We complain a lot about the outrageous profits health insurance companies are making and their reluctance to pay claims. The companies are indeed making obscene profits and are indeed refusing to pay claims. They do not improve their images any by refusing obvious claims or by denying coverage to people who they ought to be covering. But we need to look at health insurance laws to see how and why this happens. We need to fix the laws in order to fix the system. Then we need to let the insurance companies know we mean business.
It is easy to cover auto and home insurance. These policies are taken out by individuals and the jurisdiction is easily established as the place where the policy holder resides. Homes are especially easy – they can be shown to be in a given location. Health care is different – people move around, and policies are usually taken out by employers or affiliations.
So, here is the list of jurisdictions on different types of coverage and regulation:
CMMS – Medicare, some Medicaid
Department of Labor – Self Insured Plans
States – The rest of Medicaid, Other Health Care Regulations (including 50 different sets of regulation)
In one state, the commissioner regulates only about 30% of health care. The rest is as follows:
Workman’s Compensation – overlapping, competing regulations between the Commissioner and the State Department of Labor
HFPC – Medicaid
Department of Health – Quality of health care but not funding
DORA – Professional Licensing
Health and Insurance Exchanges – new with the Health Care Reform, TBD
VA – Veterans Health Care (VA Hospitals fall under both VA and DoH)
Funding through Liability – Courts
When a case comes to an insurance company, the first thing an adjuster does is determine if there is coverage. Then they determine if there is another entity also responsible or partly responsible for coverage. Of course, in the interest of the company, the first goal is to find someone else to cover. If a case can be made for another party being responsible, that is what the adjuster will go with first. Could this be the responsibility of Workman’s Comp instead of the insurer? Could it be a quality of care issue? Licensing? Medicaid? Is it possible to put the claim in the bucket of someone other than the insurer? They will let the claimant fight it out with the other entity, and then themselves, or both. This is a legal way to avoid paying, or delay it. In most cases, both entities that could have responsibility will fight payment.
There are gaps in insurance coverage that insurance companies know and take advantage of. There are overlaps in coverage, where the insurance companies try to push the liability off on the other entities. I don’t blame the insurance companies, I blame our laws. With the myriad of laws and regulations, it is almost impossible to keep up.
Imagine, if you will (not too far fetched), somebody lives in Pennsylvania. He works in New Jersey. His company is in New York. He gets sick in Delaware. He files his claim in Pennsylvania. His company bought his insurance in California. Which state’s rules apply? The insurer will try to go with the state with the rules most in its favor.
Neither the insurers nor state commissioners want to take these issues to court. Whatever the ruling, it is apt to go against both. If the courts rule that the rules of the state where the insurance was issued are the rules that prevail, insurance companies will rush to issue policies in the state with the least regulation, which will be expensive to the states (discussed below). If the courts rule otherwise, the insurers will have to adjust the cost of insurance to match each state. Claimants who get sick in states where rules are against them may wait to get home to make the claim. Because there are 50 sets of rules (not 50 rules, 50 states of rules) it is very hard to establish consistent policies. Keeping the computers up to date with all these rules and their nuances would be a daunting task if each company had just one computer platform and set of applications (they don’t – with all the mergers, they are a mish mash of old and new applications in different languages with varying quality of documentation on a bunch of different platforms).
John McCain ran on a platform that there should be the ability to buy insurance across state lines. This would be horrible for consumers. Insurance companies would all head for states where regulation is the least and coverage will be almost nonexistent. Don’t worry, though, that will never happen. States get at least 10% of their budgets from taxes paid on each policy sold in their state. If policies are sold across state lines they will lose that revenue.
This is why we need a national health care policy. This is why we need single payer. Once the laws are straightened out, once we have a national policy with one set of laws and regulations, we will be able to clearly see who the bandits are and deal with them.