Health

'They Know How to Bamboozle People': Former Insurance Exec Says Industry Will Fail Us During Coronavirus

"This pandemic, if anything, is waking people up to just how unreliable, and insecure, the current healthcare system is."
April 15, 2020, 11:00am
possible-coronavirus-patient-elmhurst-hospital-new-york-city
Two members of the Fire Department of New York's Emergency Medical Team wheel a patient into the Elmhurst Hospital Center in the Queens borough of New York City on March 30, 2020. (Photo by Robert Nickelsberg/Getty Images)

Shortly after Nataline Sarkisyan died at age 17 in 2007, Wendell Potter quit his job at Cigna. The health insurance giant had initially denied Sarkisyan a liver transplant. Days later, the potentially life-saving procedure was approved, but Sarkisyan died within hours of the approval. At the time, Potter was Cigna's vice president of corporation communications, and his job was to defend the company's actions to the media. He simply couldn't do it anymore. "I guess you'd say the straw that broke the camel's back," Potter said. "After being a part of handling the PR from that particular case, I just couldn't keep doing my job as I had. I couldn't do it in good conscience."

After leaving Cigna, Potter testified before multiple Congressional committees to explain how insurance companies operate and how their lobbying efforts work. After 25 years working in the private insurance industry, Potter not only refers to himself as a "reformed insurance propagandist" but is now an advocate for Medicare for All.

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VICE spoke to Potter about how the coronavirus pandemic—and the resulting recession—highlights the problems with for-profit, employer-sponsored health insurance. "Before this pandemic started, we had almost 30 million people who are uninsured," he said. "That's going to increase dramatically over the coming weeks."

This interview has been lightly edited for length and clarity.

Do you remember when you decided to support Medicare for All, and what led to that change of heart?
It was kind of gradual. For a number of years after I left Cigna, I didn't because I just thought it was too much of the heavy lift for members of Congress to support.

I began to see things change about three years ago, and began to notice, too, that more and more Democrats, and a Democratic caucus of the House, began signing on to Medicare for All legislation. But what I also began to understand around the same time was that employers, businesses around the country, are really struggling to continue offering benefits to their workers. Our employer-based system of health insurance is crumbling, it has been now for a couple of decades. It's been gradual, and not many people have been paying attention to it.

For example, when Amy Klobuchar and Pete Buttigieg were still running for president, they and Joe Biden were talking on the debate stage about the 150 million people who have coverage through the workplace, that they want to keep those private plans. But what they didn't tell you is that 20 years ago, 160 million people got their coverage through their employers, and during that time, the population increased by 50 million. More and more employers are throwing in the towel—they just can't continue to offer benefits to their workers.

When I realized that, and after talking personally to a number of employers, I thought, well, we really have a big problem that only real transformation can fix. And that's when I became a very vocal advocate for Medicare for All, just within the last three years.

Is it fair to say that the for-profit model of health insurance is to deny as much care as possible?
It is very fair to say that. That's how they are able to generate as much profit as they do. Insurance companies put up so many barriers for people to get the care that they need, and that's one of them. It's a process called prior authorization. Before Nataline's doctors were able to proceed, they had to send documentation to Cigna. Doctors and nurses reviewed it, a doctor who had never laid eyes on Nataline made that decision [to deny the transplant]. Insurance companies have unbelievable power. They have positioned themselves right between patients and their doctors, and they're the ones who really call the shots in many cases.

Prior authorization is one of their big tools they use to maximize profits. It results many times in delays of doctors being able to provide the care that they need to the patients. And in many cases like Nataline's, their patients die. It is absolutely the case that these companies are in the business to make money, and their biggest way of doing that is to, in various ways, make it more difficult for people to get the care that they need.

If one of the tools is to deny care, what does that look like during a pandemic? How do insurance companies operate during health-related emergencies like this, where hundreds of thousands of people could die?
The insurance companies are telling financial analysts that they think they're going to come out of this just fine—in fact, they might even make more money than they'd planned—and they've reiterated their profit expectations for 2021. They're basing that assumption on the fact that a lot of hospitals are canceling procedures that had been scheduled: Whether it's a knee replacement, hip replacement, or something else that's not life-threatening, hospitals have been canceling anything that is not emergent. That means that these insurance companies are not on the hook to pay for those procedures.

Also most of the people who are enrolled in health benefit plans now are in high-deductible plans, which means they have to pay quite a lot of money out of their own pocket. It depends on the plan, but in many cases, individuals and families have to spend thousands of dollars before their insurance company will pay a dime. Some insurance companies have said that they will waive co-payments for [coronavirus] testing and treatment, but not all of them. And so it's kind of the luck of the draw—there's no way of knowing that any one person will have to pay X amount of dollars out of their own pocket. It just depends on what their insurance carrier has decided, or what the employer has decided as well.

Another way that [the companies] anticipate that they'll be making money is a lot of the people who will be treated for the coronavirus are people who are in ill health, or have preexisting conditions like pulmonary problems, or diabetes, or heart issues. It's something that has required them to be on maintenance medication or have procedures done in the past. This may sound terrible, but it's the truth: A lot of those people are going to die.

Insurance companies are going to be avoiding paying for care [of those underlying conditions] because, if the expectations are even as the Trump administration is saying, that between 100,000 and 200,000 people are likely to die from this, and at the low end. Insurance companies, their bean counters are taking all that into consideration. They may be able to get through this without paying much more, if anything more, in medical claims.

But here's the other thing they can do: If they do have an uptick in paying medical claims [from coronavirus], they know, and they've already signaled this to customers and to Wall Street financial analysts, that they will just increase rates on everybody next year. We're seeing that: The officials who run the California health care exchange, Covered California, have already announced that premiums could go up 40 percent next year. Employers are being notified to expect a hefty increase in premiums next year as well.

These companies know how to make money, they know how to pull various levers. The thing they cannot do effectively, and makes me want to question why we can still keep them around, is they really can't control the unit cost of goods and services. They can't control the costs of prescription drugs. If they could, we wouldn't be seeing these incredible increases in the price of prescription medications over the past few years. No one insurance company is big enough to really have much of an ability to bring down the unit cost of pharmaceuticals, for example. So what they do is, as I said earlier, try to decrease the use of goods and services.

If the insurance companies say that they think they're going to come out of this just fine, is there a world in which they try to delay rescheduling those canceled, elective procedures for months and months, even after the coronavirus apex has come and gone, even after we're not really having hospitals get flooded?
They will. They'll be able to use their ability to insist on prior authorizations for a lot of, certainly the high-ticket items like an expensive surgery, a hip replacement for example. They can use that lever to slow down the utilization of care, so I would certainly expect that to happen.

But it's not entirely under their control. In the past, doctors have admitted patients into the hospital for procedures. But as I said earlier, increasingly, insurance companies are using prior authorization to avoid paying for care, or to keep people from being hospitalized in the first place. Or if they're in the hospital, [keep them] from being discharged to other facilities like rehab facilities. It's just a crazy, crazy system that we put up with, and we put up with it because we don't really have an alternative right now. We grew up with this system, and can't imagine that things could be better. They can, but people just have kind of accepted that this is the way things are.

[Insurance companies] know there is a good possibility that they could wind up paying out more in claims than they had anticipated, even with all these other procedures being canceled. But again, what they will do if that indeed happens—and even if it doesn't happen—they probably will raise rates considerably more next year than they have in the past.

If they're saying to analysts that they think they'll come out of this just fine and knowing that many of the largest insurance companies are making billions of profits every year, why do they have to raise premiums?
They don't have to. They do because they can, and their shareholders expect that. The pressure on the C-suite executives comes from shareholders and Wall Street financial analysts. They've got pressure constantly from shareholders to meet a certain profit level. They look at the earnings per share—every quarter when these companies announce earnings, they look to see if the companies have earned as much as the consensus estimate of the Wall Street financial analysts. And if the companies come in missing that estimate by a penny, then the shareholders get nervous and, in many cases, they'll start selling their shares of stock, and that will bring the share price down. That is the thing the CEO and CFO, and all of the top executives, try to make sure doesn't happen. They'll do whatever they can to meet or exceed those EPS expectations.

The shareholders and analysts are the stakeholders that are most important to these companies. I can assure you that's the case because I worked with a CEO and CFO and the investor relations team, very, very closely over 10 years at Cigna.

Those are the stakeholders who are most important, as opposed to the people that they're purportedly trying to keep healthy?
Absolutely. In those 10 years [at Cigna], I honestly cannot recall a conversation among the top leaders—and by that I mean the CEO and CFO, and others on the executive management team—I can't recall, with the exception of maybe the Chief Medical Officer of Cigna Health Care, talking about the needs of customers and patients. It is more about the needs and expectations of shareholders. That is what drives the behavior of these companies.

How are you even able to talk about this? Did you have to sign an NDA when you left, or did it expire?
I did. It comes with the territory. But as my lawyer and I reviewed the NDA, one of the things that was very apparent was that, as long as I told the truth and didn't disclose necessarily a thing that was proprietary to a specific company, I shouldn't have any problems, and I've done that. When I talk about these practices, it's the truth. These are industry-wide practices. It's not unique to Cigna or Humana where I worked, or to United, to Anthem, to Aetna, to Blue Cross plans around the country—they all operate in the same way.

We're talking about our current system. I want to take a minute to think about what the U.S. response to coronavirus might look like if there were a Medicare for All, single-payer type healthcare system in place.
We only have to look at the experience of some of the countries around the world that have done a much better job, including Taiwan, for example, which is right next to China [where the outbreak began].

They have a single-payer healthcare system that was actually modeled after our Medicare program in many ways—a program that's been around in the U.S. for more than 50 years and it's been very successful. In Taiwan, because they have that kind of system, their spending per capita is far less than what it otherwise would have been, far less than what it is in the United States. The U.S., as you probably know, spends more in the aggregate, and also on a per capita basis, on healthcare than any other country in the world, but our outcomes are, in most cases, worse than they are in other developed countries.

A big reason for that is we waste so much money on overhead and administrative stuff. About 30 percent of every dollar we spend on healthcare goes to operating this multiple-payer system that we have, and all the associated overhead and profit making. That's not done now in Taiwan and most other developed countries.

In Taiwan, they were able to get ahead of this in many ways, also through their investments in public health. In this country, only three cents of every dollar that we spend on healthcare goes to public health, to get us more prepared for something like this. Other countries have spent more, and were consequently more prepared.

Another problem here is that, on the provider side, a lot of hospitals have moved into ordering supplies on an as-needed basis to keep inventory down. And, they've been caught, in many cases as we could see across the country, not having a stockpile of masks and other things.

We've tried to see healthcare as a business in this country, and a profit-making business, rather than a means to prevent people from getting sick in the first place—and if they do, getting them well, and best in outcomes, as other countries have. We're seeing, and paying, for the consequences of that foolishness over all these years now.

What about other weaknesses the U.S. has, like a shrinking number of hospital beds over the past 45 years and a shortage of ventilators. Can a Medicare for All or a single-payer type system address issues like those or not?
Let's take hospitals as an example. The Medicare for All bill in the House, the lead sponsor of which is Pramila Jayapal, would set up a means of global budgeting for hospitals. They would look at how much a hospital has spent over, say, three years and anticipate what that spend might be, or what the budget should be to meet the needs of the community that it serves. They would have a budget that they could rely on, and I think we would have avoided so many hospital closures in this country. One of the reasons we have so few [hospital] beds per capita is because so many hospitals have shut down. I live in Philadelphia and one of the largest hospitals here shut down a few months ago.

Is that Hahnemann Hospital?
Hahnemann, exactly.

I grew up in Tennessee and Tennessee over the last two or three years has seen at least a dozen, I think 12 to 15 rural hospitals in that state closed. In many cases, those hospitals were bought by hospital chains that decided after buying them that those hospitals were a drain on profits, so they shut them down. Or the ownership was private equity firms, which decided at some point to shut them down. If we had had a Medicare for All-type system that provided adequate funding for hospitals all across the country, we wouldn't be in this situation. Where we are right now is that we have far fewer beds per capita in this country than China does—far fewer—and far fewer than South Korea does, fewer than most of the developed countries in the world.

We've allowed that to happen [by] not being too terribly worried about it. People in rural areas moan about their hospitals being shut down, but policy makers have not done very much of anything at the state or federal level to fix it.

Would the global budgeting for hospitals provision in the Medicare for All bill also allow for bulk ordering of things like masks and gowns, so you don't have states bidding against each other and driving up prices?
Absolutely. When you're considering what a budget should be for a hospital, that budget needs to be adequate enough to accommodate supplies and to have equipment available for an epidemic or pandemic, or any kind of a natural disaster. But because of the way that we've operated both from the [health care] delivery side and the payer side, we've put things in place that make it increasingly difficult for hospitals to have adequate supplies.

People like to point to Italy as an example of a country that has universal health insurance but isn't doing so well in the current pandemic. Have you seen this criticism?
I wouldn't suggest that just having a single payer system in place would have solved all of their problems, not by any means—you also have to have adequate investments, again, in the public health infrastructure. But in Italy, you also have to look at the decisions that were made, at the local, provincial, and national level in terms of getting ready for it, the preparedness.

Some countries did a much better job of anticipating what actions needed to be taken to make sure that people were not infecting each other. It's not just the structure of the healthcare system, but also the ability and willingness of political leaders to take action, and take appropriate action very quickly.

One projection from the Trump administration was that between 100,000 and 240,000 Americans will die from coronavirus. Certainly there are reasons outside of our health insurance system for that projection, including the decision to try to make our own tests, but what's your reaction to it given, as you noted, that the U.S. spends more per capita on healthcare than any other country, and then we have these projected death numbers that would potentially eclipse every other country.
This year we will probably spend more overall on healthcare than we've ever spent before. That, too, should be telling and probably we will not do as well as some of the other countries in saving people who have this virus because of our healthcare [delivery] system not being what it should be and our system of financing healthcare.

That goes back to the question about Italy: At least in Italy, the patients there don't have to worry that they could go bankrupt. While beds and equipment are not political in Italy, and it seems the scarcity here is worse than anywhere else in the developed world.

Both Spain and Ireland have nationalized their private hospitals, the government has taken them over. Is this something that countries without universal healthcare should consider?
I think they will consider that. The United Kingdom, as you know, has the National Health Service—it's not only the entity that ensures access to care, has the financing mechanism, but it also provides the care, because the NHS owns most of the hospitals in the U.K., and employs most of the physicians. That's been a model that's worked quite well for them for decades.

It could indeed happen in this country that the government might need to take over hospitals, in a certain way, or at least for a period of time. Depending on how bad things get here, there may need to be some government action that more or less commandeers the hospitals, and other kinds of businesses like hotels, and places where people who have coronavirus but are not critically ill can be isolated.

You mentioned earlier the nearly 30 million Americans who, even before this pandemic and related layoffs, didn't have health insurance. Congresswoman Katie Porter got the head of the CDC to agree that coronavirus testing would be free, whether or not that's true in practice is another question. But how would any of these people without insurance get coronavirus treatment without going bankrupt?
I think that's an unknown, and why should it just apply to people who get sick with coronavirus? What about the other folks who are also critically ill and needing care, are we going to waive out-of-pocket costs for them, or cover their treatment? It's doubtful that that'll happen.

Yes, Congresswoman Porter did an amazing thing when she held the CDC director's feet to the fire to get him to do that. But I think the problem we face here is that while the government has said that no one will have to pay out-of-pocket costs for testing, when it comes to treatment, that's an entirely different thing. Some [companies] have said they will waive co-payments and deductibles for the treatment of coronavirus, but not all of them have. To my knowledge, Anthem still hasn't, a lot of the Blue Cross Plans around the country have not. So it's a crapshoot as to whether or not you—if you have insurance—are covered by a health plan in which the company has decided to waive the deductibles, and how much [cost] exposure you will have.

People as you know, in this country, even with insurance, have to file for bankruptcy every single year, and many people with insurance turn to GoFundMe, to beg from strangers, for money to cover their medical costs, even with insurance. It's just astonishing that our policy makers let this continue.

I want to talk about the politics of health care for a minute. We've seen exit polls from each of the early primary states showing majority support for ending private insurance. It seems there's more support for that idea than there are people who voted for the presidential candidate who ran on that platform. I'm curious for your thoughts on this disconnect: Joe Biden is winning most of these states, but then exit polls show that most Democratic voters support ending private insurance, which Biden opposes.
There were a lot of people who supported Medicare for All who voted for Biden, who voted for Buttigieg, who voted for Klobuchar, and some of the other candidates, but you're exactly right: [In] every one of the primaries and the caucuses that have been held to date, a majority of those who voted supported replacing private insurance companies with Medicare for All.

Healthcare was the top issue for most Democratic voters, but they had other reasons why they voted for Joe Biden, or one of the other candidates. We keep hearing about people's beliefs in who is more electable. And there could be something about Joe Biden that led them to vote for him, even if they supported Medicare for All, because they liked the guy more.

It's complicated, but I do think that those candidates, Biden certainly included, need to pay attention to that—that even a lot of people who voted for him support Medicare for All. And that Democrats broadly, but not just Democrats...Morning Consult did a poll that showed a significant increase in support for Medicare for All, not just among Democrats, but especially among Independents. This pandemic, if anything, is waking people up to just how unreliable, and insecure, the current healthcare system is.

You went viral on Twitter in December by explaining how the talking point that private insurance preserves people's "choice" of health plans was constructed by insurance executives, yourself included. If we have 157 million Americans who get insurance through their jobs, and we're now projected to have record unemployment because of the pandemic, what does choice even mean now?
It didn't mean much to start with. That was why I wrote that Twitter thread, and a New York Times op-ed as well. The insurance industry tries to peddle bullshit, to be quite honest with you.

People have bought into the notion that they have choice, but if they really stopped to think about it, they have to realize that, systematically, their choices have been taken away from them over the years. If you get your coverage through the workplace, I don't know of a single company where the employee gets to choose whichever insurance company he or she wants to use. The employer makes that choice and the employer, working with the insurance carrier, determines what kind of benefit plans are available to the workforce. In that way, our choice of health insurance carriers has been cut and cut and cut to the point that there's almost no choice there.

Even if you get your coverage through an Obamacare [state] exchange, your choice of carriers in many cases is very, very limited—sometimes just one insurance company is providing coverage [in a given state]. People don't have much choice when it comes to picking, or having any control over their health insurance carrier. That's one thing.

The other is that people have very little choice on doctors and hospitals. Almost every insurance company now has a provider network that is getting skinnier and skinnier. The companies are kicking doctors out of their networks and that has led to surprise medical bills. Our choice of doctors, and hospitals, and rehab facilities, and you name it, they are increasingly limited.

The insurance industry has done a very good job. They know how to bamboozle people and to get them to believe things that are just simply not true—I know because I used to do it for a living. They play on people's gullibility and the knowledge that most people just don't pay all that much attention.

There's sometimes more choice if people are buying their own plan from their state versus getting it from an employer. But most of those plans, from what I understand, have multi-thousand dollar deductibles, much higher than "good" insurance from an employer.
That's exactly right. The Commonwealth Fund did a study last year and found that 40 percent of the people enrolled in the exchange plans around the country were "underinsured." It's probably higher than that now—that was based on 2018 data. It also found that close to 30 percent of people who get their coverage through the workplace are underinsured because [they have] high-deductible plans.

The trend has been going only in one direction since the advent of high-deductible plans, and that is just really straight up. And the deductibles themselves have been increasing significantly year after year.

Do you still talk to former colleagues in the insurance industry? What do they think of you and your thoughts on the state of things?
I do. Most of them have left the industry, voluntarily. But over the years, I've gotten many, many of them—some while they were still working for the insurance companies that I worked for—thanking me for what I did, congratulating me, or at least giving me a thumbs up for what I've been doing because they know that what I've been saying is true.

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