Is Health Insurance a Scam?

The Frustration Is Real. The System Is Not a Scam.

I sell Medicare coverage and I am expanding into ACA marketplace plans. I sit on both sides of this conversation regularly. I talk to people who are furious at their carriers, people who gave up after a denial, and people who worked through the process and got exactly what they needed covered. The difference between those outcomes almost always comes down to one thing: understanding what is actually happening.

Health insurance is not a scam. It is a contract that pools risk across hundreds of thousands of people so that no single person bears the full cost of a catastrophic medical event. What feels like a scam is usually a process. Prior authorization requirements, step therapy protocols, procedural claim denials. These are not tricks. They are the tools a carrier uses to manage care responsibly at scale. Understanding them is the difference between a resolved claim and a bill you paid because you thought no meant no.

What Would You Do?

Let me ask you a question. If you were personally responsible for managing the healthcare costs of ten thousand people, you would obviously approve every medically necessary treatment. That is not the question. The question is this.

The clinical evidence shows that a $10 a month medication treats a specific condition effectively in 95 out of 100 patients. A $200 a month medication treats it in 100 out of 100. Would you want the other 9,500 people in the pool to cover the more expensive option for everyone automatically? Or would you want patients to at least try the less expensive option first, with a clear path for the 5 out of 100 who need the alternative to get it once their doctor documents why?

That is prior authorization. That is step therapy. That is not a scam. That is a question about how to use shared resources responsibly, and the answer affects every person in the pool, including you.

In this example, 5 people may wait a couple of weeks for approval, but the pool saves over $18,000 a month. And for urgent medical needs, carriers have expedited review protocols that move significantly faster than the standard timeline. You just need to ask.

Everyone gets treated. The pool stays solvent for the next person who needs something serious. The carrier employs medical directors and utilization review nurses whose entire job is making that call correctly. When it feels arbitrary, it almost always is not. There is a clinical rationale behind every step of the process, and that rationale can be reviewed, challenged, and overturned.

A Denial Is Not Always a No.

This is where most people get stuck. They receive a denial letter, they feel the door close, and they stop. Most of the time, that denial is procedural. The wrong billing code. A missing prior authorization that the provider's office forgot to request. A claim submitted to the wrong plan year. A prescription for a brand name when the formulary requires a generic first. None of those are final answers.

Here is what to do when you get a denial:

• Read the denial letter completely. It must tell you the specific reason and reference the plan provision or clinical criterion it relied on.
• Call the carrier. Ask whether the denial is procedural and what is needed to resolve it. Many procedural denials are corrected in a single call.
• Ask your provider's office to help. For clinical denials, the provider can submit additional documentation or request a peer to peer review, where your doctor speaks directly with the carrier's medical director.
• Request a case manager. If your situation is complex, ask to be assigned a case manager. This is a clinician on the carrier's staff whose job is to help navigate your care, not to block it.
• File a formal appeal. Every carrier is required to have an appeals process. An internal appeal must be reviewed by someone who was not involved in the original decision. If that fails, you typically have the right to an external review by an independent organization.

The people who engage this process almost always get a different outcome than the people who stop at the first letter.

Carriers Are Not Motivated to Deny Necessary Care.

Think about it from the other direction. If a carrier denies a medically necessary surgery and the patient deteriorates over the following months and ends up in an intensive care unit, the carrier did not save money. It turned a manageable claim into a catastrophic one. The financial incentive runs the wrong way for bad faith denials of necessary care.

What carriers are genuinely motivated to guard against is unnecessary or unproven care. Treatments that have not demonstrated clinical effectiveness. Procedures that can be safely deferred. Medications for which equally effective and less expensive alternatives exist. That is utilization management, and it protects the pool the same way underwriting protects a life insurance pool. It is not the enemy of good care. It is one of the mechanisms that makes good care sustainable at scale.

When a carrier denies a claim you believe is necessary, the right response is engagement, not resignation. The system has built-in pathways specifically because wrongful denials are a real problem that the law takes seriously. A carrier that denies valid claims faces regulatory action from the Commissioner of Insurance, potential bad faith liability, and civil litigation. The safeguards are real.

It Is Not a Perfect System. Not Even Close.

I have dealt with it myself. It is not a perfect system. It is far from a perfect system. When the doctor is pointing at the pharmacy, and the pharmacy is pointing at the insurance company, and the insurance company is pointing at the hospital, and the hospital is pointing back at the doctor, things are not going to be as simple as anyone would like. I wish there were a better way. A way where the doctor and the patient could get instant answers, where every provider was fully on the same team, where competing interests did not slow down care that someone genuinely needs right now. But with that many parties involved, each with their own systems, their own liability, and their own financial pressures, who owns the problem? That question does not have a clean answer.

What I can tell you is that friction is not the same thing as denial. Most people who feel the system failed them ran into friction. That is a real problem worth solving. It is a different problem than a system designed to deny care. And the data makes that distinction very clear.

For Medicare Advantage specifically: a 2022 federal inspector general report found that 13% of prior authorization denials by Medicare Advantage plans actually met Medicare coverage rules. Those denials were wrong. That is a documented problem, and it is the reason the appeals process exists and the reason federal regulators take bad faith denials seriously. The system is imperfect. It has accountability built into it precisely because of that imperfection.

The System Works Better Than It Used To.

The friction people remember from ten years ago is not what the system looks like today. Most doctors' office management systems now interface directly with insurance carriers. Before a prescription is written or a procedure is scheduled, the provider's staff can see what is covered, what requires prior authorization, and what the formulary requires. The surprise denial on the back end is far less common than it was a decade ago because the information exchange has moved to the front end of the process.

That does not mean every denial is justified or every process works perfectly. Systems fail. Authorizations get lost. Claims are miscoded. Providers do not always complete the prior auth steps. When any of those things happen, the resolution path is clear: call, document, appeal. The path exists because the law requires it to exist.

I work in Medicare, where these processes are especially visible. A Medicare Advantage plan has prior authorization requirements, formulary tiers, and utilization management just like a commercial plan. The members who understand how to use the system get the care they need. The members who do not often pay for things their plan would have covered if they had known to ask. That gap is the reason I think this page is worth writing.

Modern Medicine Has Changed. Your Insurance Is the Hub.

When most people picture their insurance card, they picture a bill. A claim form. A denial letter. That is the reactive version of health insurance, and it is the version that feels like a scam.

The proactive version looks completely different.

Medicine today is not medicine from fifteen years ago. A patient managing a serious condition might interact with a primary care physician, a specialist, a subspecialist, a physical therapist, a home health nurse, a laboratory, an imaging center, and a pharmacy, sometimes in the same week. Each of those providers documents separately, bills separately, and in many cases communicates imperfectly with the others. Your insurance company sees all of it. Every claim, every prescription, every referral that was and was not followed up on. The case management team at your carrier has a view of your care that your primary care doctor may not have. That visibility, used proactively, is one of the most underused resources in healthcare.

A few things most plan members never think to ask about:

• Portable diagnostics. Mobile X-ray and ultrasound units now come to the patient's room inside the hospital. A patient who is too fragile or too critical to be moved gets the imaging done bedside. That is a better clinical outcome and it is covered care. Coverage for these services exists in most plans and most members never ask.
• Pharmacogenomic testing. Genetic testing can identify which medications are likely to work for a specific patient before the trial and error process begins. For psychiatric medications, certain chemotherapy regimens, and several other drug classes, this testing can prevent months of ineffective treatment. Ask your prescriber whether it applies to your situation.
• Subspecialists. There are now physicians who specialize in specific subtypes of specific diseases. Your carrier's network includes many of them. A case manager can help identify the right one and facilitate the referral, often faster than starting from scratch with a general specialist.

Your Employer Probably Did Not Explain Your Plan.

Open enrollment at most workplaces is a checkbox exercise. A packet arrives. Someone from HR gives a presentation that is mostly about deadlines. You pick a plan, sign the form, and file it away.

Most people who have employer health coverage have never been told:

• Their plan has a case management program they can call at any time, staffed by nurses who can help coordinate complex care.
• If a medication requires prior authorization or is not covered, alternatives on a lower formulary tier are almost always available and worth asking their doctor about. Most doctors do not know what is on your specific formulary until someone asks.
• Most carriers include a 24 hour nurse line for deciding whether a symptom needs an emergency room visit or can wait for a next day appointment. One call can save a four hour ER wait and a large facility bill.
• Specialist referral support exists specifically to help find the right in-network provider, which matters when you are looking at a subspecialist who may or may not be contracted with your plan.

None of this is hidden. It is in the member handbook that almost nobody reads. A five minute call to the member services number on the back of your insurance card can open up resources most members never use.

The same is true for Medicare. A Medicare Advantage plan is not just a payment mechanism. It is a network of care coordination tools, wellness benefits, transportation benefits, and clinical support programs that most members never access because nobody explained that they existed. I see this every week in my Medicare work. Members paying for benefits they have never used because open enrollment was a form, not a conversation.

If you have health coverage and have never called your carrier to ask what programs are available to you, you are probably not using everything you are already paying for.

Common Questions.

Questions About Your Coverage? Let's Talk.

I work with Medicare clients and am expanding into ACA marketplace plans. If you have questions about what your coverage covers, how to appeal a denial, or how to find the right plan, I am happy to have that conversation. No obligation.