I uncovered this example when I phoned to double/triple/quadruple check that a costly (age sucks) preventive medicine procedure was covered by my consumer driven health care plan.
Indeed, I was told, it is. I didn't hang up though. I'm too
When she said this, I swear I heard her pray that the call recording would go unheard, lest her children go unfed. Imagination, I'm sure.
The catch is that the claim will always be initially denied. It will, however, be promptly paid after a customer calls to "Appeal". If a customer doesn't appeal, however, they will have to pay the claim themselves.
I am pretty sure I know how this scam came to be.
The plan I'm in was, I believe, once part of a small consumer-driven healthcare plan startup that was acquired by a larger company. The two companies would have had different IT systems. The larger company probably outsourced IT integration, but, as often happens, I expect that didn't go well.
If I'm right then Anthem still doesn't have the right software to manage our kind of plan. When Anthem receives a claim, the software must choose between paying for claims that should be denied, or denying claims that should be paid.
You can imagine how long it took to make that decision, and how different the outcome would be with different incentives.
Since they really aren't crooks, just regular people in a hard job, they wrote Appeals process documentation so their agents would pay on Appeal. Probably 95% of their customers do appeal.
Five percent or so, however, probably don't appeal. They pay, or go bankrupt, or whatever. That five percent is pure margin. That margin probably made someone a VP.
Fixing the problem would unmake a VP. There's no money for IT anyway.
And so it goes.
It's a scam, but there's no intelligent designer. Just evolution in action. Health insurance companies can't help but be evil. It's in their incentives.
related stuff from me:
- Emergence: how entropy and incentives create scams
- Anthem - Putting the Hell in Health Insurance - emergent fraud and the Anthem web site
- Mobile phone fraud - The accidental data charge and other scams
- Memphis mortgages, complexity attacks and long term consequences
- How to use Amazon reviews (and how the system encourages fraud)
- Health insurance: we're defeated by a complexity attack
- Causes of the crash of '08 - how much fraud?
- 21st century deception and the evolution of the emergent mind
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