Not sure if anyone will be interested in this, but I occasionally talk about this issue in my classes and finally found a document to illustrate my point.

Our health care system in the US makes little to no sense, in large part due to health insurance companies.  From what I understand, health insurance companies negotiate prices with health insurance providers for pretty much every service they cover (when they cover services).  Thus, the health care provider (your doctor) charges some price for a service but the insurance company pays a different price.

So, an example:  Let’s say you go to a doctor for a visit.  The doctor charges you $100 for the visit.  The bill goes to your insurance provider, who has negotiated ahead of time to only pay $50 for a doctor’s visit.  So, your insurance company pays it’s percent of the negotiated amount – 80% or $40 –  and you pay your percent – 20% or $10.

Here’s the kicker: If you don’t have health insurance, you still get charged the full amount by your doctor – $100, no discount applied (some times they do, but often they don’t).  Now, this may not be a big deal if you’re only talking about a doctor’s visit for $100.  But what if it’s a $1000 charge, or $10,000?  Now it’s an issue of really screwing over the uninsured.

Additionally, insurance companies increasingly want all expenses to go through them – you don’t even pay co-pays anymore.  This makes it so individuals have no idea how much their health care actually costs.  I don’t remember the last time I went to a doctor’s office and the doctor actually told me the up front cost of a procedure or visit.  This way, the insurance companies are like a big black box – health care providers submit charges, the insurance companies pay whatever they pay, and they pass on a certain percent to the consumer.  This puts the insurance companies in almost complete control of health care in the US.  Consider what life would be like if all of your purchases worked this way:

You walk into Best Buy to buy a TV.  When you walk in, you have to sit down and fill out a form that asks about your purchasing history to make sure you will have no complications purchasing anything at Best Buy.  There are no prices on any TVs, but you talk to someone in the store who tells you that you “need” the 46 inch flat panel TV.  You agree and tell him you’ll take it.  You pull out your “merchandise insurance card” and hand it over.  He photocopies it, tells you to sign a piece of paper, then sets up a follow up visit to consider universal remotes.  They load the TV into your vehicle and you drive it home.  Several weeks later your “merchandise insurance company” sends you a bill.  Best Buy charged them $10,000 for the TV, but they have a discount negotiated with them of $8,000, so the TV is only $2,000.  You pay 20%, so you owe $400.  Of course, to use this “merchandise insurance company” you also pay them about $500 per month for a family plan and your employer pays an additional $1,000 per month.  So, your insurance company makes $1,500 per month and doesn’t pay full price for services.  If you don’t have “merchandise insurance,” you pay the full price at Best Buy.  Who would buy anything this way if you have no idea how much it will eventually cost you?

So, I was getting rid of 2007’s financial records when I came across a bunch of notices from our old health insurance company.  The one I scanned is great.  I won’t say what it is for, but the charge from the health care service provider was $965.  The discount for the insurance provider: $885.  That’s a 92% discount.  That leaves $80 to be paid.  Our co-pay at the time was $15.  Which means the health insurance company paid $65 out of $965 charged to it, or 7% of what it was charged.

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How many times have you heard someone say, “Thank god we have insurance”?  Are we really lucky to have health insurance? Health insurance seems like a good idea when it is used to spread out the cost of major healthcare expenses.  But today it is generally used just to enrich people: catostrophic health care is passed on to the government because the health care companies either drop them or won’t take them for pre-existing conditions.  They also try to find as many things as possible to not cover.  That leaves health insurance companies providing insurance just for the healthy, who have lower costs.  Then they get discounts and pass some of the cost on to you.  You pay for the privilege to not know how much you have to pay.  It’s time for a new system…

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3 Replies to “insurance discounts”

  1. I completely understand and agree with the state of healthcare. Here are a couple of my own little beefs with my run ins with the healthcare system:

    Story 1)
    I got stung by an Africanized honey bee on the eyelid in Arizona around Sept 2007. The first day I was fine but the second day I woke up and my eye was swollen up. Fearing infection or an allergic reaction, I went to the ER. I have a primary care physician but he’s back here in Ohio, and I wasn’t about to go doctor hunting with one eye shut.

    So I went and provided my employee provided insurance. I get back to Ohio and I get a bill from the hospital demanding the full amount because they think I wasn’t covered. Even with one eye shut I still made sure the hospital I picked was covered under my insurance. Sure enough looking at the bill a complete and total clerical mistake had been made. They had some other random individual’s insurance listed as mine and no surprise, they refused to cover me (would have been really interesting if they did!)

    So I called and gave them the proper insurance. More months go by. I get another bill from the hospital. This time it’s covered, but at the out-of-network rate. I tell them that X insurance does indeed partner with this hospital and therefore it should indeed be in-network. I give them my insurance again.

    More months pass. Finally I get a bill in the mail that looks right. Has the right insurance and is covered at the right percentages. I call because I have no information on how to pay my co-pay. The person on the other end, instead of just letting me pay already, decides to search for other reasons why there’s still some sort of balance on the account. In the end, after pleading with her several times, I convince her I just want to pay the paltry sum and be done with it.

    Story 2)
    My employer likes to provide good health insurance as a benefit and traditionally we’ve been covered fairly well for the amount we pay. Unfortunately this also means we’ve changed providers or plans nearly every time the insurers raise rates (read: every year). This year I finally got curious as to what private insurance would cost me, a 20-something who sees his primary physician once a year for the ol’ “Bend over and cough.”, a spouse and no interest in children before his wife turns 121. I had heard horror stories about the cost of private insurance so when the quotes came back I was actually rather surprised.

    Basically what I discovered is that for the same amount I pay out of my paycheck a month, I can get exactly the same PPO coverage, the deductibles and the coverage that is important to me. I pointed this out to the CEO who was also rather surprised. Because the kicker here is that my employer pays 80% of the total premium. In effect, I was able to get the same coverage my employer was providing for 20% of the cost.

    I quickly realized what’s going on here. I am a group healthcare policy’s lifeblood. Not having children (or wanting them), being young and healthy I am nothing but pure profit for the healthcare company. In a sense, the premiums paid for me by myself and my employer subsidize the old, emphysematic employees also on the same plan.

    So I find myself at the crossroads. Do I make the jump and go completely on private healthcare? I’m not really saving myself money as I’m going to the same plan. I’m not really saving my employer money as in effect, the “group” becomes that much unhealthier as I leave it. The only thing I get is the freedom from my employer choosing my healthcare for me. This means that if laid off or I decided to quit, I don’t have to worry about my healthcare (or premiums) changing during unemployment or when I start a new job.

    Finally, to prepend your “TV buying covered by insurance story”, it would go like this:

    “I felt I needed a TV. Fortunately my employer had a plan that made TV’s available to those who needed them and according to my plan’s website; Best Buy was covered under our plan.”

    Wow. Health insurance is fucked up.

  2. Duly edited (I think I got everything).

    Yep, health insurance is definitely screwed up. It makes no sense whatsoever. Either it needs to be fixed in some way that it is affordable and reasonable or we need to move to universal coverage.

    Your stories do a great job illustrating that! (The bee sting sounds terrible…) 🙁

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