Who is your health insurance company? Or a better question might be, do you have an actual health insurance company? I bet not.
At least theoretically, all types of insurance policies—auto, homeowner, renter, life, disability, business, and even health—should have something in common. After all, companies offering such policies are members of the same category of business: insurance—and the qualifying characteristic of such membership is (drum roll, please) insuring. Writers write, dancers dance, chefs cook, pilots fly, and I suppose it’s reasonable to assume insurers insure. But do they?
Let’s make a deal
What does “insure” mean? Most of us view our relationship with insurers as a financial arrangement. We agree to pay them a designated amount—the premium—and they agree to pay us if we experience an unfortunate and potentially costly event listed as part of the deal. Financially speaking, we win the game if they pay us more than we pay them. They win if they ultimately pay us less than the total of our premiums plus gains from investing them.
This seems simple enough in theory, but the circumstances requiring insurance reimbursement can be complicated. Nevertheless, in every case in which an event requires reimbursement, a dollar amount must be assigned to our loss. If we experience an event covered under the policy, they must pay. That’s the essence of the insurance deal. It’s risk management, plain and simple.
Now here’s the key question: When an unfortunate event that’s covered occurs, does (or should) the insurer have a legitimate role in determining how we can spend the money? Is that part of the deal?
As easy as 1-2-3
It should be a simple 3-step process. Determine whether the event qualifies. Determine the amount to be paid. Pay the required amount … aaaaaaand we’re done. The exact amount can be explicit in the contract, or it can be based on an adjuster’s or an expert’s assessment. Either way, an amount must be determined, and they must pay. If those three steps don’t go smoothly, then steps #4 and #5—appeals and legal battles—might kick in. Great topics for another day.
Does this 3-step process represent how health insurance companies operate? Well, no, they don’t. For comparison, let’s first look at two types of insurance that do: auto and homeowner.
Example #1: My 1995-vintage Honda Accord
A few years ago, a tree fell on my reliable old Honda, doing some structural damage. Our auto insurance policy included coverage for repairs, but it was determined by my mechanic—the appropriate expert—that the repair cost exceeded the car’s value. In other words, it was totaled.
Never did they ask me how I planned to use the money. Never did they threaten to withhold payment depending on my plans.
The insurance company offered me the depreciated value of Old Reliable. They would then own what was left of the car, and I would have some money. This seems perfectly fair, and it is what was expected and offered.
Never did they ask me how I planned to use the money. Never did they threaten to withhold payment depending on my plans. Buy a motorcycle? Buy a bicycle and pocket the change? Add a few bucks and buy a Lexus? Purchase a couple shares of Google stock? They shouldn’t care, and they didn’t. That’s the deal.
Example #2: My humble abode
I live in rural South Carolina, in the woods, in a house made of brick and lots of wood. If lightning strikes and it burns down, I’ll expect money from my homeowner policy. I hope they win the bet on this one. I hope my house does not burn down, and wish them a jolly good time spending my premiums. But if it does, then they’ll pay. There may be one amount if I rebuild, and another if don’t, but either way, they will pay.
Never would they ask me where or how I planned to live or rebuild. Buy an RV and spend my retirement years on the road? Become a renter? Move in with my kids? Find a park bench, a paper bag, and have lots of money left for many years of fine wine or bad beer? They shouldn’t care, and they don’t expect to have a vote. That’s the deal.
Example #3: My health
In the car and home examples, something bad happened, I was insured for it, and payment was made. Case closed, as far as the insurance deal is concerned. By comparison, so-called health insurance often works very differently.
If it’s really insurance, it should be as simple as 1-2-3. If I become ill with a disease covered under the plan, I and my doctor—the expert—will determine the appropriate treatment, and the insurer should pay according the plan’s payment schedule. 1-2-3. But that’s not how it works because it’s not really insurance.
For the sake of discussion, let’s keep it simple. I won’t digress into the minutia of which illnesses and diseases are or should be covered in the first place, or how much should be paid. We’ll just assume the list is specified in the plan, and that if my illness is on the list, some payment should be made. But with health, things get complicated after step 1.
Money and micromanagement
Health insurers routinely second-guess the expert opinion of our doctors. My doctor’s (and my) choice of appropriate treatment might not meet their approval. It might arguably be the best treatment, but not the cheapest. Or it might be of equal cost as others, but not the therapy the insurer likes. If we don’t acquiesce to their preference, they might not pay at all.
Health insurers routinely second-guess the expert opinion of our doctors … If we don’t acquiesce to their preference, they might not pay at all.
What kind of insurance is that?
It is tempting to think it’s all about the money, but it’s not. Suppose their preferred treatment costs less than the one we want. Suppose we offer to accept the amount they would pay for their cheaper alternative, and add our money to make up the difference out-of-pocket to obtain the therapy we think is better. Is there any financial reason to object?
Yet they will refuse such an offer. It’s my way or the highway, they’ll say. It’s their decision.
No protons for prostate cancer
A relevant and real example for The After Proton Blog is a prostate cancer diagnosis. The patient may want proton therapy, but the insurer may claim IMRT is just as good and cheaper. Maybe they’re right, and maybe not, but that’s not the point. Rather than argue the medical difference of opinion, the patient might offer to accept reimbursement for the cost of IMRT and pay the difference for proton out-of-pocket. This should make everyone happy, but the insurer will refuse this arrangement even though it will cost them not a nickel more.
Clearly, this is no longer a purely financial transaction. It is behavioral control. Either we do what they want or they pay nothing. That’s not insurance.
Routine maintenance
As further evidence that health insurance has become something else, let’s again compare it to auto and home in a different way. Let’s look at the matter of routine maintenance.
For our car to run safely and smoothly it must be regularly serviced— routine oil changes or replacing worn brake pads. If our home is to be safe and sound, it requires regular attention—cleaning gutters or sweeping chimneys to reduce the risk of fires. Do we want or expect our insurance companies to be involved?
Probably not. We don’t view routine car/home maintenance as an insurance issue, and we don’t want to complicate our lives with approvals and claims every we time we need the services of our mechanic or chimney sweep. We can handle it all by ourselves. We’re that good.
Similarly, our body and mind will remain healthy only if we attend to them in a prudent manner. Conceptually, it’s no different than our car and home. But our health insurance company has already become intimately involved in our routine health maintenance. Understandably, we are also saddled with corresponding approvals and reimbursement red tape for routine checkups, blood tests, vaccinations, medication, mammograms, colonoscopies, etc.
The power of the purse
Generally lumped together under the heading of “wellness,” these activities may help ensure good health, but is this health insurance? Regardless of whether you view this “coverage” as a good or bad idea, do you want it to be part of your insurance policy? To phrase it differently, do you really want your insurance company involved in all that?
Whether you do or not, they already are.
When routine maintenance—wellness—becomes part of the package, so does the corresponding decision-making power. Once we have already paid premiums high enough to cover reimbursement for wellness, we are understandably reluctant to pay out-of-pocket for the privilege of making a choice the insurer does not support. So we often defer to them, doing what they say, and not doing what they won’t reimburse. Their power of the purse, in effect, becomes the power to dictate many aspects of how we live. Yet in exercising it, they are doing no more than what we’ve agreed to. We have relinquished control to them.
The fly in the ointment
In the 1986 movie, The Fly, Jeff Goldblum plays an eccentric scientist who transforms into a man/fly hybrid after an experiment goes awry. I saw the movie, but can’t remember if he was ever able to undo the unfortunate mingling of DNA, or whether it became permanent.
Like the man and the fly, our health insurance has become intertwined with health maintenance, and the result is not always to our liking. We have lost some independence for daily decisions about managing our own lives. Our insurer micromanages decisions and payment for wellness, illness and disease. How and why this happened is a history lesson for someone else’s blog to provide. Whether it’s a good idea is a topic for a political blog. But suffice it to say that what we call health insurance has morphed into a very different creature.
Truth be told, we no longer have health insurance at all. We have healthcare management we mistakenly continue to call “insurance.” Nevertheless, regardless of what we call them, they aren’t really insurance companies any more.
They have become our healthcare managers.
Whose opinion matters?
I’m reasonably healthy today, but I know one of these days I’m likely to die. In the meanwhile, my goal is to live as long as possible with enough quality of life to make it worth living. There is no single formula for this complex balancing act. At last count, there were approximately a buzillion combinations of lifestyle and medical choices promising the desired result.
… my wife and I will decide together what’s best … I’m not willing to give up control of my health to insurance company employees.
There are an equal number of ever-changing opinions—some belonging to insurance employees—about which combination is best. At the end of the day, mine is the opinion that counts for me. For each lifestyle and medical challenge, I will do my own research and listen carefully to the advice of my trusted advisors. Then, my wife and I will decide together what’s best, with her vote counting slightly more than mine, as usual. And we’ll follow that course, even if we must find a way to painfully pay (again) as we go. I’m not willing to give up control of my health to insurance company employees.
A wakeup call
Although I do have opinions about how health insurance should work, this article is not an opinion piece. It is a wakeup call to see things as they are, and to face reality as it is. The fact is that for better or worse, by intent or by accident, we no longer have health insurance companies. We have healthcare companies we mistakenly think of as insurers. And this is our problem, not theirs.
For whatever reasons, we have decided as a society to forego health insurance and accept a healthcare system in its place. The wisdom of this notwithstanding, let’s at least admit and acknowledge that our health insurance is not insurance, and calling it that does not make it so. Misleading ourselves by using the wrong term creates all sorts of problems, confusion, frustration, and false expectations for us.
The fundamental choice
I realize I have oversimplified a complex topic, but sometimes that is the best way to distill the essence of an issue. At the end of the day we must decide as a society whether we want actual health insurance, or a partner in our health care. We must decide whether we want the individual risk and responsibility that comes with managing our own health, or prefer to relinquish those decisions to others. We can’t have it both ways.
If you like the health care approach, relax and rejoice. We are well along that path already. If you yearn for a less intrusive 3-step model for health insurance, fasten your seat belt because it’s going to be a long, bumpy ride.
Whichever road you think is best, be clear about what we have now without being confused by misleading labels. There are two fundamentally different approaches, and expecting one to work like the other because of a misapplied label will be a losing proposition.
Whichever road you think is best, be clear about what we have now without being confused by misleading labels. There are two fundamentally different approaches, and expecting one to work like the other because of a misapplied label will be a losing proposition.
A tulip will never smell like a rose, even if we call it that.
