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My father had a heart attack 4 months ago, and he’s been in and out of the ICU for 3 of those months. Everyone likes to think “oh, I’m insured. I’ll be fine.”

My father had a heart attack 4 months ago, and he’s been in and out of the ICU for 3 of those months. Everyone likes to think “oh, I’m insured. I’ll be fine.” But let me tell you, you won’t be fine. 3 months of ICU at Robert Wood Johnson was billed for $4Mn. BCBS-NJ only paid out $750k. The headache begins there- from a personal financial standpoint, and Tri-party incentive standpoint. Ignoring the difference of $3.25Mn “owed” to the hospital (technically, this $4Mn is an exaggerated number by RWJ to recoup as much as they can), the insurance company is essentially denying basic/reasonable services. The doctors have been fighting with insurance to get him to an LTACH, but the most they’ll pay for is a nursing home. Insurance is a business. They aren’t looking out for you, or your loved ones. I hate to sound cynical, but boy, these past 4 months have shown me the deepest, ugliest side of commerce that inevitably results from aligning incentives with profits.

lotsofpulp 8y ago
Health insurance companies' profit margins are restricted by law, whereas Robert Wood Johnson and its executives and doctors profit margins are not restricted. If anyone is on the patient's side from a cost perspective, it's insurance, and the ones benefiting from higher pricing and unnecessary procedures are the providers.
- dragonwriter 8y ago
  > Health insurance companies' profit margins are restricted by law, whereas Robert Wood Johnson and its executives and doctors profit margins are not restricted. If anyone is on the patient's side from a cost perspective, it's insurance, and the ones benefiting from higher pricing and unnecessary procedures are the providers. Untrue, because health insurers profits are limited by law, sure, but to a specified fraction of the costs they pay; if their payouts are too small, they have to refund the excess profits to the people paying premiums.
  - lotsofpulp 8y ago
    How does that make it untrue? Health insurance companies are supposed to compete with each other based on their premium prices, and the insurance companies with lower premiums (and hence lower costs) will win more customers.
    - krupan 8y ago
      Except the insurance market doesn't work like that. You get a job, that job determines your insurance. There's no shopping around for the best rates.
      - lotsofpulp 8y ago
        That's because the government allowed tax exempt employer funded health insurance to stick around. If everyone was forced onto healthcare.gov then it could be possible. Employers would have one less thing to deal with that has nothing to do with their product and taxpayers wouldn't have to worry about being tied to their employers, and can more accurately compare differences in pay and whatnot.
        krupan 8y ago
        I strongly agree with everything you said except forcing everyone to healthcare.gov. A free market for insurance can and should exist without the need for a government run website/market
        lotsofpulp 8y ago
        A free market also requires knowledgeable purchasers to make informed decisions. In the case of health insurance, it's so complicated that it makes sense to simplify it to protect consumers and offer easy to compare options (bronze/silver/gold). I guess it doesn't have to be government run, but it's already built and does a pretty good job.
      - dragonwriter 8y ago
        > Except the insurance market doesn't work like that. You get a job, that job determines your insurance. That's not really the source of the lack of competition, as employers are motivated to minimize rates for what they ger, whether they are seeking to fulfill a government minimum-coverage mandate or provide a competitive benefit to attract/retain staff. (It is a source of some other problems, just not the one at issue.)
- treyfitty 8y ago
  That’s why three party systems, such as this, is a headache. Everyone involved has vastly different goals, and incentives. Insurance companies are mandated to strict profit margins, yes. But they aren’t mandated to align with what the other parties say a patient needs. This creates a situation where insurance companies can discriminantly choose which services, and level of care to agree to pay for. I see it happening right now: Long story short, to put it into everyday terminology, our family and the mechanic is urging for a new engine. Insurance is saying “all you need is air in your tires. That’s all we’ll approve.”
  - lotsofpulp 8y ago
    US voters don't want taxpayer funded healthcare, like other developed countries. US voters also aren't able to negotiate with medical providers directly, due to lack of knowledge and ability to negotiate while dying. The health insurance setup with capped profit margins seems like a decent option, considering no others have worked. There are a few problems, like allowing employers to offer it and tax exempt premium payments. If everyone was dumped on healthcare.gov, a healthy market for health insurance might emerge.
- citrablue 8y ago
  I don't think this follows. Insurance profit margins are restricted, but they're a percentage of overall payments to hospitals. If the total charge goes up, their total profit also increases.
  - lotsofpulp 8y ago
    Ideally, this is solved by a different health insurance company offering lower premiums, same as vehicle insurance. Obviously, there are some nuances in the health insurance market that make this difficult, but other than taxpayer funded healthcare, no one has come up with a better option.
  - wang_li 8y ago
    Insurance companies are required to pay out 80%/85% of the collected premiums on medical care. Which means the remaining 20%/15% has to cover all the insurance company costs and any profit they can manage. If premiums are raised then their portion also will increase as a percentage. But if the medical costs increase without a corresponding premium increase, the insurance company won't see any profits.
    - MrFantastic 8y ago
      "But if the medical costs increase without a corresponding premium increase, the insurance company won't see any profits." That almost never happens.
- acomar 8y ago
  I've suddenly started seeing this take all over the place and I have no idea where it comes from because it doesn't make sense. That the insurance companies profit margins are restricted means rather little because executive pay isn't capped: if they earn too much money, they can simply pay bonuses to raise their expenses. Or cut shareholders a check. Or. Or. Or. Tangentially, this is why "non-profit" doesn't mean what people think it means. And despite what caps exist (can you point me to resources on this topic?), the industry is enjoying record profits right now. That's not to say hospitals aren't as well, but I'm puzzled that so many people seem to want to point the fingers at doctors. Doctors and nurses actually provide the care. If there's anyone I'm less worried about making a little more, it's the people actually doing the work. The administrators and the corporations that set and negotiate prices with the insurance companies though... I'm with you there. Lastly, the incentives of insurance companies do not align with the patients unless you ignore most of how the industry works. Insurance companies make money when they're able to deny you coverage or require you to pay more out of pocket (in vs out of network). That doesn't align with patients at all. There should not be a profit incentive in health insurance.
  - jhayward 8y ago
    > I've suddenly started seeing this take all over the place and I have no idea where it comes from because it doesn't make sense. That the insurance companies profit margins are restricted means rather little because executive pay isn't capped: if they earn too much money, they can simply pay bonuses to raise their expenses. Or cut shareholders a check. Or. Or. Or. Tangentially, this is why "non-profit" doesn't mean what people think it means. This is not correct, as I understand it. Under the ACA (Obamacare), health plan providers had to ensure that at least 80% of premiums were paid out for patient services. That leaves 20% for overheard, including profit and compensation. The "trick" here is that service providers (doctors, hospitals, MRI facilities, labs, etc.) are not limited in this way (except by "usual and customary" terms where applicable), and there are LOTS of layers of providers. So in the end you can get many multiples of actual costs by simply washing the underlying treatment or service through 5 or so layers of providers.
    - jfk13 8y ago
- noelsusman 8y ago
  RWJ is a non-profit.
  - _archon_ 8y ago
    What's your point? Nothing says a nonprofit can't overcharge. If the hospital wants a few doctors and a new MRI, it's looking at many megadollars. Nothing says a nonprofit hospital would bill less aggressively than a for-profit one.

lotsofpulp 8y ago

Health insurance companies' profit margins are restricted by law, whereas Robert Wood Johnson and its executives and doctors profit margins are not restricted. If anyone is on the patient's side from a cost perspective, it's insurance, and the ones benefiting from higher pricing and unnecessary procedures are the providers.

dragonwriter 8y ago
> Health insurance companies' profit margins are restricted by law, whereas Robert Wood Johnson and its executives and doctors profit margins are not restricted. If anyone is on the patient's side from a cost perspective, it's insurance, and the ones benefiting from higher pricing and unnecessary procedures are the providers. Untrue, because health insurers profits are limited by law, sure, but to a specified fraction of the costs they pay; if their payouts are too small, they have to refund the excess profits to the people paying premiums.
- lotsofpulp 8y ago
  How does that make it untrue? Health insurance companies are supposed to compete with each other based on their premium prices, and the insurance companies with lower premiums (and hence lower costs) will win more customers.
  - krupan 8y ago
    Except the insurance market doesn't work like that. You get a job, that job determines your insurance. There's no shopping around for the best rates.
    - lotsofpulp 8y ago
      That's because the government allowed tax exempt employer funded health insurance to stick around. If everyone was forced onto healthcare.gov then it could be possible. Employers would have one less thing to deal with that has nothing to do with their product and taxpayers wouldn't have to worry about being tied to their employers, and can more accurately compare differences in pay and whatnot.
      - krupan 8y ago
        I strongly agree with everything you said except forcing everyone to healthcare.gov. A free market for insurance can and should exist without the need for a government run website/market
        lotsofpulp 8y ago
        A free market also requires knowledgeable purchasers to make informed decisions. In the case of health insurance, it's so complicated that it makes sense to simplify it to protect consumers and offer easy to compare options (bronze/silver/gold). I guess it doesn't have to be government run, but it's already built and does a pretty good job.
    - dragonwriter 8y ago
      > Except the insurance market doesn't work like that. You get a job, that job determines your insurance. That's not really the source of the lack of competition, as employers are motivated to minimize rates for what they ger, whether they are seeking to fulfill a government minimum-coverage mandate or provide a competitive benefit to attract/retain staff. (It is a source of some other problems, just not the one at issue.)
treyfitty 8y ago
That’s why three party systems, such as this, is a headache. Everyone involved has vastly different goals, and incentives. Insurance companies are mandated to strict profit margins, yes. But they aren’t mandated to align with what the other parties say a patient needs. This creates a situation where insurance companies can discriminantly choose which services, and level of care to agree to pay for. I see it happening right now: Long story short, to put it into everyday terminology, our family and the mechanic is urging for a new engine. Insurance is saying “all you need is air in your tires. That’s all we’ll approve.”
- lotsofpulp 8y ago
  US voters don't want taxpayer funded healthcare, like other developed countries. US voters also aren't able to negotiate with medical providers directly, due to lack of knowledge and ability to negotiate while dying. The health insurance setup with capped profit margins seems like a decent option, considering no others have worked. There are a few problems, like allowing employers to offer it and tax exempt premium payments. If everyone was dumped on healthcare.gov, a healthy market for health insurance might emerge.
citrablue 8y ago
I don't think this follows. Insurance profit margins are restricted, but they're a percentage of overall payments to hospitals. If the total charge goes up, their total profit also increases.
- lotsofpulp 8y ago
  Ideally, this is solved by a different health insurance company offering lower premiums, same as vehicle insurance. Obviously, there are some nuances in the health insurance market that make this difficult, but other than taxpayer funded healthcare, no one has come up with a better option.
- wang_li 8y ago
  Insurance companies are required to pay out 80%/85% of the collected premiums on medical care. Which means the remaining 20%/15% has to cover all the insurance company costs and any profit they can manage. If premiums are raised then their portion also will increase as a percentage. But if the medical costs increase without a corresponding premium increase, the insurance company won't see any profits.
  - MrFantastic 8y ago
    "But if the medical costs increase without a corresponding premium increase, the insurance company won't see any profits." That almost never happens.
acomar 8y ago
I've suddenly started seeing this take all over the place and I have no idea where it comes from because it doesn't make sense. That the insurance companies profit margins are restricted means rather little because executive pay isn't capped: if they earn too much money, they can simply pay bonuses to raise their expenses. Or cut shareholders a check. Or. Or. Or. Tangentially, this is why "non-profit" doesn't mean what people think it means. And despite what caps exist (can you point me to resources on this topic?), the industry is enjoying record profits right now. That's not to say hospitals aren't as well, but I'm puzzled that so many people seem to want to point the fingers at doctors. Doctors and nurses actually provide the care. If there's anyone I'm less worried about making a little more, it's the people actually doing the work. The administrators and the corporations that set and negotiate prices with the insurance companies though... I'm with you there. Lastly, the incentives of insurance companies do not align with the patients unless you ignore most of how the industry works. Insurance companies make money when they're able to deny you coverage or require you to pay more out of pocket (in vs out of network). That doesn't align with patients at all. There should not be a profit incentive in health insurance.
- jhayward 8y ago
  > I've suddenly started seeing this take all over the place and I have no idea where it comes from because it doesn't make sense. That the insurance companies profit margins are restricted means rather little because executive pay isn't capped: if they earn too much money, they can simply pay bonuses to raise their expenses. Or cut shareholders a check. Or. Or. Or. Tangentially, this is why "non-profit" doesn't mean what people think it means. This is not correct, as I understand it. Under the ACA (Obamacare), health plan providers had to ensure that at least 80% of premiums were paid out for patient services. That leaves 20% for overheard, including profit and compensation. The "trick" here is that service providers (doctors, hospitals, MRI facilities, labs, etc.) are not limited in this way (except by "usual and customary" terms where applicable), and there are LOTS of layers of providers. So in the end you can get many multiples of actual costs by simply washing the underlying treatment or service through 5 or so layers of providers.
  - jfk13 8y ago
noelsusman 8y ago
RWJ is a non-profit.
- _archon_ 8y ago
  What's your point? Nothing says a nonprofit can't overcharge. If the hospital wants a few doctors and a new MRI, it's looking at many megadollars. Nothing says a nonprofit hospital would bill less aggressively than a for-profit one.