The Hidden Cost Of Unreliable Insurance
Profit-driven health insurance may irreparably damage what it ought to aid: health.
Since UnitedHealthcare (UHC) CEO Brian Thompson was murdered last month, the health insurance company has faced heightened scrutiny from the media and the public. I, too, started paying closer attention, and what I saw made my blood boil.
It turns out that UHC’s parent company, UnitedHealth, also owns a service provider branch called Optum and a pharmacy branch called OptumRx. The Wall Street Journal wrote in December that UnitedHealth had bonused Optum doctors to diagnose elderly patients with conditions that did not require treatment but did allow UHC to claim more money from the federal Medicare Advantage fund. Weeks later, the Federal Trade Commission alleged that OptumRx unnecessarily marked up the prices of some life-saving drugs by more than 1,000% to boost revenue, which was made possible by controlling companies throughout the drug supply chain. The profits, of course, were billed to tax payers and consumers.
Shattered trust
It’s particularly easy for me to get mad at all this because—perhaps you guessed it—I am a UHC customer. When I acquired U.S. health insurance last September, I was initially pleased. UnitedHealthcare sounded great: who wouldn’t want to be united, healthy, and cared for? The name of my plan—Choice Plus 80—sounded even better. And I trusted my employer, Columbia University, to select the right insurer for me. I rested easy, knowing I could not be blindsided by Kafkaesque communications and frivolous bills.
That trust is now thoroughly shattered. Whenever I need medical attention, my insurance company might try to milk me for profit. If I just need rest, I might get a costly referral. If I need medication, I might be overcharged. And everyone I deal with in these interactions might secretly be working for The Company. Instead of cared for, I feel exploited; rather than protected, I feel exposed.
Enshittification
At the face of it, the American health insurance debacle is in line with other products’ recently losing their appeal. In online platforms such as Facebook and X, ‘enshittification’ has made the user experience progressively worse as tech companies sacrifice quality for advertiser revenue and eventually shareholder value. Aerospace giant Boeing revealed its incompetency when a door plug fell off a plane mid-flight last year, causing passengers to rush to Airbus-only filters on booking sites. And even mundane items like clothes are of much poorer quality than even ten years ago.
We tend to respond to all this with a shrug of resignation. Oh well, we say, it’s a shame we can’t trust classic brands anymore, but we’ll just shop around for an alternative. But insurance is a special case. With insurance, the trust is the product. Indeed, trust itself produces the outcome health insurance is meant to promote in the first place: health.
The ‘peace of mind bonus’
One convincing piece of evidence comes from Oregon. In 2008, 30,000 poor Oregonians were randomly invited from a waitlist of over 90,000 to apply an expansion of the low-income health insurance program Medicaid. Harvard professor Katherine Baicker and her colleagues interviewed 6,387 people from the invited list and 5,842 from the waitlist two years later and compared their health outcomes. Getting health insurance nearly eliminated catastrophic out-of-pocket health expenditures (>30% of household income in a given year)—just as intended. Surprisingly, although health insurance raised the chance that people participated in preventive health services, the effects on most health outcomes were negligible. But there was one major exception: depression. Getting insurance lowered the chance of experiencing significant depressive symptoms from 30% (on par with low-income screening rates in other countries) to about 21%.
Could it be that health insurance itself provides enough peace of mind to alleviate depressive symptoms? Well, we can’t say for sure. Depression treatment plays into it to, as acquiring insurance raised the likelihood of having depression diagnosed by a professional rose from 5% to 9% and antidepressant use trended upward from 17% to 22%. However, it turns out that other forms of insurance, which have nothing to do with health services, also reduce depressive symptoms. During the covid-19 pandemic, for instance, many states made it illegal to evict people from their homes for missing rent or mortgage payments. An analysis of the U.S. Census Bureau’s Household Pulse Survey showed that such eviction moratoria lowered the likelihood that people who had difficulty paying their bills also developed anxiety or depression symptoms. In other words, being protected from a worst-case scenario may itself improve mental health.
Out of reach
The truly infuriating thing is that in a profit-driven health market, this ‘peace of mind bonus’ is never within reach. It’s a unique advantage of collective, not-for-profit solutions that can never be recovered in individualist alternatives. And that adds an interesting layer to political debate around health insurance. Economists may argue for keeping costs low, activists may emphasize fairness. The research above reveals a third way to reason about insurance. Some forms of insurance might keep us healthy simply by how they’re organized—meaning they save both money and fairness. So next time you read a tale of a corrupt corporation, remember that the corruption itself steals something you can’t buy back: trust.