• 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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    • How is Aetna’s behavior in this case “blatantly unethical mishandling of sick people.” Is it not Aetna’s or any other for-profit company’s ethical obligation to make money for shareholders?

      As you rightly point out, the insurance industry (specifically the for-profit variety) has a difficult time explaining their inherent value to the overall health care system.

      With no data to back me, rather observations from other nations that possess our NEW system of private health care under ACA, I recommend that for-profit insurance be eliminated: http://www.policyprescriptions.org/the-next-steps-to-universal-health-care/

      • Excuse me, but this guy was paying 100/month. 1500 out of pocket max per year. That’s per person, so if he was paying 400, it was for spouse and 2 children, not himself. The insurance company paid 300,000 out. Profit? Looks to me like they took a 298,000 “loss” here. As I explained below, despite his claims, he, for himself, paid approximatley $2000. The insurance company paid 300,000. He could have easily moved into an individual plan and had the limit extended to a milllion or 2. That’s what the ASU student plan says. So, apparently, the problem for you seems to be that he had to pay anything at all. It’s all supposed to fall out of the sky, no? And who are you and your kind to decare that ANY business be outlawed. Simply because you act like a vampire to garlic to the word “profit” and think government bureaucrats are the answer to everything?.
        What’s the proper amount to pay for 300,000 in medical services, according to you. $10. Nothing?

        • So maybe it is Guha’s fault, he made a poor decision about his health insurance coverage, not realizing the possibility of racking up close to half a million dollars in medical expenses in a year…
          but in a practical sense, what now happens to him?
          If Aetna declines to pay for his coverage (which they are totally within rights to do) who pays for his treatments?
          Do we bar the doors of the hospital and let him succumb to his illness because he can’t pay up front?
          Does he find his way onto a gov’t safety net program (at which point, taxpayers pick up the expense)?
          Does he just rack up bills till he eventually declares bankruptcy, at which point the hospital takes the hit? (oh and his future financial status is black-marked as well….)

          I understand the inclination in a case like this to play the blame-game, (and I think, as the article points out, that often insurance companies get a bad-rap in such discussions). But for a second lets back away from that inclination and simply explain how this system ends up working when a young-healthy person ends up on such a plan (could be seen as a poor decision, but are we confident that everyone can make good actuarial decisions about their health-insurance?) and ends up being diagnosed with (what I assume) is a rare, morbid, and costly disease.

    • He wasn’t paying $400 month in premiums. That was the monthy copay on the treatment. (See the original ABC, and then note how this fact was changed in the ensuing media barrage to monthly premium). He probably had a maximum annual out of pocket of 4800. His premium, which has not been mentioned, was much lower. I would bet the farm it was around $100 or even less. There would have been multiple options available, and he chose the cheapest, because he didn’t think he would need anything else. All of this has been left out of the dishonest media coverage of this. It always is.

    • I think you will also find, if the facts are ever presented by this man, that there was some sort of waiver for international students to get this plan if they could demonstrate that they had “full” coverage in their home country as well. The plans in question were intended to cover most injuries, etc, with the student to return home to use their home country insurance in other cases. You will see such a waiver for international students at the ASU website. I would be willing to bet that this is what occurred here. The bottom line remains that all of the facts are not being presented here, They never are. If they were, a much different story would emerge.

    • I just looked it up. Single, It’s 100 month (629 for a semester 8/15-1/3) with a 1500 out of pocket max (3000 out of network) and a 300,000 limit. However, yu can move ino an individual plan at any time. So he could have simply done that (would have had to pay more than $100 month) and the extra 120,000 would have been covered. Instead he just started complaing. This is a non-story.

    • Interesting story in many ways. I would concentrate on the fact that the insurance company ended up paying. Good demonstration of how private insurance companies have trouble holding down costs. They all want market share and are frightened of bad publicity. Find a sympathetic character with a good story, or a celebrity, and they fold.

      Steve

    • I think that it is absurd that people have insurance with deductibles below $10,000 capped a $400,000.

      On the other hand the good news is that he is a college student and so if he is cured he can easily amortize the debt! The hospital will work with him. Even up to $300,000 would not be too much for a college student to amortize. The payment on $300k is $1,520.06/month ($18,241/year). The payments are tax deductible.

      • I sure hope the statement “easily amortize the debt” is in jest. Otherwise you seem to have an interesting concept of college graduate earnings, debt, and the tax code. First, you forget interest on the debt. Next, you don’t seem to realize that college graduates may not have high paying jobs. For example, the pay range for teachers in Washington state is between 33k and 66k. This pay range is not uncommon for many professional jobs. Thus, your repayment levels are unreasonable. Finally, tax deductions are highly overrated and limited at these levels since the tax rate is quite low (only deduct over 7.5% of income, tax rates are low).

        Points two and three are also why high deductible plans are not useful for most people or families. Or why I consider most catastrophic plans, catastrophic. Any hospital event or significant illness represents a significant portion of your income. Sure, people could build up a reserve that covers the deductible, but there is no empirical evidence to suggest that would happen and plenty to suggest it wouldn’t (see credit card debt, lack of emergency funds, etc.).

        A rational person will declare bankruptcy and erase the entire debt. Which would lead the rational hospital to resist providing needed care and/or charge those with insurance more. Which then leads to the concept of universal coverage.

        • 1. I did include interest. I amortized over 30 years.

          2. Some people in Washington state live on less that $15,000/year so it can be done (we are talking about a single individual here). You expect a high school dropout to be able to live on $15,000/year so why not the generally more capable college grad. (BTW I do support a wage subsidy for low earners and since it would be based on adjusted net income a person with high medical bills would qualify.)

          3. Some people graduate over $100,000 in student debt.

    • Also
      1. This seems to be mostly ASU’s fault.
      2. It is interesting the industry resists rules like ending caps because they only pay in the very short run. The insureds will pay for it in the long run.

    • @Landrau
      I think you’re missing the point Harold is making, which is questioning exactly what value insurance brings to the health care access equation.

      That being said, you say the grad student had a family and had the option of an individual plan. However, if his wife didn’t work and wasn’t a student, she probably couldn’t get an individual plan for student and their children probably couldn’t either. If either of them got cancer, not the grad student, they’d be in the same boat.

      My guess is the student plan was designed to be within a price range that students could afford, as defined by the university, which knew the average student stipend, debt, and living costs. It says a huge amount about runaway medical costs if the only way a student can afford health insurance is with a policy that doesn’t provide adequate coverage.

      Further, note where the student is now. He has a serious health issue and if the policy cap was a lifetime limit, he’s uninsurable, except on the exchanges for the uninsurable, which didn’t exist before Obamacare.

      One bad decision and a bit of bad luck and he would be a pariah for life. And please note, about 25% of people in their 20s have been without health insurance at some point in time. How many more have had inadequate plans?

      His mistake is made by millions and millions of people like him, but the incidence of cancer is low, so most of them never discover their cheap plans are woefully inadequate.

    • As a payor I am always frustrated by these cases. Why is he yelling at Aetna and not the hospital that racked up 300K in bills so quickly. I can guarantee from experience the hospital collected 200-400% of their cost to deliver the care he received.

      ACA does not even begin to fix this problem, in fact it makes it 100 times worse. As payors we know who the worst of the worst are when it comes to value, in the past we would charge employees a % of the bill to help drive them to the more cost effective hospitals. ACA limits and on large claim completly eliminates this ability.

      Not to mention the whole concept of annual and lifetime maximums, again from experience I would bet he could have received better care for 1/3rd the price if he had shopped hospitals. Instead patients want to see which ever provider they want and want the provider to be able to charge how ever much they like then blame the insurance company for either charging high premiums or limiting what they pay. The media is all to happy to feed this problem with slanted coverage.

      • @ Nate Why isn’t Aetna yelling at the hospital? They have vastly greater resources and expertise than the individual. If the differences in providers are so great, why didn’t the insurance company do more to encourage all of heir customers to use the cheaper, better provider.?

    • Obamacare has indeed extended the life of our for-profit system. I support the ACA because it ameliorates a flawed system that causes so much hardship — physical, emotional and financial — on so many people. Something had to be done sooner than later.

      I see business owners ultimately wielding their power with lawmakers to get insurance delivery off their backs. The ACA encourages states to innovate. We see Vermont pushing for single-payer.

      Vermont’s success combined with employer weariness and an American public liking the benefits of the ACA will cause a shift in the American consciousness.

      I predict Americans will be clamoring for single- payer system in time.

    • I am in complete agreement with Landru.
      Caps are needed in order to hold down premiums.
      This individual could have also searched for a policy with a $300,000 deductible which would take over any needed payments.
      The school should have provided this stop-loss insurer as a complement to the student plan.
      The ACA will be very destructive to holding down premiums.
      The no caps on annual and lifetime benefits are a joke.
      Do we really want people, even those who are desperately ill, milking the system for untold millions of dollars?
      What about the rest of the vast majority of insureds, who have to pay for those claims?
      What about the taxpayers who have to pay for the subsidies so that the insurers can sell their pricey insurance, and receive profits they did not earn, except for the grace of the American taxpayer?
      And, do we expect these subsidies not to raise the price of the insurance, if so-called demand (partially funded by the taxpayer) is artificially created to fit the supply?
      Don Levit

    • @ Don Milking the system? People have no financial incentive to get unnecessary medical care (unless they are collaborating with the provider to commit fraud) and medical procedures generally aren’t considered fun. Are you concerned that providers will milk the system by providing unnecessary care? Or would you consider providing necessary care financed in part by taxpayers milking the system?

      ACA allows for $5,950 (initially) in out-of pocket expenses. For many people, that leaves room for significant incentives to avoid unnecessary costs. For others, companies might have to be creative. Is there something in insurance law that would prevent companies from offering targeted bonuses and incentives (e.g a $500 bonus for using hospital X, )