How do health insurance companies determine what they’ll cover?

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As someone that has had troubles with insurance companies, I can say that there are a lot of things that don’t make sense to patients or doctors.

And now that I’m doing an internship in the mental health field, I’m seeing a daily struggle with insurance companies to get people the help they need because insurance companies say “I know the treatment plan is x number of days, but we don’t think that’s necessary”

How can insurance companies deem treatments unnecessary or even cut them short compared to what health professionals consider necessary? Are they held to a certain standard or is it up to them because they’re a private business?

I understand that insurance companies themselves don’t stop treatment, but by cutting off what they’ll cover, they don’t leave patients any choice.

In: Other

They make a calculation how expensive it is to cover each person and how likely each condition is to occur and price accordingly.

Insurance pays for whatever’s covered in the contract. If you know of insurance companies that are refusing to honor contractual obligations, you can report them to your regulator. Even just threatening to report them to the regulator will make them pay up quickly.

Insurance is all about managing risk – if you offer a very generous policy that covers everything and anything without limit, you probably won’t make much money as you’ll always be paying for treatments. If your policies are too strict, then you still won’t make any money because you won’t have any customers since they will see it as a waste of money.

Trying to strike that balance between what is useful for customers and what is profitable to offer sometimes results in insurance companies deeming things unnecessary or placing limits on procedures.

It’s a very complicated coast analysis on their end. The short notes version of it is:

Health insurance company are “betting” you **won’t** get sick or hurt. Meanwhile you (who are paying the health insurance) are **paying in** for the day you do get really sick or hurt.

The longer explanation is:

Small things like yearly check ups and getting medicine for common illnesses are usually covered and inexpensive (depending on whatever your plan is). This is what the “co-pays” covers. The health insurance pays for most of this and you pay out-of-pocket for the difference.

Beyond that, things like broken bones and other more serious but still common injuries and illnesses are usually covered if you have a better “premium” plan.

Really rare or very serious injuries and illnesses that require additional treatments or physical therapy have a limit. This is where **ALL** of your **paying in** comes in. The health insurance company will pay up to a limit based on whatever level of their plan you were paying for.

It’s part of the design of their products. They use statistics to project/model the probabilities for their customers. Then they specify things very precisely in their contracts. Some jurisdictions, like the US, have laws, The Affordable Care Act in the US, which set bounds on things they must include in the contracts or must not include in the contract. The person who signs the contract and takes on the insurance policy is doing that with knowledge of the terms of the contract for coverage.

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