How Health Insurance Avoids Payment Through Unnecessary Complication

What is health insurance?

Insurance is nothing more than a way to manage risk.  You, and society at large, pay insurance companies a small amount and they pay if SOMETHING HORRIBLE that happens to you.  My grandfather left me a clock he built, and it is one of my most prized possessions. There is little chance that something will happen to it, but I want to insure it in any case.  Let’s say it is worth $1000, and the insurance company will insure it for $1 per month.  If SOMETHING HORRIBLE happens to it, they will fix or replace it. Health insurance is like that, too.

What is covered?

Procedures.  That is what is covered. Your doctor doesn’t get paid until they perform a covered procedure.  They aren’t paid to keep you healthy; they aren’t paid to actually solve the problem, they are paid to do the same procedures, in their specialty, all day, every day.  Paying for procedures instead of health is a problem.  Further, dental and vision aren’t covered and sometimes, well usually, mental health isn’t covered either.  So, your teeth, eyes and brain aren’t part of your body.  This is all a big problem.

What are all the words they throw around?

What is all this jargon and alphabet soup they throw around and why is it so complicated?  Here is a short list of things that confused me.

Premium  

The premium is the money you pay to have your risks covered.  In the clock example above, the $1 is the premium, usually due monthly.  It is a subscription fee, like to YouTube.

Deductible

In an effort to persuade you to NOT use your health insurance, the company assesses a fee for the first payments that you have to meet first.  For example, Let’s assume deductible is $500 and your insurance year runs from January 1 to December 31, and your annual deductible hasn’t been met.  If you need a $500 procedure, you pay $500 and insurance pays nothing.  That is if you don’t have a copay. …or co-insurance.

Copay

 This is the amount that you have to pay for a certain procedure regardless of the status of you your deductible.  If your $500 procedure has a $50 copay, you pay the $50 even if your deductible has been met.

Co-insurance

This is the percentage that the you have to pay for a certain procedure regardless of your deductible.  You are literally sharing the risk with your insurance company.  Aren’t you paying them to manage the risk?  Yes.  You are also sharing that risk with them.  Which is what you are paying them to do.  Um. Ok.  If our $500 procedure above has a 20% co-insurance fee, you are still paying $100 for this procedure regardless of your deductible status.  

Every test or procedure will have a different copay and co-insurance, negotiated separately.  Copays and co-insurance DO NOT count toward your deductible.  They do however, count toward your

Out of Pocket Maximum

Finally, here is some good news.  This is the maximum you will have to pay out of pocket for the insurance year.  Unless you go to an out-of-network-provider.  Then that doesn’t count toward your out-of-pocket maximum.

Maximum Benefit

Annual Maximum Benefit

The maximum amount your insurance will pay for the year regardless of your needs.

Lifetime Maximum Benefit

The maximum dollar amount that an insurance company will pay for benefits for as long as an individual is enrolled in the plan, regardless of your needs.

Seems to me like they give out of pocket maximum with one hand and take maximum benefits with the other.

In Network Provider

These are those practitioners and practices that your insurance company have a contract with to provide your procedures at a reduced rate.  That means that the insurance company hires an attorney to go sit in a boardroom and convince your doctor to take less than the going rate or they won’t get paid at all.  Talk about the tail wagging the dog.  Who pays for this attorney, boardroom, lost productivity and general unnecessary monkey motion?  That is correct.  YOU DO.

Out of Network Provider

These are the practices and practitioners who told your insurance company to get bent, they aren’t accepting their insurance.   The refused to sit in the boardroom with the attorney YOU are paying for and get screwed.  Good for them!

Drug Tiers

Prescription drugs are broken down into tiers that are associated with their cost, basically.

• Tier 1 includes generic drugs
• Tier 2 includes brand name drugs
• Tier 3 includes non-preferred brand name drugs and
• Tier 4 includes specialty drugs

Some providers have four tiers, some have five, but they skip the third, and so on.  If you want to know what tier a certain prescription is, you have to CALL them.  By ‘call them’  I mean that if you go looking for their Drug Formulary online, you will get a page with hundreds of links to PDFs that are hundreds of pages long, that are the cartesian product of all the plans and all the drugs to figure out what you will pay for that script.  This is insanity.

Open Enrollment

This is the time that everyone can change their health insurance.  That is correct, you can’t get a new policy unless you are between November 1 and January 15 depending on your state, no matter how much you want or need to.  That means you are locked in for the entire year and can’t change outside of these dates.  Your choices then become “keep getting screwed by your current provider” or “don’t have health insurance altogether.”  Unless you have a qualifying life event.

Qualifying life event

In the individual/family market, qualifying life events include:

• Birth or adoption of a child
• Marriage (and divorce, if the exchange or insurer counts it as a qualifying event, or if the divorce triggers a loss of other coverage)
• Loss of other coverage (as long as the coverage you’re losing is considered minimum essential coverage), including COBRA
• Permanent move to an area where different health plans are available (as long as you already had coverage prior to the move)
• Change in income that changes your subsidy eligibility (may not apply off-exchange in states that run their own exchanges)
• Increase in income that moves you out of the Medicaid coverage gap
• Grandfathered or grandmothered plan’s non-calendar-year renewal
• Becoming a U.S. citizen or lawfully present resident (only applicable in the exchange)

COBRA

Consolidated Omnibus Budget Reconciliation Act.  If you lose your employer provided health insurance, you can continue it for up to 18 months by paying the entire premium yourself.  Spoiler alert: DO NOT do this it is amazingly expensive.

HMO

Health Maintenance Organization is a plan made up of a network of doctors, hospitals, and other healthcare providers who have agreed to set rates for services.  Remember the stupid expensive lawyers and boardrooms above?

PPO

Preferred Provider Organization is like an HMO, or health maintenance organization, a PPO plan offers a network of healthcare providers you can use for your medical care. These providers have agreed to provide care to the plan members at a certain rate. There are differences

• PPO plans do not require you to choose a primary care physician (PCP) and do not require referrals. For example, if you already have a doctor you like, you can continue receiving care from that provider.
• If you need to see a specialist, you do not have to first consult with a PCP. No referrals are required for any doctor, specialist or hospital.
• If you find yourself in need of medical care when you are away from home, you can see any healthcare provider you choose.
• Higher cost

EPO

Exclusive Provider Organization is the plan only covers in-network providers, but it allows you to go straight to a specialist whenever you want. Here are some differentiators

• EPO plans only cover the cost at doctors or health providers that are within your network
• Emergency care is covered, even if it’s out of your network
• You do not need a referral if you want to see a specialist with EPO insurance
• An EPO is a hybrid between an HMO and PPO plan

POS

Point Of Service is the type of health insurance that offers a mix of HMO (Health Maintenance Organization) and PPO (Preferred Provider Organization) features.

• Policyholders need to designate a PCP and generally require referrals to see specialists
• Allow out-of-network care
• Cheaper than PPOs but more expensive than HMOs

Conclusions

It seems that health insurance is doing everything it can to obfuscate the issue, creating alphabet soup, avoid giving a straight answer to any question, putting layers of provisos and caveats between a patient and a payment.  On short, they are doing anything and everything they can to avoid the one thing they are legally obligated to do:  Pay for your healthcare.  

I will even submit that if they did away with all the rigamarole and monkey motion that the cost of health insurance would go down by simply not having to pay for attorneys and boardrooms and negotiations and adjudication and medical coding and basically everything they do that isn’t PAY FOR YOUR HEALTHCARE.

What we need, then, is a new breed of health insurance. Before, we stated that all insurance does is pay for procedures. What if the insurance company provided the electronic medical records system to doctors or practitioners free of charge? Then the insurance could pull procedures performed and pay for them in real time. This automates the entire process of health insurance and quite literally makes it an app. The consumer, or patient, then could be charged the true cost of the risk, based on age, gender, blood work and behavior, plus a nominal ten dollars per month to us to manage the data. By our calculations that reduces the cost of health insurance by over 50% and frees the doctors of the need to fight with legacy insurance and pay for medical coding.

Read on Substack: https://sentiahealth.substack.com/p/how-health-insurance-avoids-payment
Or
Watch on YouTube: https://youtu.be/gCyaLohtAVQ