Health insurance companies excel at devising new ways to reduce their losses, but it is doctors and patients who pay the price for their utilization management strategies. Doctors now spend more time filling out forms than caring for patients. Patients jump through endless administrative hoops to access care. Both have run out of patience and are demanding a return to a healthcare system where doctors, in partnership with their patients, drive patient care decisions.

In the last four years alone, physician burnout has increased by 25%, according to Medscape’s Lifestyle Report 2017. The main cause reported was “too many bureaucratic tasks.” Doctors now spend more time entering data and reading guidelines than examining patients and treating illness. The American College of Physicians (ACP) estimates that doctors have to spend two hours completing additional administrative work for every hour spent interacting with a patient.

It should come as no surprise to anyone that the amount time U.S. physicians spend on paperwork has increased proportionately with the growth and complexity of managed care. The U.S. healthcare system is a sprawling web of payers, including multiple employer-provided plans, dozens of independent insurance providers (each of which may offer a handful of different plans), a federal Medicare bureaucracy, and 50 independently-administered state Medicaid programs.

The average doctor answers to over a dozen third-party payers at any given time. Each payer has its procedures for verifying patient eligibility, collecting copays, filing claims, billing denied claim lines, referring to specialists, measuring care quality, and appealing denied claims, each of which can change with little notice.

The cost of all this reporting has ballooned as well. Administrative costs as a percent of total U.S. healthcare spending doubled between 1980 and 2010. Paperwork for third-party payers now constitutes about 18% of the country’s total healthcare expenses, an estimated $471 billion in extra healthcare costs each year. Per doctor, total billing and other insurance-related costs amount to as much as $85,000 each a year, according to the American College of Physicians.

 

These practices are not only time-consuming, but are also costly and dangerous

For all the added costs, patients are facing rising premiums and steeper deductibles. Americans with employer-provided healthcare saw their premiums rise by 255% since 2006, according to a 2015 Kaiser study. Despite paying these extra costs, Americans are increasingly being denied access to prescribed treatments, which is jeopardizing the health of patients treating chronic diseases—like diabetes, high cholesterol, or cancer—in particular.

A recent survey by the Doctor-Patient Rights Project (DPRP) found that insurance providers denied treatment coverage to nearly one-in-four patients being treated for a chronic or persistent illness or condition—as many as 53 million insured Americans. Most patients had to wait over a month just to hear the bad news (28% waited 3 months or longer).

For over a third of those patients, the out-of-pocket costs proved too high and they had to skip treatment altogether. More than 40% say they were already “in poor health,” and 29% said their condition worsened.

Among the patients denied coverage for a prescription medication, 24% reported that their insurer deemed their treatment “medically unnecessary,” 12% said their insurance provider denied coverage because their insurer requires them to try a series of cheaper drugs first (a policy known as “step therapy” or “fail first”), and 5% say their insurance provider covered an alternative medication used to treat similar symptoms instead (a policy known as “therapeutic substitution”).

More than half of American adults report that they, or someone they know, had to battle their insurance company to overcome these “utilization management” strategies and get their insurer to cover the cost of a prescribed treatment. Many lost and either had to pay costs out-of-pocket or forego treatment entirely.

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The downside of pharmacy management

When insurance companies are not erecting barriers to patient access to healthcare, they are denying coverage outright. In particular, insurers have rapidly expanded their formulary exclusion lists, annual catalogs of all the treatments the insurance company will not cover, except in dire, rare circumstances.

The number of treatments the nation’s second largest pharmacy benefit management (PBM) company (CVS/Caremark) excludes more than quadrupled, from 38 exclusions in 2012 to over 168 in 2017. Express Scripts (the largest) has yet to release its formulary exclusion list for 2018 but has revealed that it will include 159 treatments, more than any other PBM.

Formulary exclusion lists ostensibly save insurance companies money by allowing them to refuse to pay for the most expensive drugs if there are cheaper alternatives. The substitute drugs, however, may have an entirely different chemical structure from the medication the doctor originally prescribed, which can reduce the effectiveness of treatment and adversely impact patient health.

Drugs that treat similar illnesses or symptoms are generally grouped into the same therapeutic class. But exact substitutions are rare. Doctors decide which drug to prescribe based on medical science and sound clinical practice, taking into consideration a patient’s particular physiology and medication history. The cost to the insurer is (and should be) a secondary factor, if it is a factor at all.

For insurers, cost is often the primary concern. Too often, however, the cheaper treatment the insurance company will cover is not as effective as the treatment the doctor prefers. In some cases, the insurer’s choice can introduce complications from unknown drug interactions or adverse patient reactions.

Unfortunately, insurance providers are increasingly exercising their powers as payers to make themselves the final word in treatment decisions. While no insurer can bar a patient from receiving prescribed care, they can withhold payment, which amounts to blocking access to treatment for many patients.

 

Patients may be reaching their breaking point

Patients may be reaching their breaking point. More than two-thirds of the patients DPRP surveyed said their perception of their insurer either had not changed (27%) or had gotten less favorable (38%) over the past 5 years. A clear majority (52%) felt insurance providers were playing a less constructive role in healthcare than they had previously. Even more (64%) felt that insurance companies were failing their customers—a number that grows to 85% among patients who had been denied treatment coverage for a chronic condition.

The highest number of respondents to DPRP’s survey (91%) rejected insurance companies having the final say in treatment decisions. Almost as many (88%) said they wanted their doctors to be empowered to fulfill treatment decisions, without interference from insurance providers.

Health insurance is costing America’s doctors and patients more time and more money. In return, they are getting more paperwork burdens and less access to the care they believe they are paying for through their premiums. Insurance companies, in the meantime, do not appear to be suffering any similar losses. In fact, despite increased regulatory compliance costs under Obamacare, U.S. health insurers made record profits last year, according to an Axios analysis.

The situation is unsustainable. Insurance companies would be wise to start rolling-back their barriers to healthcare access for patients and removing some of the excessive administrative burdens on doctors. If they refuse, they could soon see losses of their own, in the form of fewer customers, greater regulation, or both.