HerMoney with Jean Chatzky – Episode 460: Delay, Deny, Defend: Fixing The Broken Insurance System

Release Date: January 29, 2025

In Episode 460 of HerMoney with Jean Chatzky, host Jean Chatzky engages in a profound conversation with Jay Feynman, a distinguished professor emeritus at Rutgers Law School and author of the pivotal 2010 book, Delay, Deny, Defend: Why Insurance Companies Don't Pay Claims and What You Can Do About It. The episode delves deep into the systemic flaws of the insurance industry, particularly focusing on health and homeowners insurance, and explores actionable steps consumers can take to navigate and mitigate these challenges.

Introduction to the Broken Insurance System

Jean Chatzky opens the discussion by referencing the chilling news surrounding the murder of UnitedHealthcare CEO Brian Thompson, highlighting the tragic culmination of widespread frustration with the insurance system. She introduces Jay Feynman, recognizing his expertise and the timely relevance of his insights.

Jean Chatzky [02:25]:
"I want to start with three words that you have all likely heard by now multiple times. Deny, defend, depose."

Understanding the Insurance Industry's Failures

Jay Feynman explains that while insurance companies are legitimate businesses aiming to make a profit, the current system suffers from inadequate regulation and a lack of consumer understanding. He emphasizes the need for improved transparency and stronger regulatory frameworks to protect consumers.

Jay Feynman [04:12]:
"I think we need a couple of things. One is we need to make the system of buying and selling insurance more better. People generally don't understand the details of what they're buying."

Feynman discusses how insurance marketing has shifted focus predominantly to price, often at the expense of clarity in coverage details, leading to consumer surprises during claims.

Challenges in Health Insurance

The conversation zeroes in on the complexities of the U.S. health insurance system. Feynman critiques the fragmented nature involving multiple stakeholders like insurance companies, healthcare providers, and pharmacy benefit managers, which complicates the claims process and elevates administrative costs.

Jean Chatzky [08:17]:
"I was thinking, what if you go to the doctor, and I'm pretty sure he's going to get bills that he did not expect from this surgery."

Feynman underscores the importance of understanding potential catastrophic costs over minor expenses and advocates for clearer upfront communication about coverage to prevent unexpected medical bills.

Jay Feynman [06:53]:
"People ought to think about insurance as protecting them against really large financial expenses."

Comparing U.S. and International Healthcare Costs

Chatzky references a viral comparison between emergency room visit costs in China ($80) and the U.S. ($230,000), prompting Feynman to acknowledge the multifaceted reasons behind the exorbitant costs in the U.S., including higher drug prices and the complexity of the healthcare system.

Jay Feynman [16:32]:
"Part of it surely is because the system is very complex, which increases not just patients' frustrations, but administrative costs."

He points out that political decisions, such as rejecting single-payer systems like Medicare for All, have entrenched these issues, necessitating incremental reforms to curb rising costs.

Navigating Health Insurance Decisions

Chatzky shares personal anecdotes about unexpected medical bills, highlighting the need for consumers to be proactive in understanding their insurance policies. Feynman advises consumers to:

1. Seek Information Upfront: Inquire about all potential costs before procedures.
2. Assess Personal Medical Needs: Determine the type of coverage based on expected healthcare usage.
3. Utilize Available Resources: Consult Consumer Reports or local contractors for accurate rebuilding costs in homeowners insurance.

Jay Feynman [12:11]:
"It's not your fault, you haven't done anything wrong. This is the way the system is set up."

Homeowners Insurance in the Age of Natural Disasters

The discussion transitions to homeowners insurance, particularly in the context of increasing natural disasters. Feynman highlights that most American homes are underinsured by 20% or more, leaving homeowners vulnerable to significant financial loss.

Jay Feynman [25:15]:
"The statistics from the industry suggest that 2/3 of American houses are underinsured by 20% or more."

He advises homeowners to focus on coverage that protects against catastrophic events by understanding rebuilding costs rather than market value and emphasizes the importance of adequately insuring high-cost components like roofs.

Balancing Price and Value in Insurance

Feynman draws parallels between purchasing appliances and insurance, stressing that while price is important, consumers should prioritize value and reliability to avoid long-term dissatisfaction.

Jay Feynman [27:24]:
"You should consider price. But like anything else, if you're buying a television set, you can go into Best Buy and buy the cheapest television set they got, and maybe that's satisfactory."

He encourages consumers to conduct thorough research, comparing policies based on coverage quality and company reliability rather than solely on cost.

Mailbag Segment: Long-Term Care Insurance

The episode transitions to the Mailbag segment, where Katherine Tuggle and Jean address a listener’s query about long-term care insurance. The listener, approaching retirement, is advised to consider various options, including whole life insurance with a long-term care rider versus standalone long-term care policies.

Jean Chatzky [34:11]:
"Long term care insurance is pricey...but the insurance companies are highly restricted in how they are allowed to invest your money."

The discussion emphasizes the importance of shopping around, understanding the differences between hybrid policies and traditional long-term care insurance, and considering tax benefits and future financial security.

Conclusion and Takeaways

Jean Chatzky wraps up the episode by reiterating the need for consumer awareness and proactive engagement with insurance policies. She highlights the vital role of experts like Jay Feynman in shedding light on systemic issues and providing practical advice to navigate the complex insurance landscape.

Jean Chatzky [43:02]:
"Thanks so much to Jay Feinman for sharing his thoughts on the changes we can make as individuals and society to make the insurance system work better for all of us."

Listeners are encouraged to engage with HerMoney’s programs, such as Finance Fix and Investing Fix, to further empower themselves financially.

Notable Quotes

• Jay Feynman [04:12]:
  "People generally don't understand the details of what they're buying. They focus too much on price."

• Jean Chatzky [08:17]:
  "I was thinking... why is medical care so much more expensive here?"

• Jay Feynman [25:15]:
  "2/3 of American houses are underinsured by 20% or more."

• Jean Chatzky [34:11]:
  "Long term care insurance is pricey...but the insurance companies are highly restricted in how they are allowed to invest your money."

Resources Mentioned:

• Delay, Deny, Defend: Why Insurance Companies Don't Pay Claims and What You Can Do About It by Jay Feynman
• HerMoney Newsletter: HerMoney.com/subscribe
• Consumer Reports and J.D. Power for insurance company ratings

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