Who Was Actually Paying My Medical Bills?
Have you ever actually read your insurance card? I hadn’t. In ten years here it was a thing I handed over at the front desk, watched someone scan, and took back. There was a logo on it, so that was my insurance company. Done.
The other day I was moving the card to a different wallet and happened to look at the front. Under the Cigna logo, in small type: Shared Administration PPO. PPO I know. Shared Administration? Shared… administration?
So I dug up the old Premera card I used to carry. That one has a whole sentence printed on it: Premera Blue Cross provides administrative service only and does not assume financial risk or obligation with respect to claims. At the time I filed it under legal boilerplate and moved on. Reading it now, it was already explaining everything. Premera was telling me, right there on the card, that it carries no financial responsibility for my medical bills. It only handles the paperwork.
Here’s something most people working in the US go their whole careers without learning. If your company is big enough, the one paying your medical bills is not an insurer. It’s your employer. The company doesn’t buy insurance from an insurance company; it pays its employees’ medical costs out of its own pocket. This is called self-funded, and despite the name it isn’t really insurance. Insurance means handing your risk to somebody else. This is a company just paying. It’s common once you’re past a few hundred employees, and nearly universal above five thousand. The reason is simple: the company would rather keep the margin and the risk premium an insurer would have taken. To keep one catastrophic claim from blowing up the budget, they buy something called stop-loss, which is roughly reinsurance for the employer.
So what’s the insurer’s logo doing on the card? This is where a contract called ASO (Administrative Services Only) comes in. A big insurer sells no insurance at all and handles only the administration: processing claims, lending out its hospital network, running the call center, printing and mailing the cards. That sentence on the Premera card meant exactly this. The Premera card in a Microsoft or Amazon employee’s wallet works the same way. The card says Premera, but the money leaves that company’s account. From the employee’s side it’s almost impossible to tell apart from ordinary insurance. There’s a logo, someone picks up when you call, and that company’s name is on the bill.
Trying to tell the difference is a bit of a letdown. No card politely informs you that it isn’t insurance. The tell is the language about who carries the financial risk. If you see something like does not assume financial risk, the plan is almost certainly self-funded. The insurer puts that line there because it needs to be on record as not being the one on the hook, which happens to make it the one clue an employee gets. If your card only has a product name on it, like mine does, you’re left searching that name. To be sure, look up Form 5500. Under ERISA (Employee Retirement Income Security Act), the 1974 federal law that governs employer benefit plans, companies file an annual report on those plans with the Department of Labor. It’s public, so you can look up just about any company. Quietly useful when you’re weighing a job somewhere and wondering what their plan really is.
So what was the Shared Administration on my card? A Cigna product name. An independent TPA (Third Party Administrator) does the administration, and Cigna lends out its PPO network and access to its negotiated hospital rates. Which means what Cigna does on this card is closer to renting out a network than selling insurance. They’ve pre-negotiated discounts with hospitals, and they charge for the right to use them. TPAs come in varieties too: UMR is owned by UnitedHealthcare, Meritain belongs to Aetna (CVS), Allied is independent. At some point you stop counting how many companies are tangled up in a single card.
Premera or Cigna, both cards that passed through my wallet turned out not to be insurance.
When I explain this to people back in Korea, I put it this way. In Korea, NHIS, the national insurer, is the wallet, and HIRA reviews the claims. Both run nationally, in one piece. The US takes those two jobs and splits them company by company. The wallet is wherever you work, the review and administration go to an insurer or a TPA, and the hospital rates get rented from a network. Which is why companies that would have no reason to exist in Korea exist here as an industry. When I first started working in healthcare, I stared at a list of company names with no idea what any of these places did. Turns out there’s one company attached to each of those little shards.
One more thing: health insurance being attached to your job was nobody’s plan. During World War II, wage controls came down, and companies scrambling for something to offer instead of money started throwing in health coverage as a perk. A historical accident, hardened over eighty years into the structure we have now (oof).
Next time you have your insurance card out, flip it over and read it. There’s more on there than you’d think.
References
- Search Form 5500 through the US Department of Labor’s EFAST: efast.dol.gov/5500Search