Why US Health Insurance Companies are Hated

What moderates fail to get about the gloating over UnitedHealthcare CEO Brian Thompson assassination

A debate about the US health instance companies has been sparked by reactions to CEO of UnitedHealthcare, Brian Thompson, being gunned down. I have seen when this story has been covered here in my native Norway, the journalists simply have not had any concepts of how horrible UnitedHealthcare as a company is and what reality Americans face.

Many articles have written about this. CNN had an article with many of the stories patients have shared:

A class action lawsuit filed last year in US District Court in Minnesota argued that UnitedHealthcare uses AI “in place of real medical professionals to wrongfully deny elderly patients care,” according to the complaint. More than 90% of the denials are reversed through an internal appeal or proceedings before federal administrative law judges, the suit alleges.

Norwegians will not understand this because when we deal with health insurance companies it is an entirely different experience. Most of us have no idea how terrible US health insurance companies are. Norway, of course, has a socialized health care system, but you can buy private insurance as a way of getting treatment faster or to get more extensive options.

I have used private health insurance both in the US, the Netherlands and in Norway. The attitudes of these companies are thoroughly different from each other. In Norway and the Netherlands the companies generally trust you. In the US they operate in a paranoid fashion where assuming you are a conman seems to be the default. They are constantly looking for an angle to deny you care. Any large payment triggers a very active job in hunting for ways to reject your claims.

That is my issue with the story Noah Smith write titled: Insurance companies aren't the main villain of the U.S. health system.

It is an article that gets all the statistics and data right while still essentially missing the point. It is a problem I see with many of the "sensible moderates." The obsession with data and statistics can make these people miss the forest for the trees.

For instance, Noah Smith writes:

What does this mean? It means that if UnitedHealth Group decided to donate every single dollar of its profit to buying Americans more health care, it would only be able to pay for about 9.3% more health care than it’s already paying for. If it donated all of its executives’ salaries to the effort, it would not be much more than that.

But that isn't what the outrage is about. Noah tries to make this into a debate about health care costs. But this is not about costs, but about how people get treated by the system.

It is true that no system can give infinite health care to everyone. All health care systems, whether public or private, has to ration care in some way or another. Nonetheless the manner in which this rationing happens is of profound importance.

In public health care systems the rationing is primarily done based on balancing available resources against health care needs for patience. It means you may not get the most fancy treatment or you may have to wait longer than you wanted to. But that is in stark contrast to private insurance which will try to find any reason to deny you care. Their goal is not to provide you with the best care possible with the resources they have at their disposable but rather to seek to deny you as much as possible.

BuzzFeed has a number of stories of how insurance companies play every possible dirty game to deny care. Consider this cynical tactic:

We went to the hospital only to find out the cancer had spread to his chest, lungs, and lower stomach. The emergency room doctor said he sees this all the time. The insurance companies start dragging their feet so the person will get sicker and no longer qualify for the clinical trial. He passed away within a couple of weeks.

The deliberately delayed approval so that the patients would get sick enough that the treatment they sought approval for was no longer possible to do. A public health care system does not play this kind of cynical games with the lives and health of its citizens.

Noah claims these companies cannot pay for much more health care by cutting their profits, but that is beside the point. For instance, consider this pregnancy case:

Our babies spent a week in the NICU, and we got a bill for $100,000 for their one-week stay. Fought the insurance for almost a year to get it covered.

The company paid. That is not the issue. The issue is the whole experience of having to fight the system. People who are on their knees, often sick and weak, who have to fight tooth and nail against the system.

• Struggles of a woman with a terminally ill four year old. The way the insurance companies treated her is just grotesque.

People also have to fight the system in my native Norway, but not in this same way. There is not the same kind of financial stress in the equation. Since I am married to an American, I can hear all sorts of stories from distant relatives and their health care experiences. I can compare with what my family has been through and myself. Health care is not perfect in any country. We also feel frustrations and anger about things we experience, but what infuriates us pales in comparison to what Americans experience.

What if Insurance Companies were Ethical?

What would happen if insurance companies did not fight tooth and nail against claims? These costs might not increase that much because many claims are paid anyway after prolonged battle. More ethical companies would mean more a better experience for patients. Instead of using their last energy to get coverage, they get what they need without stress.

But will this not lead to a large increase in costs? Surely, there are claims which are now denied which needs to be paid cutting into their profits. Absolutely, but the question is costs will increase that much. Today, even small increases in return on investment is chased because they compete in a market. Investors will flock to whatever company can squeeze the most out of their customers.

Here I am reminded of queuing theory that I studied years ago when learning about how to simulate things like queues for buses, toilets, supermarket cashiers etc. A problem stores face is how many cashiers do they need working to process customers. Do they require 3, 4 or perhaps 6 to handle them all? If you add more cashiers you get short waiting lines in the store, but the idle time will also increase. Customers don't arrive continuously to a store at a fixed rate. There are fluctuations. What we find is that if you want to go to something like 95% utilization, the lines to the cashier grow dramatically. While reducing utilization to 90% reduce most of the lines.

Don't get hung up on the precise numbers, as it is a long time ago since I worked on this. It could have been 80% vs 90% for all I remember. The key takeaway, however, was that increasing utilization with only a few percent caused a dramatic growth in waiting times.

Why am I mentioning this? Because I think a similar effect happens in insurance. Trying to get a few percent more in profit likely leads to a dramatically worse experience for claimants. Of course, this cannot happen in a capitalist for-profit system because any health insurance company which acts nice will be outcompeted by the wolves. Being an asshole is rewarded. That is the key problem.

Are Health Providers the Real Cost Drivers?

Let us tackle the debate over what is driving up costs. Noah is trying to get Health Insurance Companies off the hook. To quote him:

In other words, Americans’ much-hated private health insurers are paying a higher percent of the cost of Americans’ health care than the government insurance systems of Sweden and Denmark and the UK are paying. The only reason Americans’ bills are higher is that U.S. health care provision costs so much more in the first place.

While technically true, that omits numerous important details. Health Insurance companies are part of the system that drives up that cost. Allow me to explain. Preventative health care is by far the cheapest. That means if you are on the path to developing diabetes, it would be good to intervene with treatment and medical advice early on.

The problem in the US is that there is no financial incentive for Health Insurance Companies to do that. Why not? Surely if an insurance company hindered a guy from developing diabetes through preventative care, they will save lots of money five or ten years down the road?

Actually, no, they don't. In five years that patient could have switched to another insurance company. In this case, the first insurance company saved money for them and not itself. Here you can see how having a for-profit market-based system creates perverse incentives. It directly discourages cheap preventative care. Instead, it pushes the health care system towards expensive emergency care.

In fact, if you analyze US health care system, this is what you will find. It is very bad at preventative care and dealing with healthy lifestyles. However, it is superb at emergency care and very dramatic visible health care like cancer treatment. The US health care system is very bad at the boring things, such as just getting people to live healthier.

For public health care system, there is a much stronger incentive towards pushing healthier lifestyles. The government pays for your health care. If they can reduce hospital bills by making their citizens more healthy, they will do that. They lose money in every possible way of citizens get sick. They have to pay health care bills, unemployment, or disability benefits.

In a for-profit health care system, there are no incentives like this. In fact, a sicker population will financially benefit health providers. Meanwhile, health insurance providers don't have much incentive to make you healthier. They can simply deny you coverage or increase your premiums. A public health care system cannot deny you coverage or increase premiums. The only choice it has in reducing costs is actually by making you healthier.

So when Noah shows you the graph demonstrating that most of the cost in US health care comes from the providers, he isn't telling you the full story. He doesn't show how much of that cost has been amplified by the fact that insurance companies discourage preventative care.

A relevant case in this story is infant mortality in the US. My native Norway has much lower infant mortality rate and that is achieved by much more thorough followup of pregnant women. The US system in contrast frequently skip on the tight followup of pregnant women. Instead enormous amount of money is spent on heroic efforts to save children at the point of birth. Often this efforts are unnecessary. It could all have been avoided if better care had been provided during the pregnancy period.

The US is in essence spending money on Hollywood moments. What looks exciting and dramatic in a Hollywood movie involving health care. Situations where there are minutes between life and death and a child is saved thanks to heroic efforts by genius doctors. Meanwhile boring Scandinavia gets better outcomes with average doctors doing rather boring work. It doesn't look good in an action movie but it costs a lot less money and gives better results.

Having said all this I will not let health care providers in the US off the hook. They have the same perverse incentives as health insurance companies. They are driven by profit. That means they will push for care that isn't even necessary. The US is top in the world on over-treatment. To quote wikipedia:

Unnecessary health care (overutilization, overuse, or overtreatment) is health care provided with a higher volume or cost than is appropriate. In the United States, where health care costs are the highest as a percentage of GDP, overuse was the predominant factor in its expense, accounting for about a third of its health care spending ($750 billion out of $2.6 trillion) in 2012.

Public health care does not have this problem. It is not in the interest of government to provide you care that you don't need. That just increases their costs. They don't make money on providing unnecessary care.

In short, if you analyze the health care situation in the US you keep getting back to the fundamental problem: Capitalism. Turning patients into customers cause perverse incentives. And I have first hand experience from that living in the US. I noticed quickly that the focus in US health care was never on what was best for me from a medical perspective but rather what could make them most money and make me as happy as possible.

Hence when I visited a doctor in the US, I was given antibiotics for a common cold. I challenged my doctor on why I was given antibiotics for a virus infection. He admitted that antibiotics were entirely useless for my case. Instead he came with vague apologies about how I could theoretically develop a throat infection. I never took the antibiotics and I never had a throat infection. It was simply another example of totally unnecessary care.

And unnecessary care is detrimental to your health. Antibiotics can negatively affect your gut bacteria and give you health complications. So you should not take it unless you really need it. Likewise an operation has negative health consequences. You should not get surgery unless you really need it.

Why are Health Care Corporations Better Behaved Outside the US?

I argued that capitalism was the problem, but at the same time I also mentioned that I never had the same bad experience with health insurance companies in Norway and the Netherlands. Does that mean capitalism isn't the issue after all?

While I stand by my claim that for-profit health care creates perverse incentives avoided in socialized health care systems, it is worth noting that not all free market systems will be equally bad.

Market systems tend to be worse in the US because it is a society that idolize and worship capitalism and profit. For instance there are states which require by law that corporations only care about making profit for shareholders. The variant of capitalism that exists in Nordic countries or the Netherlands is not like that. The laws do not mandate a sole focus on shareholder profits but a more holistic approach.

Norway’s corporate governance framework emphasizes a stakeholder-oriented approach, mandating that companies consider the interests of various parties, including employees, customers, and the broader community, alongside those of shareholders. This is reflected in the Norwegian Code of Practice for Corporate Governance, which promotes transparency, accountability, and sustainable value creation.

In contrast the United States, corporate governance traditionally emphasizes shareholder primacy, where directors are expected to prioritize shareholder wealth maximization. This principle is rooted in legal precedents such as the 1919 Dodge v. Ford Motor Co. case, which asserted that a corporation’s primary purpose is to generate profit for its shareholders. However, this perspective has been subject to debate, with some arguing that U.S. corporate law doesn’t strictly mandate shareholder wealth maximization but that it remains a prevailing social norm.

These are broad reasons for why there is a difference in behavior. The effect is that in general Norther European nations will enact regulations and rules to keep corporations acting more in the public interests while limiting freedoms of corporations in any way is taboo in the US. In addition health insurance companies in Norway compete against a well functioning public sector. If they behave like American insurance companies they would look very bad.

US insurance companies don't have to worry about a more ethical public sector providing health care insurance. They know customers can only choose between other greedy and unethical companies. I remember this experience well from being screwed over by various cell phone companies in Norway. At one point there was no other company to switch to. All of them engaged in some form of unethical practice. If I wanted to have a cell phone service I just had to suck it up and accept it.

That is why US health insurance companies fight hard against medicare being available as an option Americans could pay for. They know that they would quickly get outcompeted by a public sector option.

What about the Brian Thompson assassination?

As a final word, I should say something about the Thompson assassination. I honestly don't know if I can give an objective take. I have thought a lot about this. One of the things I pride myself in is that I am willing to admit when I am wrong and not necessarily side with the popular opinion. I try to base my beliefs around objective facts, but also recognize that plenty of opinions will ultimately come down to preferences and values rather than facts. There are no facts, for instance, which can let you objectively determine if pizza or pasta is better.