Let’s consider the general concept of insurance. How does health insurance differ from other kinds of insurance? What are the similarities and differences between them?
Next, let’s consider some of the issues that employers face in providing health insurance to their employees. Why has the cost of employer-sponsored health plans increased significantly over the last 5 years?
Private healthcare is funded predominantly through indemnity insurance plans such as Blue Cross Blue Shield, Aetna, and United Healthcare. The public financing of healthcare is accomplished through the Medicare and Medicaid programs. We will examine the complex reimbursement methodologies adopted by public and private payers. We’ll also look at the incentives that are inherent in each methodology and assess how these incentives may impact the operations of payers, providers, and employers. Once the payment methodologies have been identified, we’ll consider what is working and what is not working in terms of provider reimbursement and the challenges faced by employers in providing health insurance. We’ll also look at the triad of care – access, cost, and quality – to assess how reimbursement strategies drive each of these dimensions. The more we learn about the U.S. healthcare system, the more complex it becomes. Our current payment methodologies are very complicated and demonstrate another justification why healthcare reform is so important for the U.S.
Healthcare has become so expensive and the economy crashed in 2009. All employer paid benefits has risen for all employees during this time since most employers can’t afford to take on the burden of paying for full healthcare coverage for an entire family. Some offer different levels of paid benefits, if it is single the company will pay the cost per month and the employee will pay deductibles and co-pays along with co-insurance. If they want to add their family there are different levels of monthly payments coming from the employee along with deductibles, copays and co-insurance. The payment system is complicated and cumbersome for most people to even understand if they are not in involved in healthcare. Or even if they are involved in healthcare all the different payment systems are fragmented.
Why has the cost of employer-sponsored health plans increased significantly over the last 5 years?
First, dominant insurers are rolling over and paying powerful hospitals the rates they demand to be paid, which increase each year because they know that patients do not pay for their own healthcare directly and have no idea what their employer is paying for healthcare.
Second, is the lack of preventive care. Patients will subtle illness either fear going to the doctor for care, or do not want to pay the cost to see the doctor or they just simply do not have the coverage to pay to see a doctor and so they wait. Often times they wait until things get worse and they have no other choice but to go see a doctor, and by this time their treatment is long term and costly.
The compelling solution: reform the employer tax exclusion
The solution to this problem is, from a policy standpoint, simple: equalize the tax treatment of individually-purchased and employer-sponsored health insurance. If more people bought insurance for themselves, more people would understand the tradeoffs between higher prices and access to brand-name hospitals. Those “must-have” hospitals, in turn, would be more reluctant to exploit their market power to raise insurance premiums. And insurers would, in turn, have more ability to walk away from pricey hospitals, instead of rolling over and passing those costs onto their policyholders.
From a health insurance perspective, what is the insurance risk and who bears the risk? How do insurance premiums reflect this risk?
“The insurer assesses, as accurately as possible, the risk it will bear for covering an individual or a group against specified types and extents of losses (the risk assessment function of insurance)” (Barton, 2009 p. 110). Insurance companies establish the amount of risk they take on in two ways: underwriting process and experience rating. In the underwriting process, actuaries evaluate the possibilities of events happening to whatever is being insured (health, cars, property, etc) and modify as needed. Experience rating utilizes prior claims to predict the likeliness of future claims. Auto insurances utilize experience rating when they evaluate how many traffic violations you as a driver have. A violation will usually cause an increase in your premium.
Barton, P. L. (2009). Understanding the U.S. health service system. (4th ed.). Chicago, IL: Health Administration Press.
An actuary is someone who looks at the data for a population and determines their potential utilization of services which will determine insurance premiums. What are some characteristics of a population which may drive up health insurance premiums?
An article in the New York Times in the Money & Policy section states that one reason premiums are on the rise is because of the new federal law. Actually, we are paying more for a lot less. It also stated that next year there we be competition among the carriers which will lower the premuims. The name of the article I found online is As Health Costs Soar, G.O.P. and Insurers Differ On Cause. A second reason why premiums are on the rise is because health insurance is very expensive which makes health care expensive. The last reason is the new law ObamaCare. There are many people out there believe this is the main reason. This law does not prevent premiums from rising. I found out about this information on Reason. com. The name of the article is “Is ObamaCare causing Health Insurance Premiums To Rise?
Characteristics of a population that drive up health insurance premiums are:
1) People who smoke cigarettes/cigars/pipes, etc.
2) Overweight or Obese (BMI)
3) High Blood Pressure
4) Heart Conditions
5) Cancer – active, remission, survivor, etc.
6) Insurance fraud – prior, current, etc.
7) High cholesterol
8) Working in highly stressful or dangerous environments
9) Depression or history of mental illness
10) Post Traumatic Stress Syndrome (PTSD) from military service or abuse (domestic, sexual, mental, etc.)
Chronic health conditions greatly impact the health insurance premiums. “Nearly half the U.S. population has one or more chronic conditions, among them asthma, heart disease or diabetes, which drive up costs. And two-thirds of adults are either overweight or obese, which can also lead to chronic illness and additional medical spending”.
Some other factors that drive up our health care costs include:
- We pay our doctors, hospitals and other medical providers in ways that reward doing more, rather than being efficient.
- We’re growing older, sicker and fatter.
- We want new drugs, technologies, services and procedures.
- We get tax breaks on buying health insurance — and the cost to patients of seeking care is often low.
- We don’t have enough information to make decisions on which medical care is best for us.
- Our hospitals and other providers are increasingly gaining market share and are better able to demand higher prices.
- We have supply and demand problems, and legal issues that complicate efforts to slow spending.
Insurance risk means that there is a possibility that the cost of treating the patient will be higher that the premiums that the patient pays. So the insurance company bears the risk that they will reimburse the hospital for more money than they expected. Insurance premiums can reflect this risk when the healthier people pay less premiums, while those who are unhealthy or engage in riskier activities like smoking cigarettes pay higher premiums.
Do you support the idea that that smokers should pay more for their health insurance as compared to non-smokers? How about individuals who exceed a specific body max index (BMI)?
I would not support the idea of higher premiums for smokers or overweight individuals. It seems as though this will be hard to regulate, especially for families were there is one individual in the family that smokes or is overweight. It wouldn’t be fair to charge the entire family at a higher rate for the behaviors of one individual. I do believe that smokers should pay more for their insurance, because there are so many programs and pills to support a person to quit smoking. Smoking also affects those around you more than obesity does. When a person is fat, it only effects how they themselves breathe, look, feel, health, etc. When a person smokes, their habit affects the air that others breathe. It also has been stated several times that 2nd hand smoke is worse than first hand. I have never understood how this could be true and still to this day, don’t really know if it is true; however, I know that smoking has an effect on others besides yourself and therefore, for the good of the masses, we should do all that we can to help people stop smoking.
I wouldn’t necessarily agree with smokers paying more for their health insurance because there are other things that people do that harm their bodies such as alcohol or drugs. Just because they smoke doesn’t mean that they will have health issues. They can pay the same premium but if they are required to have more doctor visits, then they will pay the difference.