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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.
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.
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.
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.
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).
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.
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.
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.
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.
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.
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.
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.
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.
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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