“For some it’s hard to imagine the future, a future which is unfolding right now before their very own eyes. This future is yesterday in many respects except for one………..it’s better.”
By Bill Rusteberg
Since the 1970’s the health insurance industry has undergone fundamental changes. Transitioning from indemnity plans to Major Medical plans in the 70’s was a milestone. Initially, carriers kept the indemnity platform in place and added a major medical umbrella at a very low premium. The major medical policy limit was a $250,000 umbrella priced at less than $3 pepm. To hedge bets, much of this additional risk was borne through reinsurance treaties.
Even with major medical in place, insureds were responsible for dealing with balance billing issues. This was not a problem at the time because balance billing was extremely rare. However when it did occur it was the provider who was viewed as the “bad guy” not the insurance company. The consumer effectively had “veto power” with skin in the game.
Major medical benefits didn’t include copays. Instead they had a calendar year deductible of $100 which equaled to about one week’s take home pay for the average American worker. There was no such thing as a network. All licensed providers were paid based on “Usual, Customary & Reasonable” as determined by the insurance company. Assignment-of-Benefits was hit and miss. More often insureds paid for their care upfront and then filed a claim for reimbursement. Prescription drugs were not covered, and in those rare instances they were, the insured paid the full cost and then filed a claim to recoup 80% of the billed amount (Subject to their annual deductible) by filing a paper claim and waiting weeks to get some of their money back.
We used to call this Medical Insurance. But times have changed.
With the advent of PPO’s and HMO’s (Managed Care), the relationship between patients and their providers fundamentally changed. Secret and proprietary contracts inserted between patients and providers placed by Managed Care Organizations became the norm whereas before such contracts did not exist. Clueless patients became third party beneficiaries of contracts to which they were not a direct party losing control of their health care costs. They lost their veto power without knowing or caring why. Lemmings we all became.
Whereas we used to call this Medical Insurance, we now call it Managed Care, or PPO plans, or HMO plans. But times are changing again.
Over time many became aware that managed care contracts do not save money at all and that the opposite was true. Managed care contracts guarantee ever increasing health care costs through escalator clauses and outlier provisions (which effectively eviscerates so called discounts).
Whereas in the 1970’s we called this Medical Insurance, we now call it Confrontational Medicine.
Instead of paying claims based on Usual, Customary & Reasonable” (There was nothing “Reasonable” anymore upon which to base payment), they choose Medicare pricing as the claim paying benchmark instead.
This movement to go back to what worked before faced stiff opposition from vested interests. It became confrontational medicine.
Medical providers fought back hard. Their managed care partners did too. The medical industrial complex had built up into a money machine over 40 years in the making, sucking almost 20% of the GDP directly to their money coffers. They were not about to give up without a fight.
The medical industrial complex let loose their dogs to attack patients through balance billing skirmishes intended to put pressure on Plan Sponsors to “cave in” to the financial demands of medical providers, especially hospitals. Pitting plan sponsors against plan members was an effective strategy because it worked.
These renegade plan sponsors turned to Inserting attorneys into the fray with good success. Placing a legal wedge between a medical provider and an insured on balance billing issues is effective.
Despite the true believers, pushing Reference Based Pricing, it is a transitional phenomenon at best.
But Now we are beginning to call it Medical Insurance once again………….
We are seeing a movement back towards the principles of the 70’s where third party barriers, the Berlin wall between patients and their care givers, are being destroyed, fated to become a distant memory. Instead of artificial pricing strategies such as Usual, Customary & Reasonable or Reference Based Pricing, market driven pricing is taking over.
Competition for cash paying patients is increasing. A movement away from traditional managed care arrangements has started. Third party administrators are no longer needed to the extent they were needed before and stop loss insurance has become less important too.
For some it’s hard to imagine this future, a future which is unfolding right now before their very own eyes. This future is yesterday in many respects except for one………..it’s better.
It’s medical insurance in it’s truest form – Cash pay centric health plans plus insurance for catastrophic claims only. Direct relationships with medical providers without the Berlin Wall. This is the future and the future is now.
