Are Health Insurance Companies The Problem? In the debate over health care, many point the finger at insurance companies.

Are Health Insurance Companies The Problem?

  • Download
  • <iframe src="" width="100%" height="290" frameborder="0" scrolling="no" title="NPR embedded audio player">
  • Transcript


This is TALK OF THE NATION. I'm Neal Conan, in Washington. Today, as part of our series of conversations on health care, we turn the spotlight on insurance companies. As President Obama presses Congress to approve health care legislation, insurance companies are at the center of the conversation. In our previous programs, we asked: Are doctors the problem? Are patients the problem? Many listeners said, look at the insurance companies.

Nessie(ph) in Hillsboro, Oregon, emailed us: They are in the business of not providing health care. They create schemes to garner high premiums, high deductibles and co-pays while they deny care and create administrative nightmares.

Well, fair or not, the perception is widespread. Today. George Halvorson, the chairman and CEO of Kaiser Permanente, joins us. Later in the program, we continue our series on Talking Race with Dawn Turner Trice of the Chicago Tribune. Following the arrest of Harvard Professor Henry Louis Gates Jr. at his home in Cambridge, we focus on perceptions of the police and black men. But first, we've asked patients and doctors if they are the problem. Today we ask insurance companies: Are you the problem?

If you work in the health insurance business, what don't we as consumers understand about what you do? Tell us your story. Our phone number here in Washington is 800-989-8255. Email us, You can also join the conversation on our Web site. That's at Click on TALK OF THE NATION.

George Halvorson joins us from the studios of member station KCPW in Salt Lake City, and it's good of you to be with us today.

Mr. GEORGE HALVORSON (Chief Executive Officer, Kaiser Permanente; Author): It's good to be here.

CONAN: And I know you've heard the criticism from President Obama. You just heard what emailer Nessie had to say. Are you being unfairly judged?

Mr. HALVORSON: Well, I think there are a couple of points to make. One is that we are the only industrialized country in the world that does not have universal coverage, and I think that's almost criminal. We should have coverage for every single American, and we should get that coverage as quickly as we possibly can. So I think that we're long overdue for universal coverage, first point.

Second point is one of the reasons we don't have universal coverage in this country is because we have two business models for insurance in America. If you go to the Netherlands, or if you go to Germany, or you go to Switzerland, they all use health plans to cover everyone, and they use a double mandate. They have a mandate that every citizen must buy insurance, and they have a mandate that every insurance company must sell to everyone. And the combination of the double mandate, you must buy and you must sell, makes that model work.

I think what President Obama's been talking about is the fact that in this country, we not only don't have the mandate for people to buy, but we also don't have the mandate for insurance companies to sell. So there's a risk-screening process that goes on. So when people are looking to buy insurance, the insurance companies, if the people are coming in as individuals, will health-screen, and if somebody is pregnant, or if somebody has cancer, or if somebody is having a heart attack, they don't get coverage.

In Europe, that doesn't happen because in Europe, every single carrier must sell to every single person who applies. And what's really kind of interesting is in America, for 94 percent - there's two business models, as I said. For 94 percent of the population, we have group coverage, and the group coverage works the same way the European model works. Everybody in the group gets coverage, and if you work for GM or GE or pick your - NPR, you get coverage automatically by being in the group, and there is no health screening, and if you get sick, you continue with your coverage.

It's the six percent of the market that is individuals that comes in not as a group, that's the second business model. That's a tiny business model relative to health insurance in total, but we're a big country. So six percent of the people is a lot of people. For that portion of the population, because not everybody is required to buy coverage, many people don't. And the ones who don't buy coverage tend to be the healthy people, and the ones who apply for coverage are the ones who know they're pregnant or who know that they have cancer, and they want to use someone else's money to pay for their care.

And that's a very legitimate thing to do. The whole principle of insurance is to allow you to use somebody else's money to pay for your care. But in the individual market, because not everyone is in that market, if you only have the people with cancer applying for coverage, your premium rates are extremely high because premium rates are the average cost of providing care to a population.

A lot of other insurance has very complicated actuarial tables. Health care is very simple. You add up the cost of care for a given group, and that's the premium. Divide by the number of people, and that's your premium.

CONAN: When you say 94 percent of the people are covered, you're talking about 94 percent of those covered are covered under group rates.

Mr. HALVORSON: Yes, exactly. Ninety-four percent of the people who have coverage in America, and there is about six percent who have individual coverage…

CONAN: And then there's the 46 million or so who don't have coverage at all.

Mr. HALVORSON: And there's 46 million who don't have coverage at all, and that's a horrible thing, and we need to cover those folks. And some of those folks need to be covered with expansion of Medicaid. Some of them need to be covered with an expansion of SCHIP. Some of them need to be covered with an expansion of the private market, but we need a market where every single one of those people can apply for coverage and get it automatically, just like they do in Europe.

CONAN: We've also heard a lot of proposals about a public plan as one element of the overhaul that President Obama's talking about. Is Kaiser Permanente plan ready to compete with a public plan?

Mr. HALVORSON: Are we ready to compete with a private plan, or a public plan?

CONAN: Yeah.

Mr. HALVORSON: We are who we are, and we're probably ready to compete with almost anyone. Kaiser Permanente is a slightly different model than everyone else in health care. You probably know that, but we actually both insure care and deliver care. So we have clinics, hospitals, care sites, pharmacies, imaging centers. We have about 160,000 employees, and about 145,000 of them deliver care, and so we're primarily a care-giving institution. And then we also insure care. So people join us, and by joining us, they get access to our care delivery system.

So we're kind of a hybrid model, and it's kind of interesting because I go to the American Medical Association meetings, and we are one of the largest private medical groups in the world, actually a couple of the private largest medical groups in the world.

I go to the American Hospital Association meetings, and we're one of the larger hospital systems in America. And then I got to the AHIB(ph) meetings, and we're one of the larger insurance companies. And so we actually look at a much broader perspective, I think, than most. And then that's why we've got some of the beliefs we have about the need to coordinate care, integrate care and link care for patients because we don't function as silos. We function as a total team.

And one of the things we know is that 75 percent of the care costs in America come from patients with chronic conditions. Eighty percent of them have co-morbidities, meaning more than one condition. And for most Americans, that care does not get coordinated. If you have more than one specialist, you end up having a specialist with separate medical records, separate information flows, separate prescription flows, totally separate care. And so people who have complex conditions in America tend not to get the care coordination they need. And my sense is, actually, there's enough money in American health care right now in total for us to cover everyone in the country without raising the total cost of care.

CONAN: Our guest is George Halvorson, chairman and chief executive officer of Kaiser Permanente, as we're asking today, in the debate over health care: Are insurance companies the problem? Give us a call, those of you who work in the health-insurance business. 800-989-8255. Email What is it that we don't get about what it is that you do?

Let's get a caller on the line. This is Michael(ph), Michael calling us from Denver.

MICHAEL (Caller): Yes, hi. Mr. Halvorson, I am a hospitalist here in Denver with Colorado Permanente Medical Group, and I have a great concern that we, or I, as an employee of CPMG, are lumped in together by the public with for-profit health-care models. And I see that as a huge distinction in that, you know, any excess revenues that we get are put back into the system and not paid to shareholders, et cetera, and I wonder why we, as a group, don't inform the public of this. And thanks very much.

CONAN: All right, Michael, thanks for the call.

Mr. HALVORSON: I think you're making a very good point. Because of our combined model, we get a premium from people and we take care of them, and we don't have a fee-for-service model internally. So our physicians get paid salaries and work from care protocols and medical best practices. In the rest of health care, physicians are primarily paid fees for individual services, and those fees can be a real disincentive.

One of our programs, for example, we cut the number of broken bones by 37 percent by focusing on all of the patients at high risk and making sure that a team of nurses, doctors, specialists, kept those patients from having broken bones, right prescriptions, right therapies, et cetera. And for us that made a huge amount of sense because we are who we are. But if we were a fee-for-service model, we would have eliminated 37 percent of our hospital admissions, and those are very expensive admissions. Those are 20-$30,000 admissions, and we would have eliminated all of the surgical care needed to take care of those patients and all of that billing.

So we are a different model. Kaiser is a different model, but we understand the total health care delivery system of the country because we play all of the positions on the field. And so we know what the various revenue streams are and what the various care elements are.

We've actually invested $4 billion. We're about a $34 billion company, and we've invested $4 billion in electronic medical records so that we have, our physicians have all of the information about all of the patients all of the time in real time in the exam room. And then also lets our physicians do home visits that can't be done and electronic visits that can't be done in a lot of other settings. In fact, this year, we - at Kaiser, we will do six million e-visits with our patients. And if we were in any other setting, that would be six million lost opportunities to generate a bill.

CONAN: Again, our guest is George Halvorson of Kaiser Permanente. He's the author of new book called "Health Care Will Not Reform Itself: A User's Guide to Refocusing and Reforming American Health Care."

We want to hear from those of you today who work in the health insurance business. What is it that we as consumers don't get about what you do? What is it that we just don't understand? Give us a phone call, 800-989-8255. Email us, In the debate over health care, are insurance companies the problem? I'm Neal Conan. Stay with us. I'm the - this is TALK OF THE NATION from NPR News.

(Soundbite of music)

CONAN: This is TALK OF THE NATION. I'm Neal Conan in Washington. Health care in America is badly organized, highly inconsistent, internally dysfunctional, sometimes brilliant, almost always compassionate, close to data-free, amazingly unaccountable in key areas, too often wasteful, too often dangerous and extremely expensive - that from the introduction to George Halverson's book, "Health Care Will Not Reform Itself." He goes on to say: We can actually make care both better and less expensive. He should know. He's the chairman and chief executive officer of Kaiser Permanente.

Today we're asking, as part of our series of conversations on the health-care debate, are insurance companies the problem? If you work in the health insurance business, give us a call. What is it we don't get? 800-989-8255. Email us,

And let's see if we can get another caller on the line. This is Tom(ph), Tom with us from Charlotte, North Carolina.

TOM (Caller): Hi, Neal. Yeah, I'm not in - I don't work in the health insurance industry, but I am a health insurance consumer. And in my view, insurance companies by their very existence are the problem because of the overheads that they represent to the system directly through their staff. And I believe Mr. Halvorson implied that he has about 15,000 of his people work on the insurance side of the business.

Those people don't take a blood pressure, don't give an injection, don't dispense medications, don't do physical exams, yet they represent a huge cost. And then there is the indirect cost that every physician's office and every hospital has to bear to work with insurance companies to make claims, follow up on claims, process them, re-bill them to the patient when the insurance company does not pay or does not pay in full. All of these are just costs that don't have any direct efficacy on patient health care.

CONAN: George Halvorson, that's a criticism I'm sure you've heard before.

Mr. HALVORSON: That's a good point to make. Let me say a couple of things. One of them is that I wasn't very clear about the 15,000. Seven thousand of those people work in our IT shop, and they run our electronic medical records and our digital imaging centers and all of the areas that electronically support care. So the number actually of people who are doing pure insurance functions is less than that.

So about 7,000 are caregiver support team, and in fact, they take great pride in calling themselves caregivers in our shop. But relative to the other issues that the caller mentioned, we do have an amazingly complicated system or non-system relative to all kinds of administrative issues.

We shouldn't have physician offices needing to know 80 different claim-submission processes. That's a waste of time, it's a waste of energy, it's a waste of dollars. And what we should have are a couple of streamlined changes and reform, and one of them should be a single claims portal. We should evolve over time so that every physician office, if they're going to send a payment to Medicare, to Medicaid, to any private payer, can send it to one place in one form in one way.

CONAN: With one code.

Mr. HALVORSON: And have that place - one code, exactly, one code, and then have that site distribute the claims and then get the payment done and get the money back to the people. And there are a number of other areas where we ought to have standardization. And with computerization, standardization ought to be very possible. We should have personal health records that flow from payer to payer. So if you leave that and then to go CIGNA and go to WellPoint, your personal health information should flow so that it - the database is there when you get to the new site. And right now, that's all truncated. That's sitting in isolated files. The information isn't flowing from place to place, and patients don't have good information about their own health.

CONAN: Why haven't we gone to this system? Why does it take this crisis to generate these kinds of proposals?

Mr. HALVORSON: I think that it was a proprietary advantage of many carriers in the past to have a separate process. I think it was a competitive issue, and I think it's a competitive issue we can't afford. I don't think we can afford to have people competing on the design of their claims forms. I think it's too dysfunctional and too expensive for America. We need a single claims form. We need a single submission process, and the fact that this crisis is pushing us there I think is a good thing because those monies are not spent on people's care. They're spend on pushing around paper about the care, and that's the wrong use of money.

CONAN: Tom, thanks for the call.

TOM (Caller): Thank you.

CONAN: Bye-bye. Here's an email from Chris(ph). I've been in the insurance business for many years, for the most part in the underwriting end of the business. Underwriters evaluate groups for risk and set rates for taking that risk. Historically, we adjust trend, or the rate of medical inflation, and that is always well above actual consumer inflation.

Currently, the medical prescription trend is 12 percent annually. We simply pay the bills and load on our fees and reserve requirements. No one is talking about the hospitals and doctors raising fees and adding more tests, et cetera, et cetera. It is not the insurance companies. It is the providers. I'm not meaning to fully support the status quo, but it's irksome that nobody seems to be pointing the finger at the driver of costs, the providers. Well, Kaiser Permanente, a provider. You're on both sides of this argument.

Mr. HALVORSON: Yeah, we're on both sides of that argument.

CONAN: Do you agree? Are providers the problem?

Mr. HALVORSON: Well, one of the things that I've looked at - I'm chair of the International Federation of Health Plans. So I meet with health plans from 40 other countries regularly, and I know what their issues are, and I know what their expenses are. And one of the things I know is that if you deliver a baby in Canada as a physician, you get paid $475, and if you deliver a baby in Paris, you get paid $1,005, and if you deliver that same baby in the U.S., you get paid $1,500 to $3,500, and just about every other area of care has that same disproportionality.

So an office visit in Canada is $32. That same office visit in the U.S. is about 120 to $140. So the premium is the total amount of care divided by the total number of people covered. And if you pay twice as much or three times as much for each unit of care, of course your premium is higher. That's where premium comes from, and so the caller is right. We pay, per day in the hospital, our cost in America about $2,200 a day, and in Europe, they're under 1,000 a day.

So if we were paying - in fact, one of the interesting things that I put out just for conversation, we could not possible afford - the American health care infrastructure would collapse if we got paid a Canadian rate. So that it would not work. We couldn't pay our physicians, we couldn't pay our nurses, we couldn't pay our care system. But just to put it in perspective, we're sitting at about 17.6 percent of our GDP right now is spent on health care.

If we took our health care expense today, exactly as it sits, same number of visits, same number of hospitalizations, same number of tests, same number of drugs, same number of everything, and we applied the Canadian fee levels, where they pay half as much for each drug, they pay half as much for the hospital, they pay half as much for each office visit and well-baby visit and delivery, we would bring the GDP in the U.S. to about 11.5 percent.

We could cover everybody and give everybody a cash bonus for having coverage, and we're not going to go there but - and shouldn't go there because it would be totally disruptive to the health-care economy in America. But, yes, the health care costs in America are driven by the fees, and the fees in America are higher than fees anyplace in the world.

CONAN: Let's go next to Doug(ph), Doug with us from Dayton, Ohio.

DOUG (Caller): Hi. I work with the health care industry. I worked in managed care for 15 years, and I think that by negotiating contracts with providers, we're actually protecting the public.

If you look at a statement, if I look at a statement I get, where I've gone to the doctor, or I've had a lab test done, the negotiated price, the price that is actually paid back to the provider may be anywhere from a third to a tenth what they are actually billing. If somebody that went in without the network of an insurance company negotiating for them walked in, I could pay $200 for something that I actually only need to pay 20 for. That is the fully paid amount.

So I think that with the negotiating power that the insurance companies have, they are helping the consumer. Another thing I would like to toss out very, very quickly is there is - I have seen a very large not-for-profit hospital network that will go to the newspapers and say they're never reimbursed enough for their care, but yet they have money to pay millions of dollars for a number of high school football fields for advertising.

CONAN: Well, all right. I see your point, but Doug, I think you'd have to concede that most consumers don't see it your way. They - a lot of people really feel ripped off by the insurance companies.

DOUG: Oh, I'm sure that is the perceptive that they do, yes. But what I'm saying is I still believe that with the negotiating power, and I think the gentleman from Kaiser would help support me here, that by having a large network, we are still helping to control the prices on what the consumer actually has to pay, whether they pay it indirectly through their premiums or they pay it directly to the physician or the hospital.

CONAN: George Halvorson?

Mr. HALVORSON: One of the functions that insurance companies do generally play is to do joint purchasing. They do volume purchasing. So, they go to a hospital, instead of paying 2,500 a day, they will negotiate that price down to 2,000. That doesn't make the companies popular with the insurance or with the hospitals. And they're generally complaining that happens. But if the insurance companies did not negotiate those fees down, then the cost of care would be higher than it is now. That is true.

And one of the great ironies to me has been, there have been a couple of attorney generals and states who have actually gone to court to protect the providers' ability to raise fees at a point in time when the fees are the highest in the world. But there is that, is - that is part of the equation, is that the insurance companies do negotiate the fees.

The other issue on the insurance companies is if you take the total amount of profitability - we're not-for-profit, and we don't have stockholders, and I'm delighted. They love our model, and I would hate to be a for-profit company. So I would just be very clear about that.

But if you take the total profitability of all of the health insurance companies last year who are for-profit, it's about $25 billion. And $25 billion is a lot of money. And $25 billion against the total health care spend of America of $2.5 trillion is about 1 percent.

So, if that total spend went away, health care costs in America would come down by 1 percent. Now, 1 percent is a good thing, and 25 billion is a lot of money. But 1 percent is not the kind of numbers that people think about when you think about the cost impact of insurance companies on American health care. People generally think it's a much higher number than it is.

CONAN: Doug, thanks very much for the call. I just want to read a couple of emails, this from Susan. I will preface my statement that I work for a large health insurance company, first of all, as an accountant. I've had it engrained in my mind that the goal of a company is to maximize shareholder wealth - obviously, talking about for-profit companies here.

Insurance companies are owned by whom? Shareholders. Of course, high level people within the company I work for are going to do whatever they need to do to protect their position, salary, benefits. Secondly, what about the pharmaceuticals and the huge rebates they kickback to the health insurance companies?

And then this from Manuel: I work for a large health insurance company. If people knew the amount of wasted effort and money, they would be extremely surprised and angry. The company is more interested in the profit motive - again, he's talking about a for-profit company - than in correcting internal problems that directly affect their services. The company spent the past five years buying smaller health-related businesses and now finds itself in the position of getting 50 or more of these entities to communicate with each other. Standardization is a fine concept, but employer groups also need to buy in.

We're talking about health insurance companies today. Are they the problem in the debate over health coverage?

You're listening to TALK OF THE NATION from NPR News.

And let's go next to Don, Don with us from Weddington in North Carolina.

DON (Caller): How do you do, gentlemen? I am enjoying the program. I happen to be a chronically ill patient that suffered a Staph infection and - made me wheelchair-bound in 2006. However, had I not been able to secure a case manager nurse who was trying to take care of the patient as opposed to keeping the money away from being spent, I would not have a wheelchair. I would not have a ramp at my home. I would not have a handicap-equipped van, which I'm driving in at this time, or an electric wheelchair so that I could transport myself. And it boils down to the case manager nurse has to have the patient's the best interest at heart rather than the dollars (unintelligible) to keep in the insurance company's pocket.

CONAN: And so, Don, you felt well-served?

DON: I was well-served. But I have seen other case manager nurses that would go and not try to motivate the speed in which a patient needs equipment in order to just exist as a person in the society we live in.

CONAN: Thank you, Don. And good luck to you.

DON: Okay. Thank you.

Mr. HALVORSON: Exactly. Good luck to you.

CONAN: And here's an email we have from Dr. James. Those of us who think accountable health systems maybe an answer are drawn to the Kaiser model. What I do not understand is why Kaiser doesn't do better. I live in a market where Kaiser has had 25 percent of the market for more than 25 years. It doesn't cost much less, and it has less satisfaction with care than I would expect. I don't know why this has not swept everything else away. I especially wonder how doctors should be paid. Is physician productivity less than the Kaiser model? Or do you have administrative inefficiencies? Or just what is the downside of the Kaiser model? It should be perfect. I don't mean to be rude, but what's up?

Mr. HALVORSON: That's an interesting question. The - one of the things that it is true is that any markets that we're in, we tend to influence the market.

CONAN: Mm-hmm.

Mr. HALVORSON: So, if you look at Kaiser typical costs and compare those to Miami or Boston or New York City, those costs are multiple of the costs in our system, or much higher.

CONAN: Because you're not really in those markets. Yeah.

Mr. HALVORSON: Much higher. And we're not in those markets. Right. If we were in those markets, it would probably have a positive impact on those markets because the rest of the market would try to figure out how to be more efficient.

If you look in Southern California, there are all kinds of non-Kaiser medical groups that work very hard to manage care, coordinate care, do a good job in bringing down the costs of care, manage the dollars, in ways that they would not have to do if we weren't in those markets.

So the relative positioning and price is often a factor of the fact that the other folks in town don't just ignore us. They basically say, okay. If Kaiser is doing this with our diabetics, we need to do something similar. And that's kind of what I'm calling for in the book for the country.

What I'm basically saying for the entire country is this entire country needs to start coordinating care for our patients with chronic conditions and comorbidities. And we need to put the kinds toolkits in place, like care registries, that keep track of all of the care for the patients for those conditions and then coordinates to each of the doctors treating the patient. And if we could do those types of things, we can actually get that level of care every place in the country.

And you can have independent physicians who have no other business relationship other than to connect on a given patient. And if they have the right dataflow on the patient, connectivity is possible. But right now, they don't connect at all. In fact, if they call each other, they can have a HIPA violation relative to giving answer that they should be giving.

CONAN: HIPA, of course, the privacy aspect of this.


CONAN: George Halvorson, thank you so much for your time today. We appreciate it.

Mr. HALVORSON: Well, thank you for having me on the show.

CONAN: George Halvorson's book is "Health Care Will Not Reform Itself: A User's Guide to Refocusing and Reforming American Health Care," and he joined us today from member station KCPW in Salt Lake City, Utah.

Coming up: Skip Gates' arrest and the tensions between black and Latino men and law enforcement. Dawn Turner Trice joins us as part of our series Talking Race.

Stay with us. I'm Neal Conan. It's the TALK OF THE NATION from NPR News.

Copyright © 2009 NPR. All rights reserved. Visit our website terms of use and permissions pages at for further information.

NPR transcripts are created on a rush deadline by an NPR contractor. This text may not be in its final form and may be updated or revised in the future. Accuracy and availability may vary. The authoritative record of NPR’s programming is the audio record.