Why health insurers refuse to say what they cover
I do research-driven system design. In the early 2000s I did a project for a major US health insurance company who wanted to know what they could do to make their plan members hate them less.
So I interviewed dozens of people with “good” employer-sponsored health insurance about their encounters with their insurers. I handed over a big thick research report and talked the executives through the highlights, the way you do.
One of the key findings was “People Are Frustrated That They Cannot See The Costs Of Their Choices”.
A high-ranking executive vigorously objected. “The last thing people care about with their health is what it costs!”
(It would later emerge that we had a miscommunication. He thought I was saying that patients were concerned with what it would cost their insurer, rather than themselves. That this seemed to him like the obvious reading of what I meant is itself a lesson in where his head was.)
So I said, “I’ll tell you a particular story from the research.”
One couple we spoke to were prosperous and had good insurance. They did not need the honorarium we paid them for participating in the study, but they were eager to talk to us because they wanted to tell their story.
They had a kid who was born deaf and was a good candidate for a cochlear implant. It’s a procedure that costs about $10,000 if you pay out of pocket. In the kid’s case it had about a 50/50 chance of working.
Their insurance paid for it. It didn’t work. But for the kid’s condition, it was possible to just try it again; they could in principle attempt the proceedure repeatedly with the same odds each time. They were wary of pressing against bad luck and ending up putting their kid through surgery several times, but taking a second bite at the apple seemed like it might be sensible. As they were thinking about it, they called an agent at their insurer to see if they would cover another attempt.
The same logic which had them hesitant to put their child through repeated surgeries had them sympathetic to the possibility that the insurer would refuse; it seemed fair to them that their insurance policy would have to draw a line somewhere. And they were close to deciding that they would just pay for it out of pocket if the insurer said No.
Their insurance rep confidently told them that a second surgery would be covered the same as the first. The couple asked if there was a pre-authorization they could get in writing, but the agent said that it did not work that way. But not to worry, it was definitely covered!
Of course you can guess what happened.
They had to pay a big bill, which they would have done with a smile had the insurer just not jerked them around. As a result of this misadventure, they became obsessed with hating that insurer, and talked about how they look for every possible opportunity to tell their story, which is how they wound up talking to me.
The executive looked sincerely mortified by this example. He said, “That’s horrible. Who was their insurer?”
And I smiled. Because I got to tell him, “Oh, that was you. Your company screwed those people.”
(When I tell this story, people usually ask me who the client was. Having already bent my NDA enough, I will not reveal it. Plus - and this is important - it does not matter. This is characteristic of how all US insurers operate.)
“Understand,” I added, “we talked to people with much worse experiences than that. We talked to people hit with financial impacts they could not afford. We talked to people whose insurers’ decisions had awful, lasting medical impacts.”
In the course of that project - since I was looking at systems design - I learned why this happens. It does not come from trying to screw insurance plan members, it comes from trying to screw doctors and hospitals.
Insurance companies write deliberately obfuscated contracts with healthcare providers: Rule 122.7.14b combined with Rule 37.4.9 combined with Rule 71.16a/7 mean that the doctor only gets paid for part of Proceedure X. This creates such complexity in evaluating how a healthcare provider will get reïmbursed for what they do, so many dependencies on super-specific particulars, that the insurer cannot run the hypothetical on what their own systems will do! The machine simply cannnot produce an answer.
That does not make this inability to make commitments innocent. These are design choices. Insurers have smart people working hard all day every day to figure out inventive ways to screw doctors and hospitals. They prioritize doing that over enabling patients to make clear decisions.
I think of this whenever defenders of the private insurance system in the US talk about stuff like the virtues of copayments, the small fees patients make when getting a proceedure or medication which their insurer does cover. This is meant to create incentives which prevent patients from making frivolous use of medical services, as part of giving patients “skin in the game” in managing costs, in making trade-offs about when it matters to them to get resource-intensive care. But even if that design reasoning made sense - and I do not think it does - the capriciousness of costs which the insured actually experience makes it entirely useless.
There is no fixing this class of problem in private insurance. It is inherent in the incentives insurers face.
This is one among many reasons why there is no fixing private insurance. I advocate for single payer public healthcare - best known by the slogan “Medicare For All” - because there is no legitimate argument against it.
https://miniver.blogspot.com/2024/12/why-health-insurers-refuse-to-say-what.html