone might take it to mean "doctors are required to see you even if they don't want to" and then claim we misled them with the "any doctor" line. It ended up taking quite a while to work out a way to advertise that benefit without tripping over anything that might be claimed to confuse or mislead.
- Because healthcare providers negotiate different rates with providers, so the "list price" differs by your provider and plan.
- Because your personal cost is unknown to the doctor, as it would depend on factors between you and your insurance company (like deductible met), coverage types, etc.
Now, these are both solvable problems. And I agree with the sentiment of other posters here that it's predatory that medicine is one of the few fields where you simply don't know how much something will cost until you get the invoice.
This one CAN be known to the doctor, the full details of your coverage, current deductible met, copay amounts, etc are an X12 270 transaction away. Almost nobody does this though, unless you are planning on billing an expensive claim (outpatient surgery, post-acute care, etc) where non-payment can mean a significant monetary loss the time and money doing these checks isn't worth it for the provider. This is further exacerbated by most (all?) clearinghouse's charging to run these transactions, and a really slow adoption of CORE Phase II connectivity standards by payers (which would bypass the clearinghouses completely and allow providers to directly submit eligibility requests to payers over a standard interface).
But imagine if your mechanic did that. "Hi, thanks for bringing your car in. We investigated that noise, ran a bunch of tests, and everything looks fine to us. That will be $5,000."
(Fun story: many years ago, Jiffy Lube topped up my dad's transmission fluid without telling him there was an associated cost. When they tried to charge him the $25 or whatever it was, he told them to suck it back out.)
Everyone else has a bewildering discount scheme. The doctor literally has no idea what you pay.
In other cases you have HMOs, where primary care doctors get a monthly nut to take care of you and don't get a fee for service in most cases.
Great example. Ever checkout without an idea of what your hotel bill is going to be?
> The doctor literally has no idea what you pay.
But if it matters to me, then it should matter to my physician. Most of them will come up with a reasonable response if I tell them "doc, I checked at the pharmacist but I couldn't afford those drugs you prescribed, what else can we do?" Most of them empathize with their patients and come up with an alternate treatment plan if one exists.
I don't think it's good enough to say "well gee discounts and providers and algorithms -- math is hard let's surprise you" because somehow they can figure it out at bill-generation time. At the very least, hospitals/physician's offices could produce a "given your insurance + the nature of your chief complaint, this visit will cost $x, these common diagnostics cost $y/z/w."
I think there are great companies being built in the space (take a look at what Clover Health is doing https://www.cloverhealth.com/en/), but it's not an area I'm focusing on.
Even for a checkup, after the procedures are done, the office can't tell me the bill.
...yet we we call mechanics "wrench monkey" in a demeaning manor.
BTW, this is probably why services like Minute Clinic are getting popular...go in, get something done, pay a flat/low fee.
Do you take your car to the mechanic, get some work done, only to get a bill 3 months later?
Pieces that can impact the price. Your insurer and what product you have. These will affect who is considered in-network and the fee schedule to use. Different insures will have different arrangements. Depending on the product if you have a narrow network product they may or may not be in-network. It could also depend on the location. A provider can be in-network in one location but not in another.
Also the procedure that is actually performed may be slightly different from what was planned due to unforeseen circumstances.
This is assuming the provider is aware of what the actual costs are. In many cases they don't even know the ballpark price since that is not the portion that they deal with.
Even though the ycombinator blog post is discussing innovation etc with regard to insurance, I like the idea of innovation on the side of service providers. And it is somewhat sad that a list of prices is innovative.
Anecdotally, my wife went to her regular doctor for a nominal fee at her yearly checkup. They drew blood, then asked her what hospital she wanted a follow-up diagnostic procedure to be scheduled at. She gave the one closest to us. She showed up, did the procedure, then almost a month later, we get 2 bills. One is for the blood ($1800) which, surprise, didn't go to an in-network lab despite all of our previous years' work being covered. The other bill was for the procedure ($800 if I remember correctly). If you go to the insurance website, enter her plan, enter the hospital and the procedure, it will tell you it costs something like $40. The whole system is broken, but at least these issues wouldn't have happened in a system like Kaiser.
Also anecdotally, my sister is on Kaiser in Colorado, and she has a chronic disease along with her pregnancy. They are taking very good care of her, and nothing seems to be dropped despite her having 3 physicians whom she sees regularly. I have almost no faith that if my wife gets pregnant, we'd have the same continuity in our current setup.
We recently went to a physician who works in an area that regularly isn't covered by insurance. For all procedures, the cash pricing was upfront and understandable.
In comparison, we tried to deal with another physician for a different procedure we knew our insurance didn't cover. Literally days worth of time was spent on the phone to try to figure it out and the day of the procedure we were told the prices were wrong and didn't account for some stuff.