Why They Do What They Do
Patient perspectives generate specific outcome objectives, what they are willing to do to achieve them, the risks they are willing to bear, and the costs they are willing to pay. The same could be said about payers. By “payers” I’m speaking of the various organizations that cover health care costs for individuals in the US. I say “various” because in the US there are several different ways health care costs are covered and several different types of organizations that cover them. While from a patient perspective some coverage policies may seem irrational, when seen from a payer perspective, the coverage policies may make sense, however unsatisfying and infuriating that still may be for patients. Knowing the perspective of each payer segment helps us understand why payers do what they do.
Parsing Payer Perspectives
No formal classification system of payers exists. For the purposes of this article, I will divide them into the following categories: government run programs; health care insurers (including managed care organizations); employers; government employee programs; labor plans (unions); and risk-bearing provider groups.
While the US does not guarantee basic health care coverage for all citizens, it does cover health for specific subsets of the population. Medicare covers the elderly and disabled, Medicaid covers certain indigent populations, and the Veterans Health Administration covers certain subsets of military veterans. The Accountable Care Act (known colloquially as Obamacare) sets general minimum coverage requirements particular organizations must provide or individuals must provide for themselves, but leaves it mostly to the private market to determine how the requirements are met.
The primary goal of government run health care coverage programs is to improve health outcomes of certain populations. Therefore, the government perspective favors providing beneficiaries access to the health care products and services they need to restore or maintain health. However, because these programs are funded by taxpayer dollars, government obligations to be good stewards modulate the extent of coverage ultimately provided. Political forces further modulate this perspective, which varies based on the outcomes of political debates around the roles of government in health care. Governments thus try to provide as much coverage as they can for the greatest number of people possible. Providing coverage of highly expensive health care products for a small number of people can work against that approach, which can be the case for rare diseases
. Therefore, rare disease advocates are smart to focus a lot of attention on legislative and regulatory processes that determine health care coverage lest access to therapies they need be excluded without any consideration.
Health care insurers
Health care insurance is a major industry in the US. Companies in this industry (i.e., both health care insurers and managed care organizations) provide health care insurance mostly to employees through employers and to individuals, who are thus their customers. These companies can be nonprofit or for profit. In either form, they charge their customers premiums based on the scope of coverage provided and anticipated costs of that coverage. As a result, they bear the risk of premiums not being sufficient to cover costs.
The primary goal of health care insurers is to make their customers happy so that they remain viable enterprises. The primary perspective of health care insurance carriers on health care coverage is thus formed from what their customers want and can afford. By and large, their customers want to keep their costs as low as possible. In addition, these insurers compete amongst each other for market share of these customers, and since their customers are sensitive to costs, they have an interest in keeping costs as low as possible. That means they operate under market pressures pushing them towards more frugal coverage policies than government run programs focused on health needs of beneficiaries. Therefore, people covered under these plans will sometimes have to work aggressively with these organizations for coverage of important products and services excluded from coverage.
Employers provide health care benefits mostly as a way to recruit and retain talented employees. They can be interested in contributing to a healthy workforce as well, but that is generally a secondary consideration. Their primary goal is to win in the competition for the best talent in their industries. Therefore, the employer perspective towards the health care coverage is generally to provide no more or no less than they think is needed to compete successfully for talent. Health care coverage varies across industries as a result—coverage is typically more comprehensive in high technology companies than in discount retailers. In other words, the coverage policies reflect what is required to compete for employees than from careful considerations of health care needs of the employee population.
Employers choose to either pay for health coverage directly (“self insured”) or to pay premiums to a health insurer (“fully insured”). When an employer is self insured, it takes the risk of not budgeting enough money to cover employee health care costs. When employers are fully insured, they pay a health care insurer a premium and pass the risk to them. Covered employees often do not know whether their employers are self insured or fully insured because even when they are self insured, employers hire health insurers to administer the programs. The difference can be important. Remember, the insurer wants to win in its marketplace and needs to keep costs low to do so, but if that perspective produces health coverage that is insufficient for its employer client to achieve its goal of attracting the best talent, then the employer client will not be a happy customer. This means employers are the decision makers whether they are self insured or fully insured. Employees should, therefore, talk to their employers when they think their coverage is inadequate. With rare diseases, for example, employees could go to their employers when they find an important drug is not covered or a provider network does not include the centers that treat a particular disease.
Government employee plans (federal and state)
Government employee plans behave in some ways like employer plans, in other ways like health insurers, and in yet other ways like government run programs for beneficiaries. As employee plans, they are structured to compete for talent. Like nongovernment employers, government employee health plans have to compete for employee members because some government employees can pick from among many made available to them. Like government run programs for beneficiaries, government employee health plans are funded by taxpayer money and thus they must operate as good stewards. And, also like government run programs for beneficiaries, they are subject to political processes. The health care coverage goal is then primarily to compete successfully for talented employees, but as a hybrid of employer, insurer, and political entity. Whereas an employee of a nongovernment employer may be able to get coverage policies changed working directly with the employer, the employee in a government employee plan will have to contend with the government insurer viability concerns and political constraints.
Labor plans (unions)
Unions want to do the most they can for their members, and so their goal for health care coverage resembles that of government run programs. Therefore, their perspective favors comprehensive coverage policies. However, this perspective is modulated by negotiations with companies and government agencies that pay for their health care coverage, and by financial constraints when health care coverage is funded through member dues. Thus, the actual health care coverage policies can appear differently than would be expected from this perspective as a result of negotiations that cover more than just health care. For example, unions can give up certain elements of health care coverage in return for other benefits, such as job security, pensions, and work rules. Employees who receive health care coverage through a union contract go to their union management rather than employer when they want to call attention to inadequate coverage situations.
Risk-bearing health care provider organizations
Risk-bearing health care provider organizations agree to take contracts from payers like government run programs (e.g., Medicare) and health care insurers that pay them a fixed amount for each employee or beneficiary they have in the provider system. The provider organizations can be hospital systems, physician practices, integrated health care systems, accountable care organizations, and other various arrangements of health care providers. Therefore, these organizations are hybrids of health care providers and health care payers. Their goal is to provide their patients with the best care possible, but to also be financially viable. Thus, they start with a perspective of providing the most comprehensive care as possible and then modifying the approach according to financial constraints.
These arrangements transfer coverage decisions from employers and insurers to health care providers, e.g., physicians, hospitals. A patient covered under a risk-bearing provider arrangement who goes to an employer about inadequate coverage will likely be told that the health care provider makes the decisions. For example, physicians may prescriber lower cost drugs or only refer to certain specialists because they pay for them. Thus, in these arrangements, patients need to talk to the providers about health care coverage. These arrangements may become more common in the near future.
Knowing the Payer’s Perspective
Many different organizations pay for health care in the US, and these payers have many reasons for paying. The reasons do not always come from a straightforward health care perspective. Health care coverage policies and decisions that can look irrational from a strictly health care perspective can be perfectly rational when considering a particular payer’s perspective.
That realization can at least give some sense of what is behind seemingly irrational polices and decisions, and also provide some avenues to take and arguments to make in getting access to health care coverage otherwise denied. Therefore, anyone confronted with inadequate health care coverage should first determine where the coverage originates (e.g., employer, insurer, union, Medicare) and the perspective driving the coverage policy, and then second, make the case for better coverage at its point of origin and with an argument that addresses the perspective at work.