How a dispute with an insurance company can affect patients

8,000 patients will no longer be able to receive care from UNC Hospitals and their affiliated physician practices because of a dispute between UNC and the insurance company Aetna.

The bottom line is that Aetna does not want to pay as much for care provided by UNC as UNC wants to be paid for providing this care. No surprise there, as the interests of the two parties (health care provider and insurance company) are in opposition. However, UNC has taken the unusual step of no longer accepting Aetna’s insurance, forcing 8,000 persons to receive care elsewhere (some can get exceptions). And Aetna hasn’t backed down and increased the pay rates.

And patients are upset, because their preferred pattern of health care delivery has been upset.

There are numerous examples in everyday life in which one party wants to get paid more than the other would like to pay, and a business decision is made. I would rather Duke pay me more for being a professor than they do, but my desire is not such that I am looking for a new job. Likewise, I would rather not still drive a minivan because my kids are a bit older, but the van is paid for and I don’t want to pay as much for a new Honda Accord as the local dealer wants for it. Similarly, I am a season ticket holder for the Carolina Hurricanes, but I have upper level seats instead of lower level ones, simply because I am not willing to pay the difference in ticket price between the levels. I would rather sit in the lower level, but not that much.

All of us make innumerable tradeoffs and choices in deciding how much we are willing to pay for goods and services, and we don’t think much about it. Many people claim they want more competition and sensitivity to price of this type in health care. However, whenever you get a story like the dispute between UNC and Aetna, people get very upset because they no longer get to keep their doctor, or receive care from the hospital of their choice. I don’t know any details about how far apart UNC and Aetna are, and there are many unstated reasons that one or both of the sides in this negotiation may not want to strike a deal. It doesn’t really matter, because this is simply a story of two organizations seeking to do business in their best self interest.

If your reaction to this story is ‘but health care is different from those other examples you gave’ then you probably don’t think that health care is just another good.

Increased competition and market forces brought to bear on health care and in health insurance would increase, not decrease disruptions such as this one. That might be good or bad depending upon your perspective. And of course health insurance is not the same as health care, but very few could hope to afford care if they got sick without insurance, so a third party being involved in the patient/provider relationship is virtually inevitable, and likely to increase if we are to address health care cost inflation.

Donald H. Taylor Jr. is an associate professor of public policy at Duke University and blogs at The Incidental Economist.

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  • inchoate but earnest

    “this is simply a story of two organizations seeking to do business in their best self interest.”

    Of course. None of those whom Aetna insures, or for whom they merely process claims (where Aetna’s acting only as an administrator, on behalf of employers) are affected by this squabble any way.

    Humans (“policyholders”, “covered employees and dependents”, “patients”) and their squishy needs, fears, hopes & desires are such annoying little externalities.


  • solo fp

    I am sure Aetna has figured out that the change in doctors is minor compared to the risk of losing revenue from paying higher fees. For small groups and solo docs, it is a take or leave attitude with the insurance companies. Most of the 20+ plans that I am on pay less than Medicare fee schedule from 2-4 years ago. The 8000 consumers above have the choice to pay more for their care to keep their docs, but most will choose new doctors.

  • Marc Gorayeb, MD

    The author is right. Heath care is not just another good. Providers like UNC have the power to engage liberally in price discrimination, and insurers like Aetna have the market power to push back. The issue is whether the provider is so valued by its customers (patients) that they are willing to abandon their insurer for another willing to do business with UNC. Aetna presumaly has calculated that enough of its customers are sufficiently indifferent to their providers that they will be willing to switch providers in favor of lower relative premiums.
    The only way this rational economic activity fails to work to find a ‘market price’ is if any of the actors has near-monopoly power. Monopoly power can be due to failed government restrictions on a health care provider that has cornered the market for certain services, allowing it to over-price them. Or it can be due to excessive government regulation of insurers (with coverage mandates and premium review authority) that chases away a healthy number of competitors from the insurance market, stranding disgruntled insureds with nowhere else to go.
    Thus any way you cut it, you should look to an ideological and/or incompetent government for reasons why the system fails to work the way it should.

  • jim jaffe

    there are, of course, other options. Maryland’s comes to mind where the state sets rates that all users pay hospitals for care. real question here is whether insurer continues to provide access to competent care and both parties have an agreement to smooth transitions when such situations occur.

  • Elizabeth Rowe

    The real problem here is that the parties negotiating are not the actual receipients of the “good” that is being “sold”. The “good” is an interaction between a patient and a physician. But in the current system, the patients and physicians are mere pawns in the giant big business that health care has become, namely an insurance company vs hospital ediface company negotiation rather than a patient-physician negotiation which it should be. And one might ask what percentage of the premiums are going to the adminstrators, both hospital and insurance, and lawyers, who are doing these negotiations. (they have probably figured out a way to count most of it as delivery of services, so it doesn’t show in their medical loss ratio.)

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