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Why do we allow the health insurance companies to exist, again?

I consider myself a pretty cynical guy, but the latest news on the healthcare front shocked even me: Apparently private health insurers in California reject a fifth of claims. In one system it’s 40% of claims.

That’s worse than it sounds:

A health insurer isn’t going to bother rejecting your claim for a routine doctor’s visit or your normal heart meds–they’ll pay that. They’ll only reject major claims (for your cancer treatment, for instance). It’s possible, then, that health insurers in California reject pretty much every single major claim as a matter of course.

Then some people appeal, and some of those people win, but overall, the insurance companies save more money than they would if they just paid the claims. And the patient’s time and effort spent fighting the insurance company is in addition to the official costs of health care.

And if doctors and hospitals are the ones fighting the rejections, they have to keep more people on staff to do so. We don’t have to look farther to understand why healthcare is in the US is expensive and bad.

Two caveats: although this news comes with Reuters’s imprimatur, it seems to be pretty much a press release. Also, California is one of the more dysfunctional states as far as health care goes; some other states don’t let insurers get away with quite so much.

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