The Social Consequences Problem in Health Insurance and How to Solve It
70 Pages Posted: 20 Jun 2018 Last revised: 16 Sep 2018
Date Written: June 5, 2018
This Article identifies a problem with contemporary U.S. health care that contributes to “balance billing,” the absurd complexity of medical bills, and other visible and invisible health care consumer harms. Casting physicians as bill collectors misaligns incentives for both health insurers and physicians in ways that make the market for health insurance particularly bad at trading off health care’s medical consequences with its often severe social, financial, and psychological consequences. As a result, such “social consequences” go unchecked or even exacerbated by the entity — the health insurer — who controls when, where, why, and how insureds must pay medical bills. Having isolated health insurance’s social consequences problem, the Article offers novel solutions. “Financial distress corridors” would give insurers “skin in the game” of their insureds’ financial distress — including but not limited to medical bankruptcy — and unleash competition-driven innovation over patient-friendly insurance product designs by rewarding or penalizing insurers based on the relative financial hardship suffered by their insureds. Further, as an alternative to this competition-based approach, regulators could mandate “automatic insurer financing,” requiring insurers (rather than doctors) to bill for and collect insureds’ share of their medical costs and thereby removing doctors from the adversarial role of bill collector while making medical billing more manageable.
Finally, ad hoc health insurance consumer financial protection laws that prohibit or require particular practices have been adopted in many states and endorsed by legal scholars. This Article’s study of the social consequences problem provides a much-needed normative foundation for such laws but also reveals that they are incomplete and should be tailored to better account for the social, financial, and psychological consequences of health insurance
Note: Comments on this forthcoming Article are welcome.
Keywords: Health Care, Health Insurance, Affordable Care Act, Medical Billing, Healthcare Finance, Innovation
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