[tqi]

They are not solely responsible, but of course they bear some responsibility. ACA has a Medical Loss Ratio that requires insurers to spend 80% or 85% of premium revenue on medical services "thereby limiting administrative costs and profits to the remaining 15-20 percent."[1] In other words the only way for them grow profits is to increase cost.

This guy is way out of his depth.

[1] https://www.rand.org/pubs/external_publications/EP71133.html

[stymaar]

> This guy is way out of his depth.

It's literally Noah Smith, what did you expect?

[zephen]

> the only way for them grow profits is to increase cost.

And, of course, things like spurious denials drive up costs for them and for the providers. More direct costs, more costs at the provider they have to cover...

From the insurance company perspective, it's a win-win!

[chongli]

> things like spurious denials drive up costs for them and for the providers

Spurious denials? Or improperly filed claims?

[zephen]

Spurious denials.

It's easy to find documentation of this. For example:

https://pmc.ncbi.nlm.nih.gov/articles/PMC10391242/

https://phrma.org/blog/70-denied-how-insurance-denials-are-d...

https://www.forbes.com/sites/joshuacohen/2026/05/04/independ...

Anecdote is not the singular of data, but when my late wife was dying of cancer, the oncologist was attempting to follow standard care procedures. Preauthorizations were denied even after physician consultation with the insurance company.

My research showed me that the insurance companies contract with other companies (who they may or may not own) to handle the dirty work. It was only after learning the magic incantations to directly contact the "third-party" company that I was able to get traction.

"We do not believe this treatment is warranted."

"Well, her doctor believes it, so she's going to get the treatment. The only question is whether you pay now, or after I file a small claims case."

It was miraculously authorized at that point. It's the same fucking thing with car insurance. The poor people who can't fight really get screwed.

[chongli]

None of your links provides data on spurious denials. The third link does provide this statistic:

"Over a six-year period between 2019 and 2025, almost half of a large set of denied health insurance claims in New York state were reversed when the cases reached independent review organizations, comprised of clinicians unaffiliated with insurers"

But that doesn't get into the reasons why the claims were denied in the first place. It doesn't tell us anything about bona fide spurious denials vs. improperly filed claims (mistakes in the paperwork), clerical errors, or clients placed under investigation for claiming too early (after applying) or too often (making a lot of spurious claims), or care providers who do the same.

Insurance companies are concerned with adverse selection and moral hazard. A client who files a lot of claims shortly after getting insurance raises the suspicion that they were not honest about their health prior to applying. Similarly, a client who claims every drug a pharmacy carries raises other suspicions.

Of course, most clients aren't like that, but a not-insignificant minority are, and a small number of clients can file a very large number of claims.

[zephen]

> But that doesn't get into the reasons why the claims were denied in the first place.

The first link in that article does. It starts off by noting that this the third level review, so there were ample chances for the insurance company itself to fix things, and also says that "The report also showed that 47.1% of denials on the basis of medical necessity, 44% of denials based on care determined to be experimental or investigational, and 42.9% of formulary denials were overturned."

It's a pipe dream to assume that, by the time the appeals got to that point, it could be chalked up to administrative error.

> Insurance companies are concerned with adverse selection and moral hazard. A client who files a lot of claims shortly after getting insurance raises the suspicion that they were not honest about their health prior to applying. Similarly, a client who claims every drug a pharmacy carries raises other suspicions.

Yes, every Canadian gets 5 abortions a year, even the men. But seriously, the moral hazard goes the other way. It is so fucking difficult to get doctor appointments that the insurance companies should be doing everything in their power to help keep people healthy, rather than worrying about the 0.1% of the population that suffers from Munchausen syndrome.

[ethbr1]

It's both.

Medical fraud is like retail stock shrinkage or fraudulent credit card charges -- no one on the customer side is aware of it, because it's handled on the other side and baked into pricing.

But there are substantial amounts of both straight fraud and too aggressively up-coding / over-billing.

The meta problem is that the because of the nature of the industry (legitimate volume dwarfs fraud), it's more financially impactful to pull levers that impact legitimate volume (read: prior auth requirements).

The anti-fraud systems are also pretty robust. As you'd imagine, insurers have been dealing with this for more than a few decades by now.

[akramachamarei]

How would spurious denials drive up the cost of medical service?

[clcaev]

By failing to provide adequate treatment early in a disease course, further exacerbations and comorbidities can appear, and these can become their own chronic conditions requiring further ongoing treatment.

[akramachamarei]

This is a great answer.

[zephen]

By adding tons of paperwork and time and effort. When a denial happens, often the doctor himself has to communicate with the insurance company via phone, instead of, you know, doctoring.

This often proceeds over multiple rounds. And then either the company eventually pays, or the consumer has to pay and try to get reimbursed later.

You asked this question 30 minutes after even a casual reading of my other comment, and a little thinking about it, would have fully answered it.

I would like to assume good faith, but your other comments indicate a high probability that you are an insurance company shill.

And in response to your other question about collusion, no there doesn't have to be collusion. Insurance companies putting onerous bogus requirements on providers will automatically drive up the costs.

[akramachamarei]

I am deeply offended by your allegation. Not everyone who disagrees with you is a shill. I would not make the same accusations about you, nor would I act as if I can estimate the probability that you are. HN's commentary guidelines address this.

You can consider my mistake to be in conceptualizing the cost of "medical services" too narrowly, as just the medicine, and not the providers' surrounding administration. To that end I take your point. In theory, at least. Do you know how much this has? In particular, you refer to the back-and forth negotiation of claims--on what do you base this claim?

[zephen]

> I am deeply offended by your allegation.

Be offended all you want. It's a free country, but, to be perfectly frank, you are still making it difficult to believe you are writing in good faith, as I will show.

> You can consider my mistake to be in conceptualizing the cost of "medical services" too narrowly, as just the medicine, and not the providers' surrounding administration.

Which is fine, except that my very first comment that you responded to explicitly explained "More direct costs, more costs at the provider they have to cover..."

So I already explained that which you said you missed, before your first comment questioning it.

> Do you know how much this has? In particular, you refer to the back-and forth negotiation of claims--on what do you base this claim?

When I wrote "You asked this question 30 minutes after even a casual reading of my other comment, and a little thinking about it, would have fully answered it." I was serious.

You still asking this question, instead of looking at that comment, indicates that at best you are completely unserious. For your edification, here is a link to that comment:

https://news.ycombinator.com/item?id=48480873

When you wrote your first comment in reply to mine, there were already two comments there -- that one and its very short parent.

[esseph]

> This guy is way out of his depth.

He does that a lot, tbf

[akramachamarei]

What you wrote seems fully consistent with the blogpost. Unless you are suggesting that health insurance companies collude with providers to raise the cost of medical service?

[tqi]

It doesn't require collusion, just misaligned incentives.

"Perversely, with the MLR requirement capping profit margins and administrative costs, insurers are discouraged from containing health plans’ premium increases. Economists have noted that the MLR requirement effectively turns health insurers into “cost-plus” businesses: If insurers’ predicted premiums are less than the actual medical care spending on claims, it can lead to higher MLRs and less profits, within MLR restrictions. Professor Scott Harrington warned early on that MLR requirements could reduce insurers’ motivation to control premium increases. Prior research has found that the MLR requirement is associated with stronger financial performance for insurers, since they can raise premiums to cover higher claims and still comply with the MLR threshold."

[peyton]

That’s an opinion from an economist along with prior behavior, not reality. I’ve talked to one of the guys who worked on the ACA, and his take was basically providers will do things like e.g. buy up all the cardiologists in an area, then jack up prices across the board. Employers need to provide a certain bundle of services under the ACA. That’s where people are taking advantage.

[supertrope]

They’re locked into a red queen race. Providers merge to gain scale and negotiation power. Insurers merge to gain scale and negotiation power. The ACA encouraged scaling up to drive down unit costs, but it just resulted in companies scaling up to protect their margins.

[readthenotes1]

I'm on ACA. I get between $100 and $150 on a gift card to do my annual PCP visit even though my premium is $0/month.

Why? Obvious if you know about the perverse incentive tqi mentions

[antasvara]

The insurance company that provides your ACA plans gets money from the government for doing so. How much money they get is tied to a few things (not an exhaustive list):

1. On average, how healthy is your group of ACA plan holders? If the group has a bunch of chronic conditions, they get more subsidy money to offset the increased care costs. Going to the PCP allows them to have official medical evidence of those conditions.

2. The government gives these plans quality ratings to help people compare them to each other. These ratings are partially based on how often patients get their annual screenings and patient satisfaction. A gift card for a PCP visit accomplishes both aims.

There are also more practical concerns. Preventative care is cheaper than an acute incident for the company. You'd rather catch an arrhythmia at a PCP appointment than pay for the cost of a heart attack.

[readthenotes1]

I believe the more recent studies show that annual PCP visits actually reduce quality of health. Seems contrary, but a lot of doctors in the USA will overreact for fear of future litigation. Since most interventions have some possibility of negative consequences, it apparently adds up.

On your specific example, my understanding is that the odds are very low that a random PCP visit will detect an arrhythmia.

Of course, if you mentioned to doc that you're having fainty spells or heart palpitations, then maybe hen'll give you a holter monitor-- but then you've now increased your risk by waiting for the PCP visit instead of doing it when you first notice the symptoms.

[gatlin]

I believe you but I'm interested in the studies mentioned in your first sentence.

[EvanAnderson]

You must have very little income.

I had an ACA "marketplace" plan back for my family back in 2017 when I was self-employed. My premiums were >$15K / year for a >$10K deductible and no tax credits (because of my income).

[FireBeyond]

There are all sorts of perverse incentives in play. Many plans won't pay for weight loss drugs (obviously GLP-1s, but even beyond that) but will happily pay for gastric bypass, for one simple example.

[dd8601fn]

A surgery happens once. Glp1s are forever.

$25k today or $15k/yr for 20 years?

[FireBeyond]

GLP1s don't or shouldn't cost $1K+/month.

Gastric bypass surgery happens once. Many bypass patients require lifelong prescription nutritional supplements and all require lifelong lab monitoring.

Ulcer risks increase severalfold.

High risk of hernias, osteoporosis and complications thereof.

It's not just surgery and no immediate cost. But then again, any of those issues are options for denial, so...

[dgellow]

Could you elaborate?

[treis]

They can grow profits by capturing a larger share of the market.

[ch4s3]

After the ACA passed it's really hard for insurers to differentiate on policies because so much is mandated. They're essentially all identical products that are going to have similar prices.

[treis]

That goes against the "insurers are intentionally raising prices" argument.

[salawat]

Stop thinking of insurers/providers as separate agents, and start thinking of them as building blocks for financial engineers.

Law binds individual fictions, but not compound ones. Until we start making financial engineering basically illegal, these types of "happy, profit juicing conjunctions" will be the norm.

[ch4s3]

Not really. They're highly regulated in their offerings, and the government mandates how much they spend on care vs. overhead. They can't effectively compete so the only option is to negotiate slightly higher payments to providers and PBMs every year so they can take more profit in absolute terms.

[treis]

Either prices are in their control and one company can gain market share by lowering them. Or they're not. I don't think you can have it both ways.

[ch4s3]

It can be a one way ratchet, which is my argument here. Regulations, medicare rates, and pricing power from drug companies set a floor for prices. Insurance companies already run pretty lean and have so-so margins. The 80-20 rule incentivizes a slow ratchet up on prices and the other factors prevent competition on price. The system is designed to have slow predictable price increases.

[Fire-Dragon-DoL]

Wow, I did not realize how deep the hole is