The annual ritual of health insurance Open Enrollment is not a benefit to consumers but a “multibillion-dollar theater production” that costs Americans billions and sits “at the heart” of massive administrative overspending, according to healthcare researcher and author Neal K. Shah.
In a recent op-ed published by the Los Angeles Times, Shah—who is also the chairman of Counterforce Health and author of Insured to Death—argues that Open Enrollment, intended to drive quality up and costs down through competition, has instead become healthcare’s “most expensive lie”.
“I’m old enough to remember when there was no annual open enrollment. You got health insurance through your employer, and unless you changed jobs or had a major life event, you kept the same plan. Year after year. Simple. Stable. Sane,” wrote Shah.
“Today, we’ve built a multibillion-dollar theater production called “open enrollment” that costs more to stage than many small countries spend on their entire healthcare systems,” he added.
Shah claims that American healthcare currently wastes approximately $248 billion annually on excess administrative costs and says that “open enrollment sits at the heart of this hemorrhage”.
“Broker commissions, marketing materials, comparison portals, HR staff hours and the entire infrastructure of manufactured “choice” siphons money that could pay for nurses, doctors and actual patient care,” argues Shah.
The author says that the systemic overspend is directly contributing to profits for the insurance industry and its partners.
Insurers pay brokers significant commissions for signing up employers, often receiving a “healthy 3% to 6% of the total premium,” which could amount to “$50,000 a year for a midsize company”.
This structure, Shah argues, incentivizes brokers “to sell higher-cost plans regardless of quality”.
Shah’s argument that the process is ‘theater’ is based on the experience many Americans endure when the policies they pay for fail to deliver – with denials all too common.
This creates an illusion of coverage, he argues, saying that both employer and employee can feel good about their choices — until they actually need to use the policy.
“Here’s what the open enrollment ritual actually accomplishes: It convinces employers they’re doing right by their workers by offering choices. It generates billions in commissions for brokers and marketing revenue for insurers. And it gives Americans the exhausting misimpression that if they just compared plans more carefully, read the fine print more thoroughly or made smarter choices, they’d be protected when they get sick,” he writes.
“They wouldn’t. Because the system isn’t designed to protect sick people. It’s designed to process healthy people’s premiums while creating enough administrative complexity to deny claims when patients need expensive care,” he adds.
“We’re working within a system that treats annual disruption as innovation and administrative complexity as consumer protection. Real choice would mean transparency. It would mean published denial rates for every plan. It would mean stability unless you actively want change. It would mean spending healthcare dollars on healthcare instead of on the packaging,” he concludes.
Many Americans feel they are left with no choice but to accept the vagaries of traditional health care, however, alternatives do exist. Options such as health sharing ministries provide many with a more affordable way of protecting themselves against poor health.