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U.S. Health Insurers: Scamming a Hurried People

Why are U.S. health insurance companies as difficult to deal with as bureaucracies in Soviet-era Russia?

October 21, 2010

Why are U.S. health insurance companies as difficult to deal with as bureaucracies in Soviet-era Russia?

According to the machine-generated statement I received in the mail the other day, I have an “invoice balance due.”

Somewhat relieved, I see it’s only $30 that I am supposed to shell out. My first reaction is: What a relief. Nothing dramatic.

After the fear of being confronted with some large unexpected charge has subsided, the rational side of my brain kicks in.

What is this charge actually for? Why don’t I remember anything about it? Why isn’t it even on a credit card statement? Who sent me that form invoice anyway? Is it some sort of scam?

After all, living in the United States, a country of “free” enterprise, I receive my fair share of official-looking mail. Quite often, such mailings turn out to be a deceptive, if not outright illegal, marketing ploy. This could easily be one of those rip-offs.

What charge is this actually for? The basic question is this: Is it a fact I have to deal with – or a fiction I can laugh off?

In the text, I decipher something reading “PMTDISALLOW.” Could this concern a matter of a payment that was disallowed?

And indeed it is. The invoice lists some dates that I barely remember and concerns a doctor’s visit that has long receded into the deeper reaches of my memory.

Intimidate, don’t explain

While the total charge, according to the record in question, was $170, apparently I am supposed to pay $30. Looking for an explanation, there is none. Just the intimidating language about “account past due” and “payment due upon receipt.”

My efforts to find out more in the small print go nowhere – other than finding somewhere that the “last patient payment received” was $30, made months before. I neither remember having an account with these people, nor do I remember already having paid $30.

The whole thing is a mystery to me. All the more so as our family of three spends a hefty $1,500 a month on health insurance through an employer plan, although we are all healthy and have no preexisting conditions.

We pay what many Americans pay each month. But why on earth, I ask myself, should I have to pay yet more money for a doctor’s visit, as it now dawns on me, that it concerned a foot that got hurt during a soccer accident?

Where can I turn to find out more? Should I call the insurance company that apparently disallowed part of a claim presented by the doctor, or the hospital’s management company, which apparently sent the invoice?

Deliberately obscurantist

Good luck with that. Who’s got time for it? And has anybody ever won against the insurance behemoths? Isn’t it like the proverbial tilting against the windmills?

And even if one were by chance to gain the upper hand, it would undoubtedly come only after hours and hours of effort.

In order to get the claim discharged, I would have to spend an inordinate amount of time on hold waiting for a human voice to come on the line. There I would have to dealwith being given some hogwash and accept further runaround. It is all about getting exposed to legally and behaviorally tested language, designed to get the pesky consumer to submit and give up.

What people often don’t realize is that there is an Orwellian method to this madness. The insurance company knows you’re busy. And they know that, rather than put up a fight, your second impulse is just to pay the damn thing to make it go away.

After all, it’s “just” $30, a smartly chosen amount. After all, who has the time and energy to put up a fight for such a small sum? If it were $100 or more, well, that could be worth the effort.

Behavioral economics in action

The insurers’ rational choice is not to disallow too much, so that they can fly under the radar and just get you to pay up.

Plus, they are smart in that they “disallow” payment to the hospital or doctor who provided the service, not to you directly. So the doctor or hospital, not the insurance company, comes after you requesting payment.

Clearly, on a human level, the last thing you are inclined to do is stick it to the fellow or institution that delivered the medical services to you. That would be punishing the wrong guy, your inner voice tells you.

Thus, more likely than not, you end up paying, which in addition to co-pays for occasional doctor’s visits, medication and so on, means you end up spending not $1,500, but at least $1,600-1,700 a month on your family’s health care – about a 10% increase.

A private sector tax

If this were a tax and imposed by the government, Americans could be relied upon to go ballistic. But since it’s from the private sector, the assumption goes, it must be alright.

Other countries surely have their deficiencies too. But the health insurance scam is another example where America’s maladies are just the polar opposite of, say, Europe's. The Europeans will, falsely, tend to accept any (public) tax increase, but fight private business vehemently against what seems like any unexpected surcharge.

What is especially irritating about the prevailing U.S. health insurance practices, however, is that they fly in the face of standard claims of being a transparent and accountability-oriented society.

U.S. health insurance companies, almost without exception, have all the dehumanizing hauteur and rigor of public authorities in regimes ruled by state socialism (of the Soviet type, that is).

Their statements have the same definitive character as pronouncements from the Politburo in Moscow used to have. That’s something the Americans ought to be keen on changing.


U.S. health insurance companies have dehumanizing rigor of public authorities in regimes ruled by state socialism.

The Europeans tend to accept any (public) tax increase, but fight private business over any unexpected surcharge.

It's "just" $30, a smartly chosen amount. Who has the time and energy to put up a fight for such a small sum?

Has anybody ever won against the insurance behemoths? Isn't it like the proverbial tilting against the windmills?

U.S. health insurance practices fly in the face of claims of being a transparent and accountable society.