Health insurance plays an outsized role in our lives. But does anyone really know how it works? Or, for that matter, what it really says? In this series, I will be talking to my dad, a retired healthcare executive, about a variety of topics to get some clarity on private (employer-supplied) health insurance.
Jeremy Sachs spent 30 years working for a Fortune 500 insurance company. During much of that time, as House Counsel for the Employee Benefits Division, he advised corporate managers of the Division on a wide range of legal issues relating to the Company's group health insurance policies, including during the times when the Health Insurance Portability and Accountability Act (HIPAA) and the Americans with Disabilities Act (ADA) were passed and instituted.
This series does not apply to Medicare, Medicaid, Obamacare (The Affordable Care Act, or ACA), or individual health insurance, unless otherwise specified.
Chapter 1: What is health insurance?
All insurance is about risk. A company that sells homeowner's insurance charges premiums to accept the risk that a tree might fall on your house. A company that offers car insurance accepts the risk that you might get into a car accident. Those insurance policies are contracts between you and an insurance company; group health insurance, the kind that is offered by your employer, is a contract between your employer and a private insurance company. Most commonly, you and your employer share the cost of a monthly insurance premium. In this case, the insurance company accepts the risk that you might need the type of medical treatment specified in the policy, treatment that you may not be able to afford otherwise.
But keep in mind that health insurance companies are also businesses, like all for-profit businesses: responsible to their shareholders. It’s not easy to wrap your mind around the fact that something so personal to you is business as usual to them, but understanding that is vital to understanding how insurance works.
A Brief History
Insurance used to be a lot less complicated before the proliferation of technology and advanced treatment methods, like platinum-based cancer treatments. It was also a lot less expensive before those advances (you know, platinum).
Now we live in an age where, in many cases, our quality of life has improved exponentially. The downside is that chronic and autoimmune conditions have become a competitive market. We will always fuel that market, looking for the next drug or procedure or device that will alleviate symptoms, reduce pain, or extend lives that otherwise might be shorter than average. Insurance often is the only way for people who need the latest treatments to actually be able to afford them.
So, where do you fit?
You’re the risk. Sort of. I mean, is it really a risk if you already know the outcome? You will definitely need medical services. Health insurance covers the “care and treatment” of “accident” or “illness.” The tricky part is defining the “accidents” and “illnesses” that are covered by the plan, and what is “necessary” to treat them. Before managed care options like HMOs and PPOs, the patient’s physician decided what was necessary. Now, it’s up to the insurance company and a committee of outside medical professionals.
When the insurance policy’s definitions of “accidents” and “illnesses” are uncertain, a committee inside the insurance company looks at similar cases and the circumstances around your case, and makes a judgment call that will (hopefully) serve both the company’s interests and your own, as the patient.
When the doctor and the insurance company disagree on what’s “necessary”, they negotiate payment. This is labor-intensive, and a common reason that some doctors’ offices, especially private practices, do not take insurance. In those cases, reimbursement from the insurance company goes through you.
In both instances, you can appeal the decisions made by the insurance company, but it’s an uphill battle. For example, in the “necessary” instance, I used to take an expensive injection for anemia ($1,200/month). My symptoms were mild, but without it, there was always an underlying tiredness every day, even when I got enough sleep. The insurance company decided to set their standards against the medical community’s recommendations and make it harder to qualify for the medication.
I was not the only one who fell into the mild category. Several people with my conditions were also affected. The doctors tried to negotiate coverage with the insurance company, but it didn’t work.
It was really hard to accept that someone I’d never met had switched out the experts who knew my situation for their experts, who had no idea how it felt to drag through every day. For all intents and purposes, strangers had made a judgment call that would restrict oxygen flow to my body, including to my brain. (That’s what anemia is: lack of iron in the bloodstream, and iron delivers oxygen.) It was so personal. My day-to-day functionality, and the only option I had, was to pay the $1,200/month. The only way I could get there was to stop paying rent.
Understand that, when you enroll in an insurance plan, you become what is called a "third-party beneficiary." When your plan goes into effect, you become entitled to certain rights and coverages that your employer negotiated to be included in the policy. However, what they don’t tell you is this: no health insurance company accepts every single possible health risk. The company’s professionals -- actuaries (mathematicians) and underwriters (risk evaluators) -- decide how much risk the company can assume and still earn a profit. Because of that, every insurance policy contains specific sections that detail limitations and exclusions on benefits payable under the plan. Sometimes that means specific things like my anemia drug.
And when you are evaluating which policy is right for you, remember that these limitations and exclusions are not just found in the obvious sections. There are others listed throughout the policy. Make sure you’ve seen all of them before signing up for health insurance.
So, next time you are considering enrolling in private group health insurance, start your evaluation with the definitions section to help you understand what your plan does cover. Look for the limitations and exclusions section to see what your plan doesn’t cover. This will help you set expectations as to what doctors and treatments you will be able to afford under the plan for the coming year.
If you still have questions about the policy, reach out to your employer’s benefits coordinator or Human Resources department for clarification.
And don’t be afraid to ask questions about your specific condition and circumstances. It sucks to buy insurance and then find out after the fact that the cutting-edge treatment your doctor wants for you is out of financial reach.