Congressional testimony by major insurance company CEOs was as predictable as it was disappointing. They talked about their struggles in a heavily regulated industry and emphasized their essential role in keeping the fragile American healthcare system afloat. Watching it, I was reminded of a scene from the television show, Landman: an oil executive pitches an investor, and while conceding the industry’s flaws, calmly explains why none of that matters - oil is essential, the companies are massive, and failure is not an option. The argument is less a defense than a warning: we may be reckless at times, but you cannot let us fail. The same “logic” now dominates the justification of the power of health insurers.
But the problem with health insurance companies isn’t just that they are too big to fail. They are too big to care. Letting the status quo continue requires buying into a series of fictions about how these companies work.
Fiction: Profits are only 4 percent. No, that’s not true for most of the market. The majority of healthcare insurance coverage is delivered through vertically integrated systems where the insurer and other companies - pharmacy benefit managers and pharmacies - all exist as part of one big conglomerate. So while there are limits on the profits an insurance line of business can bank, they don’t apply to the middlemen. It’s a shell game that hides corporate windfalls.
Fiction: Insurance companies are assuming risk for catastrophic events. For most Americans, that is no longer true either. Medical bankruptcy is a uniquely American fear, but what makes it even scarier is that two-thirds of those bankruptcies strike families who already have health insurance. The reason is simple: insurers increasingly avoid paying for high-cost care. Through high-deductibles, aggressive cost-sharing, disease-specific exclusions, and narrow provider networks that quietly exclude major cancer centers and other specialty care providers, insurers limit their exposure. Massive claims are minimized because the system is set up to avoid that care ever being delivered in the first place. So, who is really at risk when catastrophic claims are actually filed? First, the patients, who exhausts their savings and then often declare bankruptcy, followed by taxpayers, who foot the bill for transitions to Medicaid, disability, and the uncompensated care that leads hospitals to increase rates. While it's common for Americans to pay thousands of dollars each year in premiums, the sad reality is that being insured no longer means being protected.
Fiction: Insurance companies only refuse to cover less than 20% of care. Deny and delay isn’t just a slogan; it’s standard operating procedure. Insurance companies claim that most care is covered, but even then, they define coverage narrowly. While they stick to the claim that less than 20% of in-network care is denied, they go out of their way to make networks as narrow as possible. What constitutes in-network care can change on a dime. And even when they do provide coverage, they do everything they can to make those payouts as painful as possible for the patient. They add prior authorization requirements to up to half of all medications and services, they often mandate that patients try and fail weeks or months of outdated therapies before even considering coverage for newer, evidence-based, and FDA-approved treatments. Or they add onerous documentation requirements. Appeals, peer-to-peer, and external review processes aren’t just designed to delay care. They are meant to exhaust the patient. The goal at every step is to make it as difficult as possible to use the insurance the member has paid for.
Insurance companies have gotten away with this because they’ve built a system that doesn't just benefit from a lack of transparency - information asymmetry is the business model, and that asymmetry works best in a system that’s too big to fail. The Great Healthcare Plan recently announced by the White House starts to address this disparity, but Congress also needs to take action to restore a functioning marketplace, including providing patients with prices up front, before they receive care, so they can make informed decisions. This will also give healthcare providers a reason to offer value. Prices are power. Fortunately, legislation that addresses just that gap, the Marshall-Hickenlooper Patients Deserve Price Tags Act, is already on the table.
Congressional hearings were a good first step. Now Congress needs to do its job and pass legislation that will make transparency permanent.
Monique Yohanan, MD, MPH, is a senior fellow for health policy at Independent Women.