Everything Wrong With the Health Insurance Industry, In One Letter
Today's blog post comes to you courtesy of my new health insurance provider, thanks to a letter I received in the mail yesterday. Ever since I took my first ‘real' job at the state Bureau for Public Health several years ago, my wife and I have had our health insurance through PEIA. Coming on as a new employee at the Center on Budget and Policy, however, meant I would have to switch to a private insurance provider. I didn't expect to have any problems - other than recently having a baby, neither my wife nor I have even had to go to the doctor for a sick visit in the last four years.
So it came as quite a surprise when I opened the letter yesterday from our new insurance carrier (who I won't name but I will say it is a large insurer) saying that it had been determined that my wife and I fell into the special "pre-existing conditions exclusion period" which would not end until May of 2014, a full year from my start date. In short, we are expected to pay our premium for an entire year, at over $1,100 per month (of which the Center generously pays a large portion), before the insurer will agree to pay for any medical care.
It especially didn't make sense considering neither of us has any health issues. Reading further, I discovered that it's not because we actually have any pre-existing conditions I wasn't aware of (whew!) but because after reviewing our file, the insurer determined that we had not "demonstrated prior creditable coverage that exceeds the period of time that the exclusion period would apply."
Oddly, our infant daughter who was born this February was not part of this exclusion period. Apparently she was able to demonstrate 12 months of prior creditable coverage, even though she's not even four months old yet.
When I completed the four page, uncomfortably invasive application for health insurance, it asked for detailed information regarding any previous health insurance we've had. I dutifully completed each question box in that section, providing the name of the insurer, the exact dates of our coverage, and even the specific policy number.
While I will be on the phone shortly with my new insurer making sure this gets fixed, this sort of common mistake underscores the whole problem with health insurance in the United States.
The more often a health insurer can successfully deny coverage to patients, deny paying claims to providers, and exclude pre-existing conditions, the greater the profit the insurer will take home at the end of the day. Insurance companies don't make money by paying out claims. With exorbitant executive salaries, ballooning administrative costs, and in some situations shareholders to appease, insurance companies that pay out too much money in medical claims are unsuccessful businesses.
While claiming that my wife and I failed to meet the standards of prior creditable coverage, our new insurer is nevertheless intending to accept our premiums for a year before taking on any of the risk associated with actually providing us health insurance.
I'm not suggesting that this was an intentional, shady maneuver concocted to generate more profits. Nevertheless, it's a serious, costly error. In fact, it highlights other major issues of health insurers - inefficiency and bureaucracy. While I provided all of the information that was requested to prove prior coverage, someone along the way deemed it insufficient. After the cost of printing and mailing a letter to tell me that we don't have coverage for the next year, I'm going to need to call customer service to speak to a representative who was hired along with dozens of others to handle these sorts of complaints. They'll probably request that I submit additional information which will require that I mail or fax in documentation which will need to be taken by someone there when it arrives who will hopefully get it associated with the correct client file allowing someone else to finally fix the error. All of that extra work, time and staff salaries on the insurer's end, not to mention my own time, for a mistake that should not have been made in the first place. For how often one hears about the efficiency of private industry, this certainly is an example of surprising inefficiency.
Fortunately, the Affordable Care Act is addressing a number of these issues. First, the ACA is prohibiting insurers from denying coverage to patients because of pre-existing conditions or excluding those specific conditions from coverage. Secondly, the ACA will prohibit exclusion periods, meaning that you have health insurance from the day you purchase coverage, not a year later. Thirdly, the ACA is setting limits on the amount of money that an insurer can spend on non-medical claims, including salaries, administration, and other expenses like marketing. This is called the medical loss ratio, or MLR, and requires large insurers to spend at least 85 percent of all of their revenue on patient claims. If an insurer fails to meet this standard, it is required to reimburse its customers the difference, which has already resulted in some pretty hefty reimbursement checks for people around the country.
Businesses have a right to charge fair rates and to earn a profit, and insurance companies should be able to pay competitive salaries for competent staff. However, trying to put a for-profit business model and health insurance company together is mixing competing, contradictory goals.
None of this is intended to paint a picture of health insurers being the big bad wolf of spiraling healthcare costs. Nevertheless, they are one of the many cogs in a piecemeal, expensive system that tends to view patients not as people in need of care but as potential money makers.
Here's to hoping my wife and I have insurance by the end of the day.