The End Of Private Insurance: Who Benefits?

Private health insurance is a contentious issue, with some calling for its abolition and others defending its existence. Proponents of a public health insurance option argue that it would improve affordability and accessibility, especially for mental health services, which are often out of network. Critics, however, warn that a public option could destroy the private insurance market, disrupt employer-sponsored coverage, and lead to increased taxation. With strong opinions on both sides, the future of private health insurance remains uncertain.

Public health insurance could underprice private insurers, causing them to leave the market

The first advantage would give public health insurance a substantial structural cost advantage over private insurers. Private insurers do not have the luxury of offloading their administrative costs onto federal taxpayers, so they would be at a significant disadvantage in terms of costs.

The second advantage is that public health insurance could dictate what it would pay healthcare providers, while private insurers do not have this ability. Most proponents of public health insurance envision that it would pay rates similar to Medicare's, which are relatively low. The American Hospital Association says hospitals receive just 87 cents from Medicare for every dollar in cost they incur caring for its beneficiaries. In 2019, these underpayments amounted to nearly $76 billion. Private insurers, on the other hand, pay hospitals nearly two and a half times what Medicare does for the same service, according to a RAND Corporation study.

Because of its artificially low cost structure, public health insurance could permanently underprice private insurers. Over time, consumers would likely switch from more expensive private plans to the cheaper public plan. Private insurers would eventually have no one left to cover and would be forced to leave the market. By 2033, according to one study, there would be no private plans available on the exchanges in 14 states.

This dynamic could be further exacerbated by the fact that private health insurance is already facing significant economic pressures. For example, Obamacare installed billions in new taxes on insurers, which will ultimately be passed along to consumers in the form of higher premiums. Additionally, private insurers are already facing strong competition from government health programs, which are becoming increasingly attractive to patients.

As a result, the introduction of public health insurance could accelerate the decline of private insurers and ultimately lead to their exit from the market.

Private insurance is incompatible with Medicare for All legislation

The private health insurance industry is a large and established one, employing about half a million people and covering approximately 250 million Americans, with revenues of about a trillion dollars. It has a substantial impact on the retirement savings of Americans, as stocks of private insurance companies are a common feature of mutual funds.

The Medicare program, on the other hand, is a federal insurance program that provides coverage for people over 65 and certain individuals with disabilities or specific health conditions. While it is possible to have both Medicare and private insurance (known as "dual coverage"), they operate differently. Private insurance is offered by private companies, while Medicare is administered by the federal government, which decides benefits, premiums, and cost-sharing structures.

The fundamental incompatibility between private insurance and Medicare for All lies in their conflicting approaches to healthcare. Private insurance is driven by profit motives and can vary in coverage and costs, whereas Medicare for All seeks to provide universal coverage with standardized benefits and premiums for all, regardless of income or pre-existing conditions.

Private insurance companies have been known to interfere with patient care

One common way insurance companies meddle in patient care is by requiring "prior authorization". This means that a doctor must seek approval from the insurance company before prescribing a specific treatment or medication. If the insurance company deems the treatment or medication unnecessary, they may deny coverage, forcing the patient to try a cheaper or less effective alternative first. This can result in delays in receiving necessary treatment, as reflected in a survey where 62% of patients reported that their treatment had been delayed due to insurance providers.

In some cases, insurance companies may even deny coverage for medically necessary procedures, as in the case of the 67-year-old woman who was denied an MRI to check for lung cancer, only to be later diagnosed with a massive tumor. Another example is the college student with ulcerative colitis who was denied treatment by his insurer, despite the risk to his health.

Insurance companies also interfere with patient care by excluding certain medications from coverage. They deem certain drugs too expensive or unnecessary and place them on formulary exclusion lists. This can leave patients without access to vital treatments for serious illnesses such as diabetes and cancer.

In addition, insurance companies can force patients to switch to different medications for non-medical reasons, such as eliminating coverage for the original medication or increasing the patient's cost burden. This can cause disruptions in patient care and worsen symptoms, as seen in a survey where 95% of patients with chronic diseases reported worsening symptoms after being forced to switch medications.

Furthermore, insurance companies often offer low reimbursement rates for mental health services, leading to therapists refusing to accept insurance. This can create barriers to accessing mental healthcare, which is already understaffed and difficult to access.

The interference of private insurance companies in patient care has led to growing support for reforms, such as "Medicare for All", which aims to replace private health insurance plans with a single-payer system that covers more services without the need for prior authorization and reduces bureaucracy.

Private insurance companies have been known to delay or withhold payments to providers

Another tactic is to misinterpret policy language, taking advantage of complex language and fine print to interpret vague terms in their favour. This can lead to disputes over the extent of damage or coverage, with insurers arguing that certain damages are pre-existing or not covered under the policy.

Insurers may also offer quick, lowball settlements, knowing that in times of crisis, claimants may be desperate for funds and more likely to accept a lower payout than what they are rightfully entitled to.

Furthermore, private insurance companies profit from delaying payments by generating interest on the money that would have been used to pay the claim. By stalling the payment, they benefit from the return on investment, essentially gambling with the claimant's money.

The process of pursuing a claim can be complex and time-consuming, with providers often having to spend hours chasing down payments, dealing with long hold times, and sending faxes or emails without receiving a timely response. This bureaucratic maze can deter providers from following up on denied or delayed claims, ultimately saving money for the insurance company.

These issues are not limited to a single company or state, as ProPublica's investigation revealed that hundreds of providers across nearly all 50 states faced similar challenges. The consequences of these delays and denials can be devastating, especially for those seeking mental health treatment, as it can lead to a worsening of their condition or even emergency room visits.

While insurers may argue that they are compliant with state and federal laws, the impact of their actions on providers and claimants cannot be overlooked. The power dynamic between insurers and providers often results in interference in patient care, with insurers pressuring providers to reduce treatment duration or frequency, even when it may not be in the best interest of the patient.

The issues highlighted above underscore the need for better regulation and oversight of the insurance industry to ensure timely and fair reimbursement to providers and adequate access to care for patients.

Private insurance companies can be selective about who they insure, which can be detrimental to those with mental illness

Private insurance companies have historically been discriminatory towards patients requiring treatment for mental illness and substance abuse disorders, compared to those needing general medical care. This is due to a variety of factors, including stigma, relatively low consumer demand for psychiatric care, a lack of knowledge about psychiatric illness and treatment on the part of insurers, and the assumption that more liberal psychiatric benefits will result in unnecessary and excessive use.

The cost of mental health services has always been a significant barrier to accessing care for people with mental health problems. People with mental illness are less likely to have health insurance than those without mental health problems. They are also more likely to be uninsured, and rates of uninsurance do not differ significantly between those with no mental illness and those with serious mental illness, despite the greater need for services in the latter group.

In the US, the Affordable Care Act (Obamacare) has expanded parity provisions to new plans and specified that mental health and substance abuse services are essential health benefits. However, self-insured plans are not included in the new coverage mandate for mental health and substance abuse services, and certain small employers are exempt when purchasing coverage in a health insurance exchange.

In India, the Mental Healthcare Act (MHCA), 2017, includes "mental illnesses" for health insurance coverage, which is a progressive step toward considering mental illness on par with physical illness. However, there are still concerns and challenges to be addressed. For example, mental illnesses do not have an assured way of "risk-based calculation," and inpatient care in psychiatry may involve interventions that do not fit entirely into the category of medical interventions.

The issue of insurance for mental illnesses brings in a host of clinical and social factors that need to be considered. For example, the long duration of treatment for mental illness, willful non-compliance by patients, pre-existing mental illness, and preventive and rehabilitation services. Additionally, there are concerns about sharing medical records with insurance companies and maintaining patient confidentiality.

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