The Big Problem with US Healthcare: Insurance Companies

The story of 17-year-old Nataline Sarkisyan’s recent death from liver failure was tragic. But it was a uniquely American brand of tragedy. Only in the United States would the medical fate of a sick child be left to some private company’s idea of what constitutes necessary care.

The Northridge, California, teenager died after her health insurer, Cigna Healthcare, spent critical weeks denying approval for the liver transplant her UCLA medical team said was her last hope. Only after public protests by her family and the California Nurses Association embarrassed Cigna did the company reverse its decision. But it was too late. The decision came the same day Nataline died.

What is wrong with this picture? Like all insurers, Cigna relies on hired medical advisors to evaluate a treatment’s medical appropriateness under the terms of a policy. In this case, Cigna’s “evidence-based” medical guidelines led it to deny the recommended liver transplant, categorizing the procedure as “experimental.” This was a complex medical situation, of course. But all the more reason why the patient’s actual medical team should have been the only authority to determine the appropriateness of treatment. In fact, there was uniform support for the transplant from UCLA’s medical experts. Instead, the insurer’s conduct became a case study in the worst possible outcome that can result from the involvement of a for-profit insurer in medical decisions.

But the case also suggests something is wrong even when things go right under the present health system. Obviously, insurance companies stay in business by paying most claims. No one would buy their products if they didn’t. But they also stay profitable by trying to avoid sick people as customers, and whenever possible by not paying claims.

Who among us cannot speak from personal experience about the frustrations of getting a legitimate claim paid? Years ago I once found myself in a hospital emergency room in Chicago with an acute kidney infection. I spent two days in the hospital and was successfully treated. I also ended up with about $4,000 in medical bills. Fortunately, I had health insurance through my employer. But fortunate can be a relative thing when you’re dealing with an insurance company. Shortly after returning to work I received a letter from the insurer informing me that my hospital stay was not covered since it was for a “pre-existing condition.” The plan excluded pre-existing conditions during my first year of coverage.

By what stretch of the imagination could an acute infection and emergency hospitalization constitute a pre-existing condition? Was it because I had always had a kidney? This was the question I had when I called the company’s claims department. The claims rep couldn’t answer my question and said he would get back to me. A short while later I received another letter from the company informing me that my hospital stay would now be covered.

The insurer’s attempt to avoid paying my claim was clearly wrong. So why would they do it? Was it just an “oversight?” Or was there some cost-benefit analysis somewhere that showed if an insurer denies coverage in 100 similar cases, X number of policyholders could be expected not to challenge the decision, thus saving Y dollars? Insurance companies are not penalized for rejecting claims, of course, unless fraud can be proven in court. But the fact that insurers will often quickly reverse a rejected claim when the customer protests suggests the rotten core at the heart of their system.

I also once sought chiropractic care, which my insurer covered at 70 percent of the cost of care. But the catch was that the insurer paid 70 percent of what they considered a reasonable fee for the particular service. Of course, their idea of a reasonable fee was always lower than the doctor’s. The absurdity of this was brought home when my doctor actually lowered her per visit cost by a small amount. Naively, I thought my out-of-pocket costs would go down. Wrong. The insurance company responded by re-adjusting downward their definition of a “reasonable fee.”

All this is otherwise known as the “let’s see what we can get away with” approach to quarterly profits. Such experiences among policy holders are hardly out of the ordinary, and they raise a pertinent question: Do we really want a health care system that encourages those who pay for care to find ways not to pay for care?

Contrary to the free-market hype of Republicans, inefficiency runs rampant in a health system controlled by private companies. Lavish executive salaries, marketing costs, and stock dividends all eat up financial resources that could be used for actual health care services. But contrary also to the reform hype of most Democrats, a more closely regulated mishmash of private insurance and employer plans combined with new public benefits, tax credits, and subsidies is not going to resolve the current system’s failings.

Both Hillary Clinton and John Edwards propose mandates that will require the public to purchase health insurance, a potential boon in new profits the insurance industry can only welcome. In return, they expect the insurance industry to cooperate with reforms to improve their products. Barack Obama’s health plan differs fundamentally only in leaving out a purchasing mandate. But either way the candidates are sidestepping reality: for-profit and health care go together like oil and water. In fact, as the California Nurses Association and other single-payer advocates note, mixed public-private systems always seem to end up favoring the private sector’s efforts to corral the most profitable patients and services. Invariably less profitable patients and services become the burden of public resources.

Unlike most modern nations, Americans have allowed their health care system to be undermined by a business culture that apparently sees no aspect of the human experience as off-limits to those who prefer dollar signs to social responsibility. Currently, millions of uninsured as well as insured Americans are not getting timely or adequate medical care because of unaffordable costs or concerns over high deductibles and co-pays. Or, sometimes, as one Northridge family learned, because their insurance company is more concerned about profits.

The CEO of Cigna Healthcare’s parent Cigna Corporation, H. Edward Hanway, earned about $21 million in total compensation in 2006. You just have to ask. Is this right? Do children who use the Canadian health care system die to make other people rich?