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Shorter LA Times: What's Wrong With Health Insurance

Lack the time or patience to plow through the just-concluded three-part, 5,000-word-plus LA Times series on what's wrong with the health-insurance industry?

Allow me to assist with this abbreviated guide to the key ideas and data points in the series, stripped of the touching personal anecdotes, Byzantine logic and wandering narrative style for which the LAT is justly famous. Read this way, it's actually a fairly useful crib sheet for tracking the industry's shortcomings.

Part 1: An eroding model for health insurance

  • Americans forced to buy health insurance on the individual market pay more for less coverage than those in group plans, and face arbitrary restrictions and denials on the coverage they do receive.
  • Health insurers WellPoint, UnitedHealth Group, Aetna and Cigna together cover 85 million Americans, or almost half of those with private insurance.
  • Medical underwriting has forced even well-intentioned insurers to get more stringent about rejecting applicants with chronic disease or other pre-existing conditions, lest they get stuck with a sicker and more expensive member population.
  • Some insurance companies have retroactively revoked coverage of members who started to run up big bills, a practice known as rescission.
  • Others are appealing to younger and healthier -- and thus more profitable -- individuals by offering stripped-down policies, a practice that also sticks traditional health plans with older, sicker -- and less profitable -- populations.
  • Insurance premiums have skyrocketed, rising 71 percent between 2002 and 2007 -- higher than inflation (17 percent) and wages (19 percent).
Part 2: Health insurers reinvent themselves as money managers
  • As health-savings accounts proliferate, insurers have opened their own banks to handle the funds that members in high-deductible health plans save to pay for doctor and hospital visits.
  • Federal regulators initially refused to offer deposit insurance to these health-insurance banks until insurers managed to get themselves redefined as financial-services companies.
  • In order to win that redefinition, WellPoint, for instance, pledged to limit its spending on non-financial items to less than five percent of total revenue. The non-financial operations in question included its mail-order pharmacy and a chronic-disease management program. WellPoint eventually got the FDIC to raise that limit to 15 percent of revenue.
  • UnitedHealth's OptumHealthBank, founded in 2005, has attracted $600 million in deposits from more than 400,000 customers. In the year ended June 30, it earned $46 million in interest and $34 million in service charges, producing a profit of $33 million for its parent company. That's on a capital investment of just $35 million.
  • Two other insurer-owned banks aim to open soon -- Blue Healthcare Bank, funded by 33 of the 39 Blue Cross and Blue Shield organizations across the country, and WellPoint's Arcus Bank.
  • High-deductible health plans are bad because they encourage users to ration their own use of medical services, including valuable preventive and early-treatment options.
Part 3: The battle of the medical bills
  • Hospitals complain that insurers are deliberately slow to pay their members' healthcare claims, and sometimes refuse to pay outright.
  • Insurers say they're guarding against fraud and administrative mistakes on the part of doctors and hospitals, and are also scrutinizing claims more closely to ensure good medical practices are used. "Utilization review is coming back," says the head of the health-insurance lobbying outfit in Washington.
  • A UCLA cancer specialist says his nurses spend close to 40 percent of their time filling out insurance forms and phoning for treatment authorization. The same oncologist says one employee earning $45,000 a year devotes his or her time to getting approvals for medical imaging like X-rays, CAT scans and MRIs.
  • More than 30 percent of U.S. healthcare spending goes to administrative costs. The comparable figure in Canada is 17 percent.
  • When insurers reduce or deny payment for medical bills, doctors and hospitals often bill patients directly, a practice known as balance-billing. California has banned the practice for emergency care, although doctors are suing to overturn the decision.
  • Doctors are fighting back by enlisting the help of companies like AthenaHealth and National Healthcare Exchange Service, which claim that databases of insurance-company reimbursement patterns can help medical professionals press their original claims.
  • A July study by the American Medical Association found that UnitedHealth paid doctors their contracted rate 62 percent of the time, Aetna 71 percent, and Medicare 98 percent.
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