Americans Suddenly Discovering How Insurance Works

It's been said to the point of becoming cliche that once Democrats passed significant health-care reform, they'd "own" everything about the American health-care system for good or ill. For some time to come, people will blame Barack Obama for health-care problems he had absolutely nothing to do with. But there's a corollary to that truism we're seeing play out now, which is that what used to be just "a sucky thing that happened to me" or "something about the way insurance works that I don't particularly like"—things that have existed forever—are now changing into issues, matters that become worthy of media attention and are attributed to policy choices, accurately or not. Before now, millions of Americans had health insurance horror stories. But they didn't have an organizing narrative around them, particularly one the news media would use as a reason to tell them.

The latest has to do with the provider networks that insurance companies put together. This is something insurance companies have done for a long time, because it enables them to limit costs. If an insurer has a lot of customers in an area, it can say to doctors, "We'll put you in our provider network, giving you access to all our customers. But we only pay $50 for an office visit. Take it or leave it." An individual doctor might think that it's less than she'd like to be paid, but she needs those patients, so she'll say yes. Or she might decide that she has enough loyal patients to keep her business running, and she wants to charge $100 for an office visit, so she'll say no.

So every year, doctors move in and out of those private-provider networks, and the insurers adjust what they pay for various visits and procedures, and inevitably some people find that their old doctor is no longer in their network. Or they change jobs and find the same thing when they get new insurance. And that can be a hassle.

But now they have someone new to blame: not the insurance company that established the network, and not the doctor that chose not to be a part of it, but Barack Obama. It's not just my hassle, it's a national issue. As Politico reported, "Speaker John Boehner (R-Ohio) said to reporters on Tuesday that the 'fundamentally flawed' health care law is 'causing people to lose the doctor of their choice.' Chief GOP investigator Darrell Issa has launched a House probe into the doctor claim. And House Republicans have highlighted the physician predicament in their weekly GOP addresses." So to reiterate: Your insurance company set terms for its network that your doctor didn't like. Your doctor decided not to be in that network. And that, of course, is Barack Obama's fault.

Before we move on, there's something we should note. You know who never loses their doctor? People who have single-payer insurance, that's who. If you live in pretty much any other industrialized country in the world, you don't have to worry whether your doctor accepts the national health plan that insures you and everyone else, because every doctor accepts it. Even here in America, there are people who almost never have to worry about losing their doctor: the elderly people who benefit from America's single-payer plan, Medicare. Despite their constant gripes about payment levels, 90 percent of doctors accept Medicare, because there are just too many Medicare patients and doctors don't want to be shut out of that business.

"Obamacare will make you lose your doctor!" may be the attack of this week, but conservatives are even trying to blame Barack Obama for the basic way insurance itself works. There's a lot of talk about what a raw deal Obamacare is, a message that's being aimed at young people in particular to try to convince them to stay uninsured. As Jonathan Cohn says, "The simplest way to describe Obamacare is as a transfer from the lucky to the unlucky." That's not just true of Obamacare, it's true of insurance generally. All insurance.

The way insurance works is that unless you're one of the unlucky ones, in purely financial terms, your insurance costs more than you gain from it. Have you ever sat down with all the bills you've paid for car insurance and homeowner's insurance and totalled up all your premiums and all the payouts you've received over your lifetime? If you did, it would probably look like you paid a lot but didn't get much in return. Some people who have had major catastrophes—an accident that totalled their car, a tree falling on their house—come out ahead, but people who haven't had those things happen to them come out behind. If it wasn't that way, every insurance company would lose money. But they don't. They work very hard to set premiums to exceed the amount they spend in payouts (not to mention working hard not to pay out for things they ought to). But as Jonathan Chait says, "Insurance isn't a kind of gamble where you bet you can beat the house by consuming more in medical care than you pay in premiums and deductibles. It's protection from risk. People like that protection. They will pay to acquire it." That applies not just to health insurance but to every kind of insurance. That's why it's called "insurance." (The only exception is life insurance, which works more like an investment.)

The only people who come out ahead in dollars and cents on insurance are those people who have had terrible things happen to them. What the rest of us are buying, as any insurance salesman will tell you, is peace of mind.

To get back to the place we started, it can seem now that people are saying for the first time, "Wait a minute! Insurance is a raw deal! I mean, Obamacare is a raw deal!" And the media are doing their part by running stories that characterize the side effects of the private insurance market, like limited networks of doctors or the fact that less expensive plans have higher deductibles, as something new that's occurring only because of the Affordable Care Act. But they aren't. If you want to have a system of private health insurers, that's how it has worked in the past, and that's how it will continue to work. If you really want to be free of those problems, you'll have to wait until you're 65 and can join the big-government, socialist plan called Medicare.


Yep, keep on defending the lies. You do know that PolitiFact just gave its "Lie of the Year" award to Obama for his repeated health care lies.

"I know that there are millions of Americans who are content with their health care coverage -- they like their plan and, most importantly, they value their relationship with their doctor. They trust you. And that means that no matter how we reform health care, we will keep this promise to the American people: If you like your doctor, you will be able to keep your doctor, period. (Applause.) If you like your health care plan, you'll be able to keep your health care plan, period. (Applause.) No one will take it away, no matter what."

Barack Obama
Speech to the AMA, Chicago
June 15, 2009

Those were direct, blatant lies, and Obama repeated them dozens of times. So, Waldman, how does it feel to be someone whose ongoing employment is conditioning upon repeating and excusing someone else's lies? Don't you feel just a little pathetic?

Interesting article, which is hard to pull off because insurance is such a tedious subject! My take is insurance is a necessary evil for all but the destitute (they are judgement proof, and with NO income, how do you justify paying ANY premiums?) and the very wealthy, who can afford to face any risk (but generally carry insurance anyway because they are prudent and want to put an insurance company between them and frivolous lawsuits and in our system the most expensive health care is uninsured expenses from people who can pay). The economic decision regarding insurance is deciding how much risk you are willing to face and at what level of risk you want to "socialize" your exposure with like minded people who are also customers of your insurance company. Due to Federal wage/price controls around WWII health insurance lost its comparability to other insurance markets (think cars, boats, houses, liability) and, unfortunately, in the employer provided market took on massively expensive tax advantages, as employers would offer "free" major medical insurance to attract workers using pretax dollars. Especially in highly unionized industries (especially public sector) it quit being insurance for the most part and converted to a prepaid medical spending scheme. I was on a school board some years ago when the family plan cost the corporation $15,000 per year, and many teacher friends lamented that their pay was not great, but at least they got "free" healthcare! At the time a starting teacher made $30,000 before benefits, and they tended to be healthy and young, and often had a working spouse who could just as easily have provided work based health insurance. I struggled mightily to get the teachers to have full access to the $45,000 pay package that the corporation was willing to provide--in our market the extra $15,000 per year would make the house payments on a 4BR, 2BA home with a yard--but to no avail, the benefit was cast in stone in an 80 page union contract and could not be changed. And so these young people would grossly overpay for health insurance because they had no choice. I am not sure how to put the genie back in the bottle, but I think we are better off when we pay cheap insurance premiums for major loss only, and pay routine expenses out of our day to day budget. Think cars--if car insurance had to cover gas, oil changes, car washes and other routine costs of operating a car the premiums would be through the roof--like health insurance discussed above. Insurance premiums consist of dollars the company expects to pay out in claims plus operating expenses (which includes the huge amount of TV ads we are all familiar with...) plus a profit. It stands to reason that the best way to save money on the insurance product is to be honest about what you can afford to pay out of pocket and only buy insurance to protect against losses above that. Give the insurance company only as much as you absolutely have to!
So as to healthcare--consider this. What if the system was set up so doctors and hospitals had to give their best price to cash payers? And prices had to be listed like gas at a gas station? And we all had tax advantaged flexible spending accounts so we would HAVE the cash to pay for routine health care? And--to pick a number--insurance only kicked in for expenses in excess of $10,000? And, to address a main point of Obamacare, everyone in the country contributed a pittance each for the well under 3% of the population who truly have preexisting conditions that are not insurable? Further, the flexible spending accounts could be bolstered by a refundable tax credit, to be sure low income folks would have access. Such a policy would bend the cost curve down, as patients would be spending first dollars in a transparent market, and overall spending would have to go down as the insurance industry would be sucking less cash out of the system by reverting to a "once in awhile" player (like car and homeowner insurance) and not an "every time you go to the doctor" player like they are now. I think Obamacare blew the chance to rein in money wasted on excessive insurance and introduce more patient spending power, which will at the end of the day not bend the cost curve and due to artificially high premiums on the young and healthy, not achieve the desired results of "reducing the uninsured".

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