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13 things you don't know about your health insurer

In this story:
1. Health insurers' profit is about 3 percent

2. Your health insurer must regularly pay for unnecessary medical tests

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3. Health insurers are making progress keeping prescription costs under control

4. Health insurers selling individual health plans accept most applicants

5. Health insurers don't decide your group health benefits

6.Health insurers typically pay about 10 to 20 percent commission to agents who sell private health insurance policies

7. You can take your health insurance gripe to an external review panel

8. Your insurer may provide financial incentives to doctors who give you "best practices" treatment

9. You probably can't sue your health insurer

10. Your health insurer may be entitled to take your auto insurance settlement after an accident

11. Health insurers want you to know how your plan works

12. Even those with health insurance are delaying needed care

13. Health insurance is seen as an essential cog in a broken health care system

 

Health insurance can seem impenetrable. For starters, have you tried reading your health insurance policy? It's dense. And with health insurance regulated differently by each state, and with hundreds of health insurers each selling coutless varieties of policies, and with pricing practices elusive to the regular consumer, health insurance can seem downright confounding.

And wrapped up in all this are myths about health insurance that were perhaps once true — or perhaps were never true. Here's a look at the top things you propably don't know about your health insurer.

1. Health insurers' profit is about 3 percent

Health insurers bring in revenues of $723 billion a year, according to "National Health Expenditures" data from the Centers for Medicare & Medicaid Services (CMS), so you might think that health insurers are making money hand over fist. But with the cost of health care and prescription drugs rising every year, health insurers generally eek out only about 3 percent profit. Health insurers would, in fact, make a higher profit margin by selling toys to small children.

By comparison, here are profit margins for other businesses, as of July 2008, according to Hemscott:

  • 1.6 percent for grocery stores
  • 4.3 percent for toy stores
  • 6.5 percent for life insurance companies
  • 8 percent for resorts and casinos
  • 8.2 percent for property/casualty insurers
  • 16.1 percent for cigarette manufacturers
  • 16.8 percent for major drug manufacturers

The CMS data show that almost 86 cents of every health insurance premium dollar you pay goes to pay for medical services such as doctor visits, prescription drugs, hospital costs and other services.

According to a 2006 PricewaterhouseCoopers study conducted for America's Health Insurance Plans (AHIP), an industry trade group representing about 1,300 companies, the remainder of your premium dollar is spent on the following:

  • 5 cents go to policyholder services such as prevention, disease management, care coordination and investments in health IT, plus provider support and marketing.
  • About 6 cents go to insurers’ administrative costs including claims processing and compliance with government regulations.
  • 3 cents go to health insurance plan profits.

2. Your health insurer must regularly pay for unnecessary medical tests

The cost of medical liability goes beyond legal costs for health insurance companies: About 10 cents of the 86 cents spent on medical services (described above) goes to medical liability and the practice of defensive medicine.

In these litigious times, doctors often feel they must cover all the bases when a patient comes in with health complaints: That can mean rounds of tests to rule out conditions that were far-fetched to begin with, or even prescriptions handed out because patients demanded them.

In Pennsylvania, for example, where there is no cap to jury awards, more than 90 percent of physicians admit to defensive medicine, according to a 2005 study in the Journal of the American Medical Association:

  • 43 percent used imaging technology when it wasn't necessary.
  • Over 50 percent referred patients to other specialists.
  • 70 percent of emergency physicians ordered additional diagnostic tests.
  • One-third prescribed more medications than were necessary.
  • 60 percent used unwarranted invasive procedures (except neurosurgery).
  • 42 percent have restricted their practices by eliminating procedures like trauma surgery and avoiding patients with complex medical issues.

3. Health insurers are making progress keeping prescription costs under control

Health insurers have been trying to grant access to prescription medications while keeping payments under control.

Three-tiered copayment plans, where you pay more out of pocket if you want to take brand-name drugs, have become common in order to meet this goal.

4. Health insurers selling individual health plans accept most applicants

One often hears about the masses of uninsured people who can't get health insurance policies. While it's true that those with pre-existing medical conditions could have a hard or impossible time buying health insurance in the private individual market, 89 percent of applicants are offered coverage, according to AHIP. About 18 million people currently carry health coverage from a private policy (rather than a group policy).

5. Health insurers don't decide your group health benefits

About 62 percent of Americans receive their health insurance through group plans offered through employers, according to the Kaiser Family Foundation. Open-enrollment time can mean a lot of grumbling among employees: Higher deductibles next year? A cut in medical benefits? Higher prescription copayments? That health insurer is out to get you, right?

Actually, your group health benefits are decided entirely by your employer. Group health benefit contracts are not boilerplate: Every detail can be negotiated and decided by your employer — your employer, after all, not you, is the buyer of a group plan. Your employer often must engage in a fine balancing act of providing attractive benefits while holding employee costs down.

6. Health insurers typically pay about 10 to 20 percent commission to agents who sell private health insurance policies

If you buy a private individual health insurance policy from an agent, they make about 10 to 20 percent commission when you buy and every year you renew.

By comparison, agents typically make 74 to 140 percent commission on sales of term life insurance policies (with no renewal commission) and 8 to 20 percent commission for new and renewed car insurance policies.

7. You can take your health insurance gripe to an external review panel

All grievances about your health insurance — such as coverage denials or other claims problems — start with a formal complaint directly to your health insurer. But if you don't receive satisfaction from your insurer's own complaint-resolution process, you can make your case to an external review panel. Only six states lack laws mandating external grievance panels, according to the Kaiser Family Foundation: Idaho, Mississippi, Nebraska, North Dakota, South Dakota and Wyoming lack the mandate. Even in states without the law, though, health insurers have a grievance process.

The Web site HealthClaimsAppeals.org walks you through the process of resolving a health insurance dispute.

8. Your insurer may provide financial incentives to doctors who give you "best practices" treatment

Health insurers are increasingly looking for ways to ensure patients receive the most effective care possible, which ultimately reduces health care costs and reduces your chances for developing a chronic condition. Your doctor may have a "pay-for-performance" agreement with your health insurer, where he gets higher reimbursement rates when he prescribes treatments that line up with "best practices" medical guidelines.

According to the National Committee for Quality Assurance, the Healthcare Effectiveness Data and Information Set (called HEDIS) is a tool used by more than 90 percent of America's health plans to measure performance on numerous markers for care and service. So, for example, if you have a heart attack, guidelines recommend treatment with beta blockers. In 2005, 97 percent of heart attack patients with group health plans received the reommended course of treatment.

9. You probably can't sue your health insurer

Only 17 states have laws mandating that you can sue your health insurer in civil court in order to hold it accountable for treatment decisions, according to the Kaiser Family Foundation: Arizona, California, Georgia, Illinois, Maine, Minnesota, Missouri, New Hampshire, New Jersey, North Carolina, Oklahoma, Oregon, South Dakota, Tennessee, Texas, Washington and West Virginia.

10. Your health insurer may be entitled to take your auto insurance settlement after an accident

It's legal in most cases for health insurers to place a lien on any third-party settlement money you get from an auto insurer after an accident if your health insurer has paid for your treatment from an accident. This practice, known as "subrogation," simply means "substituting one for another."

Health insurers are allowed to recoup the cost of your medical care from the settlement you receive from the person who injured you. For example, if your auto accident medical expenses total $5,000 and you win a $10,000 settlement, your health insurer can take half — but only if its "rights of recovery" are spelled out in your plan agreement or summary of benefits.

11. Health insurers want you to know how your plan works

According to J.D. Power & Associates' 2008 "National Health Insurance Plan Study," which measured member satisfaction among 107 health plans throughout the United States, 55 percent of Americans say they don't understand how to use their health insurance coverage and member services. J.D. Power says that member satisfaction rises when members understand issues such as their co-pays, their prescription coverage, how to locate physicians and how to appeal coverage denials. It's this "information and communication" category on which insurers score lowest, with 671 out of a possible 1,000 points. And that's a drop of 22 points from last year.

This plummet in satisfaction shows the disconnect between health insurers and members: While health insurers have increasingly launched interactive Web sites that help members search for doctors, compare hospitals, research health conditions, manage chronic conditions and provide feedback to health care providers, among other information, so far the efforts aren't translating into increased member satisfaction with communication.

J.D. Power's Health Plan Rankings are available online.

Perhaps insurers' increasingly sophisticated approaches to information will turn the tide. For example, CIGNA announced in July 2008 that it is developing a virtual health care community where a visitor will be greeted by an avatar who will lead them to a virtual seminar and 3-D gamelike activities.

12. Even those with health insurance are delaying needed care

The gap between the uninsured and those with health insurance is closing in terms of delayed or unsought medical care. In 2007, more than 23 million Americans reported going without needed care and 36 million people delayed care — the sharpest increase in a decade, particularly among insured Americans — according to the "2007 Health Tracking Household Survey" by the Center for Studying Health System Change (HSC), a health policy research organization.

While the uninsured still face the bigger problems with access to care than the insured — 17.5 percent vs. 6.3 percent, respectively — insured people experienced the larger percentage increase in unmet medical needs than did the uninsured: a 62 percent increase for the insured vs. a 33 percent increase for the uninsured.

"This is the most up-to-date snapshot of the access problems Americans are facing when seeking medical care, and it's not a pretty picture, especially for insured people, who increasingly are finding that the access to care once guaranteed by insurance is declining," says Peter Cunningham of HSC.

Robert Zirkelbach, a spokesperson for AHIP, explains that the cost of health care drives premiums, so as both go up, many consumers choose to purchase less comprehensive policies in order to pay less for premiums. However, these less-expensive plans often feature higher cost-sharing, such as higher deductibles and copays, causing even the insured to reconsider paying a visit to the doctor.

13. Health insurance is seen as an essential cog in a broken health care system

The 2007 "Health Confidence Survey" conducted by the Employee Benefit Research Institute found that 51 percent of Americans say they are "extremely satisfied" or "very satisfied" with health care quality. However, only 18 percent say they are satisfied with the cost of health insurance and only 16 percent are satisfied with costs not covered by insurance. Six in 10 rate the health care system as fair (29 percent) or poor (30 percent), and many feel the health care system needs a complete overhaul (24 percent) or requires major changes (47 percent).

That said, 42 percent believe that employers of all sizes should be required to provide and contribute to health insurance for their workers.

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