In “Double Indemnity,” the Depression era masterpiece about insurance fraud and murder, the anti-hero Walter Huff quickly disabuses the reader from thinking of insurance as a virtuous enterprise:
“You think it’s a business don’t you, just like your business, and maybe a little better than that, because it’s the friend of the widow, the orphan, and the needy in time of trouble? It’s not. It’s the biggest gambling wheel in the world.”
The recent murder of an insurance company executive and the social media jubilee that occurred in its aftermath both raise questions about the place of the insurance industry in American society. And while recent trends may help explain this senseless and tragic event — the rise in firearm availability and violence, the growing mental health crisis, increasing disaffection with institutions — animosity toward insurance companies was at the core. This sentiment is as old as the insurance business itself.
We live in a world that is bounded by insurance. Without it, many activities of daily life — driving a car, owning a home, seeking treatment for an illness — would grind to a halt. Insurance is far more than a business. It is a system of governance that determines how we share risks, how losses are compensated, whose problems matter. The way in which a society makes insurance available is a telling indicator of its values about community, fairness, and belonging. Despite some public funding and regulation, private insurance companies all too often function as enormously powerful gatekeepers who can extend or withhold security and protection, grant or deny requests for coverage.
The insurance industry thus occupies a liminal position in American society, precariously perched at the intersection of public and private life. The insurance industry is inherently governmental, with a quasi-public persona unlike nearly any other business. And though insurance is far more than a business, it also is a business, and this is a complicating factor. While exercising life-altering power over policyholders and seeking to please shareholders, insurers simultaneously inhabit two deeply unpopular roles: profit-seeking corporation and rule-following bureaucrat.
A generalized antipathy to insurance companies developed from the earliest days of the business. While 19th-century insurers proclaimed their endeavor to be a high-minded public service activity that transcended “mere commerce,” people on the ground took note of costly premiums, deceptive policy features, aggressive and misleading agent behavior, devaluations of property values after fires, and technical quibbling over life insurance claims. In the closest historical analog to the widespread loathing of UnitedHealth Group, fury rose in the Progressive Era against New York’s “Big Five” life insurers whose largesse, self-dealing, conflicts of interest, political cronyism, nepotism, extravagance, and misleading practices comprised a “tangled jungle of financial intrigue, gross delusion and deception,” in the words of one investigative reporter. Relations with fire insurers were no better. After the San Francisco earthquake in 1906, reporters and policyholders banded together to pressure insurers to fairly pay claims, with credit rating agency AM Best chiding those who “met their creditors with an arbitrary and technical spirit,” seeking to pay as little as possible.
Health insurance is the least successful test of this fragile and dysfunctional relationship between insurers and their customers, requiring as it does multiple contacts, many of which take place when policyholders are ill, sometimes at risk of death. Further, our health insurance ecosystem is fragmented into multiple segments with distinct financing and decision-making rules, leading to the very accurate impression that not everyone is getting the same deal. The absurdly unfair process by which we currently allocate access to GLP-1 medications is a good case in point, where decentralized decision-making by public and private payers yields a fractured and unpredictable landscape in which coverage is a matter of luck.
Utilization management and prior authorization are cold and technocratic phrases describing practices that, while reasonable in theory, are often experienced by enrollees as outrageously callous. The fact that appeals so often succeed reinforces the perception that many insurer denials are opportunistic attempts to save money by withholding care whenever possible. UnitedHealth Group has earned the dubious reputation as the most aggressive denier of care, with recent investigative reporting from STAT and other outlets zeroing in on practices in their Medicare Advantage business. The company’s seemingly limitless quest for horizontal and vertical integration, including the absorption of multitudes of physician practices, has raised alarms about their size and accountability. Yet UHG differs in degree but not kind from other health insurers, which operate from the same playbook on a smaller scale.
The current malaise brings to mind the angry days of the ’90s “HMO backlash,” when consumer fury caused insurers to retreat from plan designs that blocked access to specialty care without a referral from a primary care doctor. Then, as now, decisions with profound consequences for patients seemed technocratic and bottom-line driven. Then, as now, there was the pervasive sense that not everyone was getting the same deal, and that access to care required a fight. Insurers responded with preferred provider organizations and a renewed attempt to control costs by more directly managing utilization, with results that, it is increasingly clear, are disastrous for their already fragile relationship with their members.
While we have made great strides toward expanding coverage in recent years, the experience of using health insurance is catalyzing widespread dissatisfaction. There is shared agreement that our current system is not working, but no clear momentum toward substantive reform such as universal coverage.
In the meantime, policies that would create more uniformity, transparency, equity, and simplicity in all aspects of health insurance are badly needed. This includes not just regulating prior authorization, but also requiring that provider directories be accurate, creating consistency in prescription drug coverage, and establishing an affordability threshold for premiums and out-of-pocket costs.
All of that has to happen before the U.S. can rein in health care spending. Otherwise, health care consumers will distrust every denial and every piece of paperwork, blaming the insurance company’s greed for even reasonable rejections. It’s impossible to make the necessary tradeoffs to cut down on spending in a climate where trust is lacking. Every society’s approach to financing and organizing health care comes with drawbacks, but the complexity, fragmentation, and outsized power of for-profit insurers in the U.S. system is a recipe for suspicion and ill will.
Katherine Hempstead is a senior policy adviser at the Robert Wood Johnson Foundation. She is the author of “Uncovered: The Story of Insurance in America.”