Introduction

Your health insurance company has one job: pay for your healthcare. However, these huge corporations are actually about shareholder value and return on investment. If you are General Motors, Apple or JPMorgan Chase, that is one thing. If they engage in shady or outright criminal practices, people don’t die. Your health insurance company, however, could literally be committing murder by delaying care. Today we are going to discuss how and why your insurance company delays payments for your healthcare and how they make money doing it.

The Problem

Clayton, Frugé & Ward published an article on January 10, 2023 titled “How Insurance Companies Make Money from Delaying Your Claim.” Basically, the big payers play the float, just like some of you did in the 80s when you wrote a rent check on funds that weren’t there because you hadn’t been paid yet but it was ok because it would take a few days for the check to get to the bank. Playing the float was illegal then and it is illegal now. The difference is that you didn’t hurt anyone, and if your check bounced, it would clear the next day.

In this case, float refers to money that rightfully ought to be paid out to claimants but remains in the possession of the insurer. It's money that isn't actually owned by the insurance company but stays on the books for a few extra days or weeks regardless.

Those few days of delay make billions for the insurance industry, but could torture or kill you.

Why Are Claims Delayed?

In the early days of insurance, underwriters only profited from unclaimed premiums. Insurers had no immediate interest in holding on to people’s money longer than it took the bank to pay out claims. To increase profits, insurers focused on attracting cautious, accident-free clients while scaling up. Insurers eventually started investing premiums into low-risk assets, allowing profits to grow so long as paid claims stayed below a certain threshold.

In the 1980s, business consultants pitched insurers on a new source of 'pure' profit: float. When a claim is approved, there's a small period where the money officially belongs to the claimant but remains on the insurer's books. What's important to note is that this money still accrues interest. By stretching that period to a few days or a few weeks, insurers can earn interest on money that doesn't belong to them.

The interest earned on one or two claims is negligible to large insurers, but tens of thousands of claims delayed by years in total time? A few days' delay meant billions in profits. The insurance industry was permanently transformed.

One of the industry’s most successful figures has admitted that holding on to float is crucial for profits. In a 2009 address to shareholders, Warren Buffett stated that “We were paid $2.8 billion to hold our float in 2008.” This quote reveals that not only does more float make more money, but insurance companies also strategically cling to float to make that money. Delaying claims allows insurance companies to squeeze as much interest out of unpaid claims as possible.

How Does Float Cause Harm?

Payers may say that "Delaying a day or two won't hurt anyone.". But that conveniently ignores how insurance companies are profiting from money that belongs to claimants. Regardless of whether it causes discomfort or pain for claimants, it's simply wrong. A delay of any kind does harm people. For a patient, a few days might be the difference between life and death. The insurance companies are literally torturing and murdering people and causing fiscal chaos that is diametrically opposed to their stated purpose: to provide relief when the unexpected occurs. Modern insurance companies differ from 18th- and 19th-century insurance companies in that shareholders have different interests from insureds (and in fact are two different groups in the first place). There's always been a balancing act between serving shareholders vs. serving claimants, but the implementation of float interest throws that balancing act way off.

So what is the remedy for this built in conflict of interest?

The Solution

The solution, of course, is to put health insurance companies, with their criminal, murderous float policies, out of business, and we are going to show you how, right here and right now. First, you don't want greedy, profit-above-everything, business people in charge of your healthcare. The Commonwealth Fund identified several problems in their paper “U.S. Health Care from a Global Perspective, 2022: Accelerating Spending, Worsening Outcomes” That basically boiled down to two problems:

Health insurance is too expensive
Patient education is largely ignored

When we address these two problems, we fix the US healthcare system.

The Concept

Health insurance companies have two inputs: a patient and a procedure, and one output: a check to the practice for the procedure performed. That is it. If we automate the process between the input and the output, then we have eliminated everything the insurance company does. The only other thing we will address is the way to educate and incentivize the patient on how to live a healthy lifestyle. That would result in fewer claims, causing reduced rates for everyone.

The Execution

We at Sentia have designed and developed a solution that completely automates health insurance. We provide the Electronic Medical Records (EMR) system to the practice, and when they document a patient encounter, we pull out the procedures performed and pay for them in real time. There are no networks, no adjudication, no denials, no medical coding, no big buildings, no people, no float and most importantly, little to no cost once the system is built. For this service we charge $10 per month plus the actual cost of the risk. Remember that according to iii.org, your health insurance company only returns 53% of your premiums as benefits. We can return the 47% they waste to the patient, in lieu of the previously stated $10 per month, plus the actual cost of the risk. There are other efficiencies we will explain, and a way to manage chronic, behavior-based disease.

Patient Education

Also remember that treatment for chronic, behavior based disease consumes 84%, or $3.7 trillion of the $4.4 trillion spent on healthcare each year in the US. The average of avoidable deaths per 100,000 in OECD countries is 225. In the US it is 335, or about 1/3 higher. If we could bring the US average down to the OECD average, we would save about $1.2 trillion. That is a further reduction in costs of about a quarter.

How do we do this? We offer financial incentives for people who live a healthier lifestyle as measured by our built-in health and wellness system. This system takes into account measurements taken at the primary care physician’s practice, like height, weight and blood pressure, plus things screened for in blood work. Additionally, there is a mental health screening right in the wellness package. This system looks at all these factors and then prescribes patient education based on the results. At Sentia, this is part of the system. We can tell when the patient opened the patient education and how long they spent reading it, and offer a small discount for simply doing so. A larger discount is offered for reading and following the education, as evidenced by better results in the patient’s health assessment.

The Finances

Let’s look at big round numbers. Let’s say we can save the patient about 40% on their health insurance up front. Let’s say that we save the people of the US another 25% by being educated about healthy living and getting to the average OECD deaths per 100,000. We know that eliminating medical coding, providing a free EMR to the practice and putting compliance and efficacy reporting into that system will save each and every practitioner an additional $77,000 per year that they currently spend. That, however, is only about 2% of the total, so we’ll just ignore it. If we total all that up, we see more than 60% savings. That means that we would have not only the best healthcare on the planet but also the cheapest.

Conclusion

We have shown a way to save more than 60% from the cost of health insurance and have addressed both of The Commonwealth Fund’s two conclusions about health insurance in the US: cost and education. We have all of this written and deployed in a prototype application. The only thing we really need to get this all started is to clean up that application and turn it into an enterprise application with logging, administration and redundancies in hardware. We will need funding, probably about $10 million over the first year. For comparison, United Healthcare had revenue of $371.6 billion and net earnings of $22.3 billion. With about 60% savings we should service and retain 90% or more of the 300 million insured people in the US. That gives us a revenue of $36 billion, however, everything in our system is automated so that is a $32.4 billion profit at a 90% profit margin.

This figure shows that this is a viable business proposition.

We have shown a way to make patients healthier by educating them on the consequences of their behavior, and a way to capitalize on that to the sum of $1.2 trillion or about 25%. If we add that to the process automation savings of our solution, we are in the ballpark of more than 60% savings in total. We already have the best doctors and the best equipment; we just need to implement the above detailed framework to give them all the tools necessary for success.

We have this system in prototype now, fully functioning.

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We have built a comprehensive health information system to keep the patient healthy and on the right track with the ability to incentivize healthy living. Implementing this system should be fairly simple and will completely revolutionize the way healthcare is paid for, saving countless lives. We have shown a way to use this system to make the best healthcare system in the world also the most efficacious and the most affordable, and a way to move toward value-based care.

Insurance Companies Make Money from Delaying Your Payment

2/10/2025 12:00 AM