Insurance Companies, Kafka, PITB Expenses and High Deductibles

I don’t often do rants (or do I?). Today, though, I’ve a bit of a rant to share. The things we do in the name of writing about improved financial health!

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Most people know Franz Kafka as the fellow who wrote the story about the traveling salesman who woke up one day and found himself to be a bug. Literally.

But Kafka also wrote stories about bureaucracies that, as a result of their obstinate approach to doing everything in only certain ways, absolutely confounded the purpose for which they existed.

See, e.g., Kafka’s The Trial.

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Insurance companies have a reputation, sometimes rightly deserved, of being Kafkaesque. Interestingly enough, the few times I’ve mentioned that term to a customer service representative of an insurance company — as in, I feel like I’m in a Kafkaesque nightmare here — none of them has known what I was talking about.

I have a little story for you today. You be the judge.

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Very few people have a smile on their faces when they read an EOB. Usually they start out at something more along the lines of a bewildering frown, which then cycles through to utter confusion and anger, which then comes to rest at resignation and learned helplessness. It’s like an actor’s class exercise, watching all those emotion cycle through.

EOB is short for Explanation of Benefits, and an EOB is a document your insurance company uses to tell you what they’ve paid and to whom, and how much you might need to pay on your own. So usually an EOB conveys information something along the lines of this:

Your doctor billed you $376 [to just pick a number out of the air] to look at your toenail [or heart condition or whatever]. We, your friendly InsCo, told your doctor that the most s/he could charge you for doing that was $89. Of that amount, we paid $74, so you might need to pay $15.


That would be a pretty good EOB to read — a pretty user-friendly EOB. The problem is that EOBs don’t read like that. Instead, they look more like computer database data-belches (or worse), coupled with a lot of boiler plate and legalese.

(Aside for members of Kaiser: you don’t really see EOBs like this because one of the pleasures of a single payer system such as Kaiser is that most of this paperwork rigmarole stays internal to your single payer).

So most people do not take kindly to reading these things.

And you better believe that folks in their later years typically hate hate hate trying to decipher these things.

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Last week I helped my mother send a letter to an insurance company in which she directed them to stop sending her all the mail the insurance company was sending to her and to instead send it to me. She’d had it with trying to deal with all that mail (EOBs in particular), and the insurance company could not send cc copies of all of that to me, i.e., it could not send each piece of mail to both my mother and to me at our respective addresses.

In my experience, banks, stockbrokers and money managers have no problem sending cc copies out, free of charge, but most InsCos are not facile at this at all, while some simply will not do it, either because they don’t want to or because they are precluded from doing so by HIPAA.

So the choice was either her getting the mail or me getting the mail, and, after trying to stick with the status quo, she decided she’d had it and that it was time to direct the mail flow to me, solely.

The letter my mother sent to the InsCo excluded from this re-direction a single type of document but a very important one — reimbursement checks. Here the letter said to stop sending checks and to instead make payment via direct deposit into my mother’s account, the specifics of which the letter set out in perfect detail. This latter part of the letter was our attempt to deal with the fact that the direct-deposit form the insurance company said they would email to me while I was visiting my folks never arrived.

So what did the InsCo do?

They took one look at my mother’s letter that said, “Never send another piece of paper to me and always send it to my son and, oh yea, direct deposit the checks” and sent my mother a bunch of forms to fill out, including an IRS form and a banking form requesting exactly the same info we had put into the letter. Exactly.

After she had said to the InsCo, “Pretty please, no more mail,” my mother was not happy to see those forms arrive in the mail.

Nor was I.

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Sometimes you gotta wonder if you’d be better off without ’em, ya know?

Think of it this way. If you value your time (and who among us does not?), and if you value it highly enough that you value it literally, as in you put a dollar figure on it, then (a) add together the number of hours you spend on the phone trying to get the InsCo to do what it’s supposed to do plus the number of hours you put in simply trying to figure out what’s what and what you’re supposed to be doing, and then (b) multiply that total by your PITB hourly rate (that’s the hourly rate someone would have to pay you to perform these pain in the butt tasks) and then (c) judge for yourself whether the InsCo has saved you enough money to justify that PITB expense.

For instance, if your PITB expense is $1k, and the InsCo saved you $3k, then you’re good: the InsCo has been more benefit than burden. Keep ’em.

But what if it’s the other way around?

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Now clearly you have to take all of this out into the future, and ask whether the numbers might change — whether the PITB expense might diminish and/or the dollars the InsCo saves you might go through the roof. That is what happens to quite a few folks. So the answer is just about always: yes, you need the insurance.

Indeed, when it comes to many types of insurance, you’re obligated to have it, either by the government (e.g. auto insurance and, in 2014 for most folks, medical insurance) (and why the medical insurance mandate was such a problem for so many when the auto insurance mandate has never been an issue is something I might not ever understand) or by contract (you better believe your mortgage loan papers obligate you to insure your house against fire and such).

But many other types of insurance are optional. Life insurance. Long term care insurance. Long term disability insurance. Earthquake. Flood. Renters.

Of those, life insurance is, as best I can tell, the least PITB to utilize: once someone provides the life insurance company with an official death certificate showing that the insured has died, the InsCo usually pays out the death benefit usually quite readily (murder mystery plot-lines excepted).

But all the others can be a PITB nightmare to utilize.

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Looked at on a small scale, this is an argument for having the highest possible deductibles on all your insurance policies. Then you’ll self-insure for small claims, which is just fine and dandy given that, with small claims, the odds are that the PITB expense might be quite large relative to the amount of money the InsCo saves you.

Looked at on a big scale, this is an argument for the InsCos to come fully into the 21st century. I mean, these folks are all fax machines and such. Can you imagine? That is 20 years behind the curve. And it’s not like they’re broke (with one major exception over the last five years).

Even further behind the curve is when a life insurance company uses the semi-modern equivalent of an abacus to tell their customers exactly what’s going on in their policies, i.e., a one-off “trust us, this is the right set of numbers” sort of table of figures. I mean, if someone sends you a one-off complicated calculation, are you gonna believe that it’s correct? Or would you rather see that the InsCo has a piece of software its built to run the complicated calculation the same way every time? Now we’re not talking about being 20 years behind the curve; now we’re talking about being 30, 40 or even 50 years behind the curve.

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Be all of this as it may, I recommend that everyone take care of the Come What May part of their life.

Could you handle it financially if your come-what-may turns out to be strewn with a bad luck streak that lasts and lasts and lasts? As I said the other day, pooling all of our lucks together — the good, the bad and the indifferent luck — is a great way we can all, as a group of folks, make sure that we, as a group of folks, have as good a ride as possible.

Now if we could only get the businesses involved in that pooling to be better at what they do and better at how they go about doing it . . .





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