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Comment by honkhonkpants | Hacker News Reader

I just don't see how an operation like Oscar fits into the US healthcare landscape. If the benefits are denominated in dollars and you don't have strong negotiating power (Aenta) and are not vertically integrated with the health care provider (Kaiser), how can you not be screwed? The provider can bill $5000 for one Advil and there's little that can be done about that.

There's no way out of this problem except federal laws that sets the prices of services. Ibuprofen has a market price of less than a penny per milligram and that should be the end of the story. It shouldn't be possible to bill them at $100 each just because the patient couldn't object. As long as we have a system where the prices for goods and services come as a complete surprise to everybody, it is impossible to have a working "market" for insurance against risk.

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Until we disconnect healthcare from a job then pricing will be out of wack and way off market value. Once healthcare is more consumer focused and everyone has individual plans then pricing can be scrutinized. Currently it is a backdoor game with insurance and health services greatly disconnected from the customer.

We don't get auto, life, home or any other insurance from our companies, nor should we, so why do we still do healthcare? It causes all sorts of problems (starting business, stuck in jobs/quitting is more difficult, ageism, etc). Imagine if all your insurance for your auto, home and life ended when you quit a job, it is silly that healthcare does for people without individual plans.

Also companies like Aetna and BlueCross are company focused, very different than in auto, home or even life insurance where it has to be mostly individual focused (think Geico, Progressive, Nationwide).

We need to disallow getting healthcare from an employer (money can be given to help pay it but as salary). This has to change first otherwise every price control is still set in a closed fantasy market and will never change the game, far disconnected from the user product/service market value.

> We don't get auto, life, home or any other insurance from our companies, nor should we, so why do we still do healthcare?

Health insurance isn't like auto or home insurance, because it's not purely insurance. Some part of it is, because you're insuring against the risk of rare and catastrophic conditions, but a good chunk of it is covering routine care, which is by definition predictable. Under an insurance model, the insured price of a routine procedure would always be slightly higher than the out-of-pocket (uninsured) price.

The phrase "health insurance" is misleading. Real insurance has a negative expected value - you pay slightly more in expectation in exchange for having a lower variance on your possible outcomes. But people don't want that with health "insurance". They want health insurance to cover things that they otherwise wouldn't be able to afford, both routine and catastrophic. That's not insurance, which is why comparing health insurance to any other form of insurance doesn't really make sense.

> a good chunk of it is covering routine care, which is by definition predictable

I'm curious to know what you consider "routine" here? I'm trying to think of what I'd call routine NHS care and the examples I can come up with are childhood vaccinations (not employees), elder care (not employees, medicare in the US), OTC trivia like paracetamol (not exactly covered in either system), and population screening programmes like for breast and other cancers.

Then there's chronic conditions such as asthma and diabetes, and the question of whether people who've lost that particular lottery should have a permanently lower standard of living or not.

Most routine care isn't truly predictable other than vaccinations and preventative medicine (physicals, associated lab tests). However, there's a great deal that's statistically predictable but not chronic/catastrophic such as cuts that need stitches, broken bones, bad flu/high fever, etc. that most people will encounter to greater or lesser degrees throughout their lifetime.

> Then there's chronic conditions such as asthma and diabetes, and the question of whether people who've lost that particular lottery should have a permanently lower standard of living or not.

The whole point is that this isn't an insurance question. It's a question of how someone should pay for a chronic condition that may be more expensive to treat than they can afford, in some cases. But that's not an insurance question, because it's not about smoothing risk across states of the world. So talking about how health insurance should solve problems like these is a misuse of the term "insurance", and comparing health insurance to auto and home insurance is misleading.

If you have children, it's pretty statistically likely that you'll be in and out of the doctor's office for routine things like ear infections, strep throat, bronchitis, flu. If they play sports, you can tack on sprains, broken bones, x-rays, concussions, and yearly sports physicals.

The difference between paying the copays for all those office visits and paying the uninsured-but-not-in-poverty sticker price is massive.

Is that the adult with the insurance, or the children?

This is the point above about "Imagine if all your insurance for your auto, home and life ended when you quit a job" squared: as a child, your health insurance is completely dependent on your parents' jobs.

> "Imagine if all your insurance for your auto, home and life ended when you quit a job" squared: as a child, your health insurance is completely dependent on your parents' jobs.

That's not really what happens in the US (and hasn't been for a while).

Under the ACA, any involuntary loss of other coverage is a qualifying life event that entitles you to purchase individual or family coverage on the market, just as if it were during the open enrollment period. But even before the ACA, dependents could (and still can be) covered on the old insurance via COBRA for up to 18 months.

So nobody's health insurance is really completely dependent on their job (or their parents' jobs). Their ability to afford the coverage they want may be dependent on their income and financial state, but that's already true of auto, home, and life insurance.

> doctor's office for routine things like ear infections,

Why? There's not much doctors can do for ear infection. (Or strep throat, or flu).

You know that, and I know that, but a lot of people drag their kids into the doctor's every time they have the sniffles.

I guess they don't hand out antibiotics like they used to, but I can remember having strep and getting a prescription for penicillin would knock it out in a day or two, whereas suffering along and letting it run its course could take weeks.

> Why?

The baby has been constantly screaming and not eating for two days, you're physically and emotionally exhausted, and googling tells you a dozen things that could cause the symptoms, each one ending "make sure you consult your doctor". What do you do?

Except that health insurance is negative expected value. Health insurance companies make tidy profits. And I don't think it's because of negotiating leverage - free consumer choice would do wonders in depressing healthcare prices.

Technically, all insurance should have a slight negative EV. What you get in exchange is lower perceived risk.

>> Health insurance isn't like auto or home insurance, because it's not purely insurance.

True but you still shouldn't get that from the employer, that is part of the pricing problem.

>> ...because you're insuring against the risk of rare and catastrophic conditions, but a good chunk of it is covering routine care

I'd argue that individual insurance is closer to auto insurance as they have high deductibles and you still do have to pay for routine care mostly out of pocket. Maybe health insurance is changing into more of a catastrophic level like auto/home/life where it really only covers above your deductible, which will be high, so routine health checkups are paid mostly by the customer.

Not all companies offer health, dental or vision insurance but people still pay those out of pocket or on individual plans. I'd argue most routine work in most plans today, unless cadillac level, involve the customer paying most of the routine care either as a small part of their premium or at the service as it is below deductible (prescriptions aside, you need insurance to get special backdoor pricing).

Health insurance can be massive in cost, much of that is due to the disconnect from reality as it is hooked through companies/employment. I think fixing that will change how people view health insurance and the prices will match market value better, it could also change perception of how to use healthcare.

Personally I have never felt that routine care is acceptable to use too much as it harms the group/work policy. So even people that have it are sometimes not feeling like they can use it. When it is independent and personal, if you need it you need it and you can use it without affecting your company group policy, probably paying out of pocket most likely for routine work as your deductible will be high. Why have the added stress of health issues possibly affect your job's insurance group for menial routine work? I've had independent insurance for 5+ years now and that was the first time I actually felt like I could use it even though it paid for little, where the work plans I had I never felt like I could use.

Even if you think health insurance is different, it still doesn't mean it should be linked through your job/employer, that causes much of the pricing issues and many other issues associated with employment/survival. It is an ancient way to look at things when people change jobs every 2 years.

> True but you still shouldn't get that from the employer, that is part of the pricing problem.

I never said that should be the case, but it should also be mentioned you don't need get your insurance from your employer anymore, under the ACA. Employers may provide it as a benefit (just like many other non-cash benefits employers may provide), but nothing's stopping you from purchasing your own insurance separately instead.

> I'd argue that individual insurance is closer to auto insurance as they have high deductibles

That's only true of HDHPs - you can get PPO or HMO plans instead if you prefer.

> Maybe health insurance is changing into more of a catastrophic level like auto/home/life where... routine health checkups are paid mostly by the customer.

Yes, that's how health insurance would operate under an actual insurance model. Routine health checkups involve no risk, so there's nothing to insure against[0].

> Personally I have never felt that routine care is acceptable to use too much as it harms the group/work policy.

This is a moral hazard problem, and it's part of why it's a bad idea to consider coverage of routine care as "insurance".

> [health insurance being] linked through your job/employer... causes much of the pricing issues and many other issues associated with employment/survival.

I'll agree that having health insurance being tied to one's employer is bad (though as I mentioned, that's not really the case anymore). Though the pricing issues are more to do with using an insurance model to price something that is fundamentally not about risk, as well as the problems with the way the billing system is setup. I don't think the fact that having health insurance provided by the employer makes a meaningful impact on pricing in the aggregate (as opposed to in individual cases).

[0] The fact that you can choose whether or not to have your annual checkup is not 'risk' in the insurance sense; it's an issue of either adverse selection or moral hazard, depending on the point at which it occurs.

>> I never said that should be the case, but it should also be mentioned you don't need get your insurance from your employer anymore, under the ACA.

You could before the ACA it is just the plans were not as robust. I have had independent insurance since 2009. I did it and it was actually scary starting business with this fear. I was initially rejected even though I was healthy, 30 and was applying to the same insurance I just left at my employer. The ACA, for better or worse, made this much, much easier and the plans can't be pulled out from under you or prevent you from getting one. The ACA could be a start to removing insurance from employment and benefit pricing/understanding of market value in health.

>> This is a moral hazard problem, and it's part of why it's a bad idea to consider coverage of routine care as "insurance".

Maybe we need health insurance and healthcare plans separate, it is moving that way in the independent insurance area. The only way for this to happen is to separate it from the employer.

Side note, I worked in games and agencies previously and I saw on two occasions (right to work state) where people were let go who just had health issues that were more serious (heart, one sales guy, one developer). So when people get insurance through their company they think they are covered, but in reality insurers and companies want to pull out of that as soon as possible leaving the individual not insured and not safe. Both were let go shortly after their issues and left with now having to find a plan with a condition (before the ACA). So really, independent insurance is really closer to insurance than employer provided insurance that ends with employment or can be taken from you when you actually need it. Yes there is some buffer with CORBA and other temporary things but it is not safe in terms of being an individual who actually wants insurance in case bad things happens.

If everyone got independent insurance there would be massive changes to pricing and understanding of healthcare and the insurance part (catastrophic). It might even spawn two types of insurance (catastrophic and routine) out of it or industries. Noone should lose the catastrophic side when they leave a job, it is seriously unsafe and not really insurance.

>Personally I have never felt that routine care is acceptable to use too much as it harms the group/work policy.

I've worked for large companies and small ones. Never once has it occurred to me nor would I entertain the idea of not taking full advantage of a benefit that is explicitly provided as part of my compensation package.

I don't necessarily disagree about your broader point of insurance and its connection to jobs, but so long as that's the reality I'm going to work within that reality.

> Imagine if all your insurance for your auto, home and life ended when you quit a job

This was a massive lightbulb for me. For decades, I've always thought it normal and healthy that employers provided health insurance as a way to compete in the employment market. Your post triggered that lightbulb and now I don't know what to think, but thanks for shaking me awake.

During WWII the US government set wage controls, so in order to compete for employees, corporations started offering health insurance benefits. Then after WWII, the US government created tax benefits to corporations for providing health insurance. Soon the practice became the de facto way to get insured.

source: https://en.wikipedia.org/wiki/Health_insurance_in_the_United...

Of course the insurance company should never pay $5,000 for an advil. If they did that then they deserve to go out of business. The insurance policy does not cover any service at any price. You cannot just fraudulently invent a bill for services with absurd prices, and then demand payment.

Some of you reading this of course get a good chuckle because they know this is exactly what's happening. One good Attorney General pressing criminal fraud charges in a case like this would get the ball rolling.

So, how do you price the service when it's covered by an insurance policy? This can't really be an unsolved problem. What's interesting here is separating the price discovery problem from the socialization aspect. Can you fix one without necessarily resorting to the other?

So in the ER the price of the drug should reflect the cost to administer it. Or maybe you should be charged a separate daily fee plus cost of supplies. What we want, first and most of all, is price transparency. Frankly the pharmacist and the attending are not paid that much, so where is the money going?

A room full of equipment costs a lost of money, so isn't the solution to introduce different cost rooms based on condition? Too much diversity in the room / environment could be a problem, but right now it seems like they go for absolute uniformity?

"You cannot just fraudulently invent a bill for services with absurd prices, and then demand payment."

You have obviously never enjoyed the services of the US health care system!

Hence the next sentence!

> The provider can bill $5000 for one Advil and there's little that can be done about that.There's no way out of this problem except federal laws that sets the prices of services.

First, no insurer pays $5000 for Ibuprofen, the same way no (sane) customer pays sticker price when buying a car. That number is intended as the starting point for negotiation with the insurer, and they all know that.

Secondly, the reason that this negotiation is necessary is, indirectly, because of a federal agency artificially setting the prices of services. Medicare owns 40% of the payer market and also reimburses about 7% less than COGS. That is, not counting for the fact that any practice has overhead and SG&A (labor) that it needs to pay for, Medicare reimburses 7% less than what it costs providers to cover their own direct costs of supplies. Basic accounting tells you that's not sustainable unless you overcharge the rest of your patients.

So, they make up for it by doing this awkward dance where they attempt to overcharge the private insurers by 50x or more, and then the private insures come back and say, "no, how about we only pay you 300% what Medicare reimburses", and then they agree on that.

I went to a doctor a while back that had a sign on his window saying he'd like to charge less than $50/visit, but medicare by law said he must charge at least $50.

Government should be for the bare minimum of things a market can't provide, and subsidizing insurance plans for the needy and poor would be a lot better than the government, through I'm sure just some twisted set of unintended consequences, setting MINIMUM prices.

Correct me if I am wrong, please.

Medicare is actually split into four separate regions, each with its own reimbursement rates.

It's a lot more analog than that. There's a baseline schedule, but the rates for any provider are still going to vary due to other variables, in particular the "wage index" which recognizes that their labor expenses are going to be higher in areas with higher prevailing wages.

> As long as we have a system where the prices for goods and services come as a complete surprise to everybody, it is impossible to have a working "market" for insurance against risk.

Bearing in mind I'm English, so there's risk of ignorance here...

My understanding is that Insurance companies have agreed pricing deals with providers? That was the point of restricting access to certain providers etc within schemes - so that they could keep users in a relatively controlled pricing system.

Realistically though - pricing needs to be agreed at a national level and then have all providers/insurers included. Of course, this prevents strategies like vertical integration but frankly I don't see that as a great loss.

You are correct. Payers (insurance companies) and providers enter into contracts that lay out costs. It may as simple as "I'll pay you 30% of your chargemaster rates" (these are the crazy inflated list prices for the hospital) or they can anchor to Medicare rates - "I'll pay you 130% of what Medicare pays".

That's why you end up with preferred providers and in-network/out-of-network providers.

Where things get interesting is that rates are often dependent upon negotiating power. If you're a big insurer and you can push a lot of volume to a provider, you have more power to push reimbursement lower. If you're a provider in an area where they are lots of other providers, you lose leverage vs. being the only provider in a semi-rural area.

pricing needs to be agreed at a national level

The USA is a big country, with vastly different demographics across it. Medical provider costs (especially wages) are going to be vastly higher in some locales than others. Also, the risks in some areas (complications due to pneumonia, for example) are going to vary by region. So it can't really be a single national list.

An insurance company makes money from the difference in premiums collected and expenses paid. Because Oscar is a startup you are right that they have a significant disadvantage in negotiating rates with providers. But they can lower costs in clever ways by lowering utilization. For example they offer free preventative routine care like immunizations, flu shots; free generic drugs (thus shifting consumption away from brand name drugs); and free primary care visits (which over the long term shift costs away from costly complications (e.g. in diabetes), or ER visits). In addition Oscar appeals to a younger tech savvy crowd which will inherently utilize health services a lot less.

> I just don't see how an operation like Oscar fits into the US healthcare landscape.

> There's no way out of this problem except

The fact that operations like Oscar currently don't fit well is not very high on the list of problems that need to be fixed.

> if ... how can you not be screwed?

Well you can limit your enrollment and allow your reserves to grow so that haha that's not how you get in the unicorn club.

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