Get the facts: What is the role of health insurers in our health care system?

Open a newspaper, turn on the nightly news, or scroll through your social feed, and you’re likely to come across conversations about the challenges facing our health care system. While these conversations are important, they’ve also revealed there’s a lot of confusion surrounding the health care system, and for good reason – it’s very complex.

In this series of articles, we’re setting out to debunk some of the most common myths and misconceptions about health care and health insurance. Our goal is to clear up the confusion and provide the facts about how the health care system works so we can identify solutions to make it better.

One of the most common myths about our health care system is that health insurers are to blame for the high cost of care in the U.S. In reality, the reason health insurers exist in the first place is because health care simply isn’t affordable.

Health insurance is such an ingrained part of our health care system that it’s easy to take it for granted or to focus on everything we don’t like about our plan rather than the tremendous value it provides us. The reality is, without health insurance, most Americans quite simply could not afford the health care they need, and that’s because of the rising prices for hospital stays, doctor visits and prescription drugs.

Consider Medicare as an example. It was established in 1965, so most Americans today don’t remember a time before it was available to seniors. Many people may assume seniors have always had access to the medications they need and could get to the doctor when they needed care. But in reality, before Medicare was signed into law, millions of American seniors lived in poverty because of their medical costs. Or they went without care because they quite simply couldn’t afford it. Having access to health insurance dramatically changed the quality of life for our nation’s seniors.

That’s what health insurance is really all about – making it possible for people to get the care they need so they can live their best life. Health insurers know the best way to do that is to make care as affordable as possible for the people enrolled in their plans. In that sense, they’re very much on the same team as the American consumer.

They accomplish that goal in a variety of ways:

  • Guiding members to high-quality, effective and affordable care: Insurers help consumers save money on health care by helping them make decisions about where to get care. And that help is sorely needed because shopping for health care is unlike shopping for almost any other product or service consumers might buy. The huge number of options can be overwhelming, and it can be hard to determine which providers have the best track record for the specific care you need. All too often, the process can be so overwhelming that it leads to quick decisions – and possibly poorer outcomes. That’s why many insurers offer tools and information to help their members navigate these complicated decisions.

    For example, many insurers offer provider search tools on their websites and member apps, with a variety of search and filtering options to help consumers find providers that fit the criteria they’re looking for. At UnitedHealthcare, we completely revamped the provider search experience with the launch of Find Care & Costs in 2024. This provider search tool helps our members find the care they need more simply and intuitively. It leverages claims and pricing data as well as AI to provide more accurate results and a more personalized search experience for our members.
     
  • Negotiating lower rates from hospitals and doctors: Insurers and providers establish contracts that dictate the reimbursement rates for the care that’s provided to people enrolled in the health plan. During the contract renewal process, insurers work hard to ensure providers are reimbursed at fair and competitive rates, as higher rates will lead to higher out-of-pocket costs for their members and higher health care costs for self-insured employers. Because those employers pay the cost of their employees’ claims themselves, higher reimbursement rates to providers have a direct impact on their bottom line.

    It’s important to remember that health plans’ goals during provider contract negotiations are the same as yours – to help you access the care you need and to make health care as affordable as possible. You can see the impact in every medical bill you receive: compare the provider’s original charges with the contracted rate your insurer negotiated. Typically the negotiated rate is a substantial discount.
     
  • Identifying low-value care: Another way health insurers work to drive costs out of the system is by helping to identify low-value care, which adds unnecessary costs to the health care system. Out of the roughly $3 trillion spent each year in the U.S. on health care, between 10% to 30% is considered low-value care,  according to KFF Health News.

    A recent report by the Colorado-based Center for Improving Value in Health Care found that Colorado alone spent $134 million in 2022 on low-value care, or care that has risks or costs greater than the benefit to the patient. According to the center’s report, the costliest low-value items of the past three years were prescriptions for opiates, prescriptions for multiple antipsychotics and screenings for vitamin D deficiency. Low-value care not only raises the cost of care for everyone, but it can lead to health complications for patients. Prior authorization is an important tool insurers use to identify emerging patterns and trends in how care is delivered and can potentially redirect low-value care before it’s administered.
     
  • Capping members’ health care costs: Perhaps the most valuable benefit of having health insurance is the peace of mind it provides by capping your out-of-pocket costs. A health plan’s out-of-pocket maximum ensures members never pay more than a set amount for care from providers in their plan’s network. 

    Your out-of-pocket maximum protects you from having to pay tens if not hundreds of thousands of dollars to the hospitals and doctors providing your care. Most Americans quite simply couldn’t afford to pay those bills, but thanks to their health plan, they never have to.

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