Few people are satisfied with how health insurance serves us. Issues range from the very political (Obamacare good or bad?) to the very practical (will the insurance pay for my child’s service?)
Philosophically, the purpose of insurance is to protect a group of people from uncertain and potentially costly events. While contemporary health insurance maintains that role in terms of catastrophic medical events, it also has become more and more the manager of our health services.
This trend is problematic and fraught with hazards. Here at Creative we deal with its consequences daily. Many of our clients are constrained and sometimes denied services because of decisions made by administrative and quasi-medical people at insurance companies.
My purpose in this article and others to follow is to help all of us maximize our benefits by knowing the law and asserting our rights, by dealing crisply and smartly with insurance, and by maximizing our benefits and their application.
About 4 decades ago during the Nixon administration, Congress passed two laws that set the stage for our current situation. One took power from us and gave it to insurance companies; one took power from employers and gave it to us. The insurance companies have spent the last 40+ years maximizing their profits from all this. They have also done a good job in keeping us from understanding and asserting our rights.
Beginning with the first HMO enabling act in 1973, Congress allowed and encouraged insurance companies to manage health care. Ostensibly, this was so that they could add efficiencies to the markets and balance rising health care costs with collective purchasing power—all for the benefit of the consumer. Further, there was some consideration to reduce medically unnecessary services through mandatory second opinions and peer review.
The next year, through the passage of ERISA, Congress also put employers on notice that when they promised a benefit—such as medical care or pensions—they had to deliver. While the primary motivation of ERISA was protecting against the severe and increasing problem of employer pension default, the inclusion of medical benefits under its protection was prescient and forward thinking—and of great significance to us today. The passage of Affordable Care Act in 2010 extended ERISA protections to government employees and other plans.
This may be a lot to take in. So let’s make one more key point and wrap up Part 1.
Consider a pension. It’s straightforward. You leave the company and at a predetermined time in the future you start getting paid a certain benefit each month (or some other arrangement). What you get paid is determined by the plan.
The company may hire an insurance company (or a bank or brokerage) to administer the pension. That agent may even subcontract part of their function. All that is fine as long as it does not change the amount or the frequency of the benefit. Indeed, any change would be a violation of their fiduciary responsibility; and if they kept money that should have been paid you, they would be guilty of fraud.
Why spend two paragraphs on pensions? Reread them in terms of medical benefits instead pensions. The same principles apply.
We will discuss this further in Part 2.
— Richard Feingold, Co-founder