The Social Consequences Problem in Health Insurance and How to Solve It
68 Pages Posted: 20 Jun 2018 Last revised: 16 Jul 2019
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 medical providers as bill collectors misaligns incentives for both health insurers and providers 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 an entity—the health insurer—who controls when, where, why, and how insureds must pay medical bills.
This “social consequences problem” in health insurance provides a much-needed nor- mative foundation for existing and proposed health insurance consumer financial protec- tions. But the social consequences problem infects all aspects of medical billing for insureds and existing reforms address only its most visible symptoms. The Article therefore calls for and proposes systemic solutions.
“Financial distress corridors” would reward or penalize insurers based on the relative financial hardship suffered by their insureds, giving insurers “skin in the game” of their insureds’ financial distress and unleashing competition-driven innovation over patient-friendly medical billing. “Automatic insurer collection and financing” would require insur- ers (rather than providers) to bill for, collect, and finance insureds’ share of their medical costs, removing providers from the adversarial role of bill collector and greatly simplifying medical billing for those with insurance. After proposing and evaluating these systemic reforms, the Article identifies ways existing ad hoc consumer financial protections should be tailored to better address 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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