No bad guys here, but a bad insurance plan

Brad Flansbaum draws my attention via Twitter to a remarkable story reported by Lela Moore in the New York Times. Arizona State doctoral student Arijit Guha has a bad cancer and a bad insurance plan. He was covered under his $400/month ASU Aetna Student Health plan that included a $300,000 dollar caps. He’s hit that dollar cap through surgery that removed most of his colon, chemotherapy, and other costly and physically traumatic treatments.

As his denied claims reached $118,000, he took his case to Twitter, under the ironic moniker @Poop_Strong.

Not surprisingly, Guha excoriated Aetna. His first message reads:

@Aetna has now denied $118k in claims (in just 5 mos) since kicking me to the curb. Gotta preserve that $2 billion annual profit somehow.

Aetna responded:

@Poop_Strong We care about our members. We want you to be empowered to be healthy and make informed decisions.

Such tone-deaf corporate pr-speak virtually guaranteed the ensuing Twitter storm.

Mark T. Bertolini, Aetna’s chief executive joined the fray, noting:

“We paid hundreds of thousands of $ already.  A call is all it takes.”

As the Times’ Moore related the story:

Mr. Guha responded:

Does that mean if I call you, you’ll graciously offer to pay my bills?

The surprising exchange continued, and Mr. Guha challenged Mr. Bertolini to defend Aetna’s student health care plans with limited caps.

@mtbert Do you think it’s morally justifiable to offer a flawed insurance product that doesn’t cover catastrophes?

Mr. Bertolini responded:

@poop_strong Why do you think the premiums were so low? Don’t you look at your policy limits when you buy other insurance (auto)?

And then… Aetna backed down. It is paying the young man’s bills. It’s also working with ASU to fashion a policy that phases out such dollar-caps as specified under the Affordable Care Act.

This case can be read many ways. Maybe it’s a victory by one shrewd and sick patient who got one over The Man. Maybe it represents a wise decision by a big company to spend $118,000 in averting a public relations nightmare. Maybe it represents the intercession by one human being—who happens to be a corporate CEO—to help another. It’s probably all of these things.

I think it’s instructive to step back for a bit in considering this little episode. I think insurers get a bit of a bum rap in health policy debate—or at least in the politics of health policy. Our family is grateful for our BCBS plan, which paid my wife’s large cardiac care bills with no fuss or hassle.

Of course, Insurers get this bum rap for some obvious reasons. Particularly in the individual and small-group market, it’s depressingly easy to find examples of insurers’ obnoxious and blatantly unethical mishandling of sick people.  I work for a large employer. Although my own monthly premium is $490, the annual total cost of our insurance comes to about $17,000.

As I’ve written before, insurers face a fundamental problem.  It’s hard to precisely specify why this industry should exist or what value it really adds to our health care economy. One might object to specific actions by Pfizer, Massachusetts General Hospital, or my orthodontist. Yet one immediately understands why pharmaceutical companies, hospitals, and orthodontists perform useful functions in the world. When I conduct the same thought process about insurers, their role and social utility seem much less obvious.

We don’t want insurers to make money by cherry-picking healthy consumers. We don’t really trust them to manage our care when we are really sick. The examples of Medicare, Medicaid, and employer self-insurance indicate that we don’t need these firms as bearers of financial risk. These firms often lack the market concentration and the social legitimacy to challenge prestigious academic medical centers who overcharge for the lifesaving services these institutions often provide.

Because these basic questions linger, we easily blame Aetna et al. for broader policy failures and regulatory problems which really aren’t the industry’s fault. We also see the industry as a bad actor when in many cases it’s merely one side of a capitalist act between consenting adults that can turn out badly. As consumers, many of us—particularly those of us young and healthy—gravitate to cheap, indeed cheapo insurance plans that don’t protect people when they became very ill. At times, the very inadequacy of these policies makes them appear to be an even better bargain if the fine print and insurance company underwriting keeps sick people from signing up.

This case is more complicated because Guha purchased a student health plan, and that was apparently what was offered. If he’s anything like what I was at that stage, he probably had no idea what his policy really covered or what that dollar cap even meant. He probably assumed it was adequate, or ASU wouldn’t have offered it. Since he was unlikely to need it, he may never have given it much thought until he was sick. Perhaps he assumed that the ASU benefit office had sweated these details. Apparently they hadn’t.

As far as we know, Aetna honored the letter of its insurance contract with this young man—right up to the moment Guha hit the $300,000 cap and faced crushing bills.  Suddenly that $400/mo plan isn’t such a bargain anymore. When the practical consequences of these limited policies are given a human face, we want to restrike that bargain.

I’m glad that this young man was helped, but the real lesson is more fundamental.  If we can’t, ex post, tolerate the human consequences of a particular insurance policy that leaves cancer patients vulnerable to medical bankruptcy, we must, ex ante, craft a properly-regulated, properly-supported market to ensure that this doesn’t happen. Someone—individual policyholders, taxpayers, colleges, employers, insurers—must pay for that, too.

Here is where many in the insurance industry can be rightly blamed. As political actors, the industry frequently opposes policies that would ameliorate serious market failures and would help the industry clean up its act in the individual and small-group market. In the 1990s, it ran those Harry-and-Louise ads against the Clinton health plan. The Affordable Care Act helps now, through requirements to phase out annual dollar-caps on insurance policies, essential health benefits, and medical loss ratio regulations that ensure that the bulk of premium dollars are used for health promotion and health services. The industry has fought much of this, too.

Ironically, ACA may be insurers’ best hope.  The industry’s long-term survival requires a subsidized, stable, and regulated market, including an individual mandate requiring people to purchase reasonable policies. It’s hard to explain this on Twitter, but it’s true.

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