Chapter 3 — The Fragmented Promise: A Warning from the United States
A society may insure a large share of its population while leaving much of the loss with the people affected. The United States1 provides an especially clear example. Insurance organises a large part of health care, housing, motor protection and retirement. It is also closely tied to employment. This extensive presence guarantees neither adequate coverage nor straightforward access to payment. Protection depends on the contract a person holds, the network it opens, their employment status and their ability to pay what insurance leaves behind [1–3].
Marcus worked in a logistics warehouse outside Atlanta, Georgia. He prepared orders, moved pallets and scanned parcels. His annual pay was about $40,000, with some overtime when activity increased. His health insurance came with the job.
He had chosen the least expensive individual plan offered by his employer. The amount deducted from his pay already seemed high. He had paid less attention to the annual deductible, which exceeded $2,500, the provider network attached to the plan and the copayments required for some services.2
In the spring, chest pain sent him to the emergency department. The tests ruled out the heart attack he feared. After several hours, he returned home with a prescription and a recommendation for follow-up care. He was relieved. He was also insured and expected most of the cost to be covered.
The bills arrived separately. The hospital sent one, the laboratory another and the imaging department a third. The insurer had negotiated some of the charges and paid part of the care. The rest counted towards the deductible or required a copayment. Marcus still owed more than $1,400, a substantial share of his monthly income.
The insurer had not denied the claim. It had applied the contract. Marcus was covered, but only part of the financial loss had been transferred. His insurance card showed that he had coverage. It did not show what he would have to pay when he needed care [4, 5].
The scene is composite, but the mechanism is ordinary. A person may pay a premium every month without receiving complete protection. A high deductible, a percentage of the bill, an out-of-network provider or a prior authorisation requirement can leave the patient with a large expense or delay care. The contract exists, but it divides the loss among several actors and several administrative stages.
Fragmentation does not mean that insurance pays nothing. It means that no institution necessarily takes responsibility for the whole problem. The insurer pays part of the bill. The employer finances part of the premium. The patient pays the remainder. A public programme may intervene according to age, income or health. Each institution applies its own rule and leaves the rest outside its perimeter.
Insured, Yet Still Exposed
American health care shows that holding a contract is not the same as receiving effective protection. Illness comes with an additional administrative risk. The care must fall under the correct plan, provider network, billing code and period of coverage. The patient must understand what is required while often facing dependence, pain or urgency.
This architecture has a long history. Proposals for national health insurance were blocked or redesigned by professional, industrial and political coalitions [6]. American medicine gradually developed around hospitals, medical professions, employers, private insurers and separate public programmes [7]. Much social protection therefore takes the form of private benefits supported through the tax system and governed by law [1].
The system is not an insurance desert. It produces an abundance of administration. Employers select plans. Insurers build networks. Administrators check authorisations. Providers send separate bills. Patients receive statements distinguishing the amount charged, the negotiated amount, the insurer’s payment and the balance they owe [4].
These procedures serve a purpose. They verify eligibility, limit improper payments and apply the benefits set out in the contract. They can also discourage legitimate claims through repeated forms, delays and appeals. Administrative cost is not measured only by the number of employees or documents. It includes the time, uncertainty and abandonment imposed on people seeking a benefit [8, 9].
The boundary of coverage can move throughout the process. A person is insured, but the doctor is outside the network. The treatment is covered, but only after approval. The claim is eligible, but the deductible has not been reached. The decision can be appealed, but the patient must know the procedure and have enough time to follow it.
This problem should not be reduced to a simple opposition between an insurer and a patient. Medical care must be financed. No contract can promise to pay every bill without rules or review. The difficulty begins when complexity makes the scope of protection impossible to know in advance and leaves the person who needs care to reconstruct the chain of responsibility alone.
Protection Tied to Status
In the United States, protection often follows the position a person occupies. Stable employment may provide access to health insurance subsidised by an employer. Losing a job, having working hours reduced or becoming self-employed can change income and coverage at the same time. The labour market therefore distributes wages and degrees of security [1, 5].
Public programmes reduce part of this dependence. Medicare mainly covers older people and some people with disabilities. Medicaid is jointly financed by the federal government and the states and covers some people with low incomes under rules that vary across states.3 Other arrangements subsidise the purchase of insurance or organise regulated marketplaces. American protection is therefore assembled from public rights, employment benefits and private contracts.
This combination can protect some people effectively. It also creates breaks in continuity. Moving to another state, changing employer, experiencing a change in income or altering family status can change the available plan. Protection does not always follow the person as continuously as illness or the need for care. Commercial health plans also experience substantial turnover among their members, which makes investments with benefits appearing several years later more difficult [10].
Jacob Hacker describes this development as a transfer of risk towards households. Illness, interrupted employment and uncertainty in retirement do not become more individual when protection is reduced. Their cost is simply shifted to family budgets that are less able to absorb it [2, 5].
The state does not disappear. It defines tax advantages, contract rules, eligibility conditions, appeals and the mechanisms that intervene when a company cannot pay. Private markets operate within a legal architecture that already distributes risk [11, 12]. Speaking only of individual choice assigns to the person a situation produced by several institutions.
Fragmentation also creates a particular morality. Protection appears to depend on choosing the right job, contract and level of cover. A difficulty can then be presented as the consequence of a personal decision even when the available choices were narrow and their effects difficult to foresee [3, 13].
What the Law Refuses to Turn into Price
The Affordable Care Act, usually called the ACA, limited some forms of selection in health insurance. A pre-existing condition is an illness, diagnosis or health condition already present before coverage begins. For plans subject to the reform, an insurer cannot refuse a person or increase the premium because they previously received a diagnosis of diabetes, asthma or cancer. Pregnancy cannot be used to deny coverage or impose a health-related increase [14, 15].
Rating criteria are also restricted in the individual and small-employer markets. Age, tobacco use, family composition and place of residence may affect premiums within limits set by law. Health status, medical history, sex and occupation cannot be converted directly into differences in price [16].
The law does not claim that these characteristics are unrelated to future spending. It decides that predictive value is not sufficient permission for use. Information may be statistically relevant and still be removed from pricing because using it would make access to care depend too directly on illness itself.
Genetic information shows that this boundary varies across forms of insurance. Federal law restricts its use in health insurance and employment. It does not impose the same federal prohibition on life, disability or long-term care insurance [17]. The same information may therefore be inadmissible in one contract and available in another.
Prohibiting a variable does not remove the expected cost. The cost still has to be distributed. A wider group of policyholders may carry part of it. A risk-adjustment mechanism may transfer resources towards insurers that cover more costly populations. A public subsidy may reduce the premium paid by the household. The legal rule moves the question away from the precision of the individual price and towards the organisation of sharing [15, 18].
This decision is essential. Without it, the person with the greatest need for protection becomes the person the market has the strongest reason to avoid. Illness raises expected spending. If every known difference must be charged immediately, the premium rises at the very moment when the ability to pay may fall.
When the Claim Arrives
Fragmentation does not end when the contract is purchased. It returns when the policyholder asks the promise to be honoured. A single hospital stay may involve the hospital, doctor, laboratory, insurer, employer and sometimes a public programme. Each actor classifies a different part of the expense.
Prior authorisation is approval required from the insurer before some care, tests, medicines or treatments are provided.4 It may prevent an unnecessary intervention or direct the patient towards a less expensive treatment. It can also turn access to care into a procedure. The decision then arrives before the bill, when the insurer decides whether it will finance the service.
Chapter 5 examines this asymmetry more closely at the moment of loss. The policyholder becomes the creditor of a promise, while the company retains much of the power to classify the request, demand evidence and set the timetable. In the American system, the number of intermediaries and the separation of bills intensify this difficulty.
Justice does not require every request to be paid. It requires the rule to be understandable and a refusal to be challengeable before delay makes care, housing or income inaccessible. An appeal that exists only on paper offers little protection to someone who does not know the precise reason for the decision or the documents needed to contest it [8, 9].
When the Private Promise Returns to the Collective
A private contract gives the impression that one company alone carries the promise made to its policyholders. That image disappears when several insurers become insolvent after the same catastrophe. Guarantee mechanisms, law, surviving insurers and sometimes taxpayers must then assume part of the commitments.
On 29 August 2021, Hurricane Ida reached Louisiana. Wind, rain and flooding caused extensive damage to homes. Policyholders submitted claims to companies that had sometimes already been weakened by previous storms.
In the months that followed, seven property insurers operating in the state became insolvent. They no longer had the resources required to meet all their obligations. The Louisiana Insurance Guaranty Association had to assume part of the claims left by the failed companies.
In 2022, the association sought to borrow $600 million to settle about 24,000 claims without making households wait for several years. The loan was to be repaid through assessments imposed on insurers still operating in the state. Tax credits then allowed those companies to recover part of the amounts they had contributed [19].
The loss had begun in private homes. It had been submitted to private insurers. After their failure, it moved through an association created by law, surviving companies, credit and public finances. The contracts remained individual in form. Their continuity depended on a collective arrangement established in advance.
A guaranty association does not replace an insurer in ordinary circumstances. It intervenes when the company can no longer honour its promise and assumes covered obligations within limits fixed by law.5 Its existence shows that solvency is not purely a private matter.
The state also acts before failure. It requires reserves and capital, supervises companies, sets some terms of coverage and may organise an insurer-of-last-resort scheme. These interventions do not abolish the market. They make possible a promise that no company could guarantee alone against every accumulation of loss [12].
The Louisiana case does not mean that every increase or withdrawal is unjustified. An insurer that does not finance catastrophe risk adequately promises protection it will be unable to provide. Preventing all adjustments without addressing claims costs may weaken the supply of insurance. Affordability must therefore be connected to prevention, capital, reinsurance and an explicit allocation of losses.
Need as a Basis for Selection
In insurance understood as protection, need is a reason to enter the collective. In a highly segmented market, it can become a reason for exclusion. The sick person, exposed home or frequent driver is first described through the cost they may impose.
This tension does not arise from simple malice. An insurer that accumulates costly commitments without adequate premiums, capital or reinsurance threatens everyone to whom it has promised payment. A regulator that prevents every price change may accelerate company withdrawal. Poorly targeted public assistance may preserve dangerous exposure or provide the largest subsidy to the wealthiest property owners.
The conflict begins when these constraints are presented as a complete answer. Expected cost does not decide who should bear it. It does not determine the minimum protection that should remain accessible, the differences that may enter the price or the obligations that should fall on employers, insurers and public authorities.
The United States did not wait for contemporary algorithms to fragment protection. Models can nevertheless accelerate reclassification. A person who appeared to belong to the ordinary market can move into another category after a diagnosis, a change in status or a new estimate. Protection becomes a succession of contracts, each of which reassesses whether the person still belongs.
Withdrawal does not always take the form of a refusal. The premium may exceed the household’s resources. The deductible may absorb its savings. An appeal may succeed only after the patient has abandoned the treatment. A residual market may maintain a policy while offering narrower protection.6 The promise then shrinks in stages without any institution announcing that it has disappeared.
Holding an insurance policy7 is therefore not enough to turn a loss into a claim that can genuinely be enforced. Coverage must remain accessible, the amount left to pay must be bearable and an institution must be able to assume the commitment when the private contract fails. The next chapter returns to the historical moment when some forms of misfortune ceased to be treated as family matters and became collective claims.
References
In this chapter, American refers to the United States. For convenience, the chapter sometimes speaks of an American market in the singular. Insurance is largely regulated by individual states, each with its own rules and supervisory authorities. Federal laws, public programmes and large national companies connect these markets without making them identical.↩︎
In American health insurance, the deductible is the cumulative annual amount the patient pays before much of the coverage begins. A provider network is the group of professionals and hospitals covered on negotiated terms. A copayment is a fixed amount charged for a covered service.↩︎
Medicare is a federal programme that mainly covers people aged sixty-five or older and some people with disabilities. Medicaid is financed jointly by the federal government and the states. It covers eligible people with low incomes under rules that differ from one state to another.↩︎
Prior authorisation is approval required by the insurer before certain care, examinations, medicines or treatments are provided. Without it, coverage may be denied even when the service appears among the benefits described by the plan.↩︎
A guaranty association or guarantee fund assumes some obligations of an insolvent insurer within limits set by law. It is generally financed through contributions required from other insurers operating in the market.↩︎
A residual market, or insurer-of-last-resort scheme, offers coverage to people or property that cannot obtain it from ordinary insurers. Coverage may be narrower and the price higher.↩︎
An insurance policy is the contractual document describing the coverage, exclusions and obligations of the insurer and policyholder.↩︎