Why Health Insurance Firms Fight the Public Option

Whether measured by GDP or on a per capita basis, Americans spend more money on healthcare than any other industrialized nation. It would stand to reason that Americans would therefore have the best system for the average citizen. Yet measure after measure, it is in the bottom rather third. Here are just some of the measures, life expectancy, infant mortality before the age of one, life expediency at age of sixty, recoverability from treatable medical conditions, etc.

In America 20% of medical premiums is insurance company overhead and profit. This figure does not include the medical billing costs and overhead experienced by provider. Nor does it factor in the amount of time a patient and the patient’s family spends pouring over medical bills to ensure accuracy. For Canada’s single payer system, the overhead is 3%, the same as it is for Medicare and the Veteran Affair’s program for Vets.

When an insurance company pays a bill, they call it a “medical loss”. The companies seek to have a “medical loss” no worse than 80%, and some aim to push it toward the 76% market. To achieve this end, they deny coverage to people they consider to be too risky. Another vehicle is to put great efforts into avoid and delaying payment on medical claims. About 30% of claims are “denied”, the most of which are paid upon appeal by the recipient of the treatment.

Some excuses for denial are dubious, such as a signature not in the right place. One person’s claim was denied because the services were given to this businessman while he was in Japan. The insurance company denied the claim for two reasons, the bill was in yen and they could not verify treatment. The company says that the provide insurance for out of country treatments but policy holders only learn later that the statement must be in US dollars and is paid in US dollars. Second, and the more daunting is that treatment must be verified by the insurance company personnel which creates two problems, a) the company’s phone system does not allow for out of country calls to verify treatment and payment information, and b) having to find someone who speaks English well enough on the other end to answer satisfactorily the range of questions being asked by the company. Hence, the insurance company puts up walls that the insured must find a way to overcome in order to have the out of country treatment paid by the plan.

A host of minor treatments provided within the US are routinely denied with the hope that the insured will cover the items out of their own pocket (one out of two will not appeal) even though the company knows they will pay the bill if the insured appeals the decision. A majority of the 30% denied claims fall into this category. For profit companies have teams of people who examine bills to find reasons to deny them so as to maintain the targeted profit margin.

Medicare on the other hand which does not have to pay out high seven figure and eight figure salaries to executives or pay out dividends to shareholders, or have teams of people whose primary purpose is to deny claims, which is why it has a 3% administrative overhead versus from profit companies 20%. Insurance companies are right when they say that they will not be able to compete with a public option as either the government will be able to offer the same coverage for about 15 to 17% less or for the same premiums offer greater coverage. Regardless of what other reasons the health care insurance firms will give, the 17% difference will kill them.