Reform is coming to the health insurance industry. If we’re not careful, the reforms may make matters worse instead of better.
The pressure for reform is building because the skyrocketing cost of providing health insurance for their employees is becoming too much of a burden for businesses. Large firms find themselves at a competitive disadvantage in the global economy. Small businesses simply can’t afford the cost. The percentage of workers with health insurance provided by employers is declining.
The practice of providing health insurance as a fringe benefit began during World War II as a means of circumventing wage controls. It has endured because it benefits everyone involved. Employers can deduct the full cost of providing insurance as a business expense. Workers pay less in taxes since they are not taxed on the value of the premiums paid on their behalf. Insurance companies get more business than they otherwise would.
Since increases in premiums don’t show up as a reduction in take-home pay, workers have been insulated from the impact of dramatic increases in the cost of health insurance. Now costs have reached the point where employers are reducing their contributions toward premiums and co-pays are rising.
As more and more workers are left to fend for themselves, even those who can afford health insurance experience a great deal of “sticker shock” when the cost of premiums is no longer hidden among their fringe benefits. Individuals with incomes just above the limits for Medicaid simply can’t afford to purchase a policy on their own. Many young and healthy members of our society who could afford coverage, elect to forego having health insurance if it’s not provided through their employer. The people who need insurance the most - those with serious health issues and/or chronic conditions - are the most likely to be priced out of the market or simply excluded by insurance companies.
Health care spending in the United States has been spiraling out of control for some time now. A report by the World Health Organization paints a very clear picture:
- The percentage of our gross domestic product devoted to health care more than tripled during the period from 1960 to 2005, growing from 5.2% to 16%.
- Overall, the World Health Organization ranked our health care system as 37th best in the world.
- In 2004 we spent $6102 per person on health care, compared to $3165 for Canada, $3150 for France, $3043 for Germany, and $2508 for Britain.
Although we outspend them by a wide margin, life expectancy in the U. S. is lower than it is in any of these other nations. All of these other nations have universal health care.
Article comments
1 - P.Marlowe
good article... Long article... really, really long, but good!
Marlowe
2 - DHL
The catastrophic illness plans are interesting, but may not contribute much to solving the problem of providing coverage to those currently uninsured. The product idea is not new, insurance companies do offer "high-deductibles" to cater to individuals who have affordability problems. If it is not mandatory, not all car owners may buy liability insurance. Our "health care" crisis is not just a health insurance crisis. In reality, health insurance companies are becoming the popular whipping boys. They are blamed for inefficiency, and bureaucracy, and being profit-minded (Blue Cross/Blue Shield are not-for-profit) at the expense of patients' well-being. We are not sure if we can safely remove the roles of insurance companies from our system without creating another form of crisis. Substituting the insurance companies with a government body may not be a better solution, as seen in the public transportation system or our public education system.
The aging population, the availability of more expensive advanced technology that treats diseases that were terminal previously, and even economic growth all contributed to our rising health care expenses as a nation. In the book entitled "The Fattening of America," by Eric A Finkelstein and Laurie Zuckerman, it was reported that over two-thirds of Americans are overweight or obese. Over the past three decades, the number of obese Americans has more than doubled, across the socioeconomic spectrum, and for all racial and ethnic groups, most dramatically, for America's children. According to Eric, America's growing waistline is a by-product of our economic and technological success. It has been estimated that the annual cost of overweight and obesity in the U.S. is $122.9 billion, a sum that is comparable to the economic costs of cigarette smoking.
All health care crisis has to be tackled on all fronts, and as you pointed out, reform could involve a grassroot movement. You suggested that we should band together to limit the role of insurers with or without help from the government. On the positive note, grassroot organizations have already started to direct the effort in discouraging smoking, addressing obesity, and adopting a healthy lifestyle. These are sure steps in bringing health care burden under better control in the long run.
3 - Rod Reasen II
It is interesting that most claims for reform are directed at insurance companies not the system as a whole. I find it mind bogling to believe that Americans are as foolish as many may make them out to be. The health care system is made up of three primary components: You and Me; doctors and facilities and payers.
The main problem with our current system and the direction that we should focus is TRANSPARENCY.
You and I don't actually know where most of the cost comes from in a bill. I submit that if we were fully aware of all charges from all parties we might have a basis for discussing change. Until we have this, we are simply submitting ourselves to idle chatter.
Rod Reasen II
President TriplePoint Consulting
4 - bliffle
The insurance companies have created a marvelous illusion: that somehow Health Care depends on Health Insurance. They've employed this illusion to place themselves at the center of the entire "Health Industry" and thus reinforce their monopolistic grip on that entire segment of society. They've created the notion that you can't have Health Care without Health Insurance.
Now, we have presidential candidates who are seriously advancing proposals to enslave US citizens to Insurance companies though 'mandates', which put one in mind of Indentured Servitude, which is the (only slightly) less ugly sister of slavery.
Hasn't it occured to people yet that the jury-rigged facade of capitalistic health care has completely collapsed?
Nothing could be further from the truth.
5 - Rod Reasen
Again, blaming the insurance industry for rising costs is simply misplaced energy. They do play a part: Manage Risk. If you want to solve the problem of rising costs you must see where the costs are located.
I have spent the last 12 years representing employer groups. We have helped them maintain modest levels of costs (around 1-4% annually) by knowing what causes the increases. It is not the insurance company.
The insurance industry adjudicates claims and manages risk. They do not hoard your dollar. I am sure many will contest this but prove it.
If we want lower costs than we need to be wiser consumers, frugal in our spending on health care and be forward looking about our health. The old saying "garbage in, garbage out" really does apply to your health.
6 - bliffle
Bah! All insurance companies are arrogant monopolists (OK, let's call them oligopolists - the effect is the same).
They are enabled in their monopolistic endeavors by the 1945 McCarran Ferguson act which prohibits Federal regulation of ALL insurance companies, thus leaving only the weak state regulators to fight their predations.
It is this which enables their 40% profit margins.
We need to revoke the McCarran-Ferguson act and enforce Federal anti-monopoly laws.
7 - Ruvy
You and I don't actually know where most of the cost comes from in a bill. I submit that if we were fully aware of all charges from all parties we might have a basis for discussing change. Until we have this, we are simply submitting ourselves to idle chatter.
I wish to respectfully disagree with you on some of this, Mr. Reasen.
My son was born a preemie about 19 years ago and he needed to stay in the hospital for over three months. At the time, my wife's health insurance required a $400 co-pay. When we saw the hospital bill, a voluminous document that weighed several kilos and came to over $180,000, we were extremely grateful for the coverage my wife had. We got a similar bill from the physicians attending our preemie for $85,000. It too, weighed several kilos. We had to pay a nominal sum, if any at all, an amount of money I honestly do not remember.
But the point is that every little jot and tittle of "treatment" my baby got was accounted for from the bilyrubin lights to the diapers and tissues, and was was noted and charged for. Need I say that we were overcharged? We probably weren't terribly overcharged - the insurance company would have refused to pay - but we were overcharged.
The hospital was a private hospital and needed to show a profit, so that was part of the charge. But there was transparency. No attorney could have argued that these huge bills were not clear.
I suggest to you that the problem is not necessarily the insurance company - though insurance companies do have a nasty habit of setting themselves up as care brokers and cherry picking the population in the process.
I would look in the hospital supply room instead. When I was a kid, hospitals used to sterilize equipment and reuse it. Today everything is use once and throw. The oil companies make a fortune on the plastics used for much of the use and throw equipment. And it costs a fortune. That is just one place to look to trim costs in the health system.
8 - Doug Hunter
"Republicans never miss an opportunity to push the message that government is incompetent and incapable of providing services as efficiently as private enterprise. If they truly believe that, they have nothing to fear from offering people a choice between private insurance and a government-run program."
I agree that we need universal healthcare, but this little jab is totally nonsensical. It's an apples to oranges comparison. Government programs are subsidized with hundreds of billions of dollars every year. Medicare takes premiums from every worker young and old, then only covers old ones and still operates at a loss. The government can 'lose' tens or hundreds of billions on a program every year and still maintain it by diverting taxes or simply printing more money. The largest mega corporations can only lose money for a year or two in much smaller amounts without going bankrupt.
Private industry DOES run more efficiently and effectively because of limited resources, that is also it's weakness. The government runs sloppy and inefficient but is in no danger of running out of money as long as they own the printing presses.
9 - JB
Why should I pay for another person's health care.
Those folks who need help go ask charitable organizations and not the gov.
If you follow God's Law on food then most of folks health problems would go away. Also avoid sugar and exercise.
10 - Jessica T.
I completely agree with the writer. Healthcare in the US has completely gotten out of control. It will take an act of God to get it back on track.