The horizon is not so far as we can see, but as far as we can imagine

Insurers engaged in systematic price fixing

This is a story I had missed.  It seems that insurance companies determined rates for “out of network” medical services by looking at an independent database run by a company called Ingenix, United Health Group.

But the way the database “independently” determined the going rate was by having insurance companies enter data on how much the rate was for given services.  And for a decade they systematically entered prices which were lower than the actual prices being charged by doctors.

The result was that patients would get a larger bill than expected, the insurance companies would redeem the doctors for less than expected, and often the gap would never be made up.  A win for insurance companies, a loss for patients and doctors.

Companies involved, include (but I’m not sure if are limited to):

United, WellPoint, Aetna, Cigna, GHI/HIP, Capital District Physicians’ Health Plan, Independent Health, Excellus, MVP Health Care, HealthNow and Guardian Life Insurance Co

They have all “settled” with NY Attorney General Andrew Cuomo’s office and promised to use a new, more transparent database as soon as one is available.  They have given 100 million to make the new database.  And, of course, none have admitted they did anything wrong.

Bottom line on this is that the amount of money they saved (ripped off) is almost certainly more than their “settlements”.  So the entire scheme has been worth it, especially since no one went to jail.  Just another cost of doing business.

This is how large american corporations operate.  Law breaking and immoral behaviour is simply a cost-benefit matter.  If the money saved by doing something illegal is more than the cost of doing something illegal (including legal costs), too many of them will do it.

I would suggest that the only things which would really get executives to stop doing these sorts of things are to either treat them as criminal matters (and send CEOs to jail) or to treat them as what they are: clear collusive action to use an oligopoly position to control prices, and break them up.  But the second is no longer possible after the Supreme Court ruled that actions which suggest collusion cannot be taken as evidence of collusion, overturning prior precdent.

And, of course, senior executives rarely go to jail for screwing ordinary people, let alone committing massive fraud (or half Wall Street would be heading for the hoosegow) so real criminal charges certainly won’t happen.

I wonder what other scams the insurance companies are running we don’t know about?  What other ways they are fixing the books?  Only a fool would bet they aren’t.


Insurers engaged in systematic price fixing


Bottom Line On the Financial Sector: fewer bigger companies and a repeat of the financial crisis

1 Comment

  1. Whole life policies. Something like 90% of these are sold to people who’d be much better off with term.

Powered by WordPress & Theme by Anders Norén