A U.S. Senate study released Wednesday documents just one health insurance fraud scheme, but it found that virtually the entire health insurance industry was participating. Insurers intentionally underpaid certain claims by approximately 30 percent. The study also found that the companies compounded the fraud by intentionally misleading customers about the extent to which they would pay claims.
Tens of thousands of insurance company employees must have participated in this pattern of fraud for more than ten years, yet no criminal charges for insurance fraud are planned, and this is just one of many ways in which insurance companies commit insurance fraud. It is no wonder if health insurance companies feel as if they can do whatever they want, with little or no risk of prosecution or government intervention of any kind.
This state of affairs is largely the result of the conflict of interest built into health coverage, and it can be corrected only by changing the way the health insurance industry operates. But restructuring the whole industry could take five years or longer. A quicker approach would be to have the government set up its own health coverage system with integrity built into to the way it operates. People who need coverage now should not have to wait five years just because it is hard for insurance companies to change — and it could be more than ten years if the insurance industry decides to challenge the reforms in court. But after a properly functioning government health plan exists, the insurance industry could copy the practices of the government health plan.
If the system worked the way the laws say it should, many of the insurance companies should be shut down. If fraud is supposed to be a sufficient cause to revoke an insurance license, then a business model based on fraud ought to permanently disqualify a company from any involvement in the insurance business. I suspect the reason regulators do not take action against insurers is that they are afraid they will make a bad situation worse. But if we are so dependent on the insurance companies that we cannot rein them in no matter what crimes they commit, that is all the more reason to create an alternative.