The Inherent Problem With Health Insurance




Opinion.jpgI’ve been helping a friend look for health and dental insurance these past few weeks. As a physician employed by a hospital, I get insurance as a benefit of my employment. Essentially, it is a corporate type of insurance that is paid for by my employer. Anybody who works for my hospital gets the insurance, regardless of whether they are healthy or sick, smokers or non-smokers, or young or old.

I’ve never really had to get insurance for myself outside of the workplace and I’ve found that it is extremely frustrating for the individual who must acquire the insurance himself – who basically does not receive this as a benefit of his employment.

Not only is it expensive, but your health condition affects the cost of insurance. If you have asthma, some insurance companies will not even write you a policy. Those that do charge you about double the rate of a healthy person of the same age. There are two disturbing things about the insurance industry.

First, as I mentioned, your health history affects your coverage. Thus, there is an incentive to not disclose as much health information to your physician or to your insurance company because doing so will increase your costs. Essentially, the sicker you are, the more expensive you are to the company. As a patient you are clearly being financially penalized for being sick.

The second disturbing thing is that insurance as a business relies on shared risk. The shared risk is the sharing of financial risk. An insurance company makes money by collecting fees in the form of premiums from its members. An insurance company can only make money by collecting more than it pays out in claims. Thus, all of the healthy members or members who underutilize health care help pay for those sick members or overutilizers of health care.

The purported benefit is that a member can pay an affordable premium in exchange for the promise of coverage if there is a catastrophic event that the member would otherwise be unable to afford.

What this conundrum amounts to is a health system that is focused on the bottom line. Members must go out on a limb and have faith that their insurance carrier will honor their claim when they are sick. Members must have faith that their insurance carrier will be financially solvent when they get sick. Those without insurance must acquire it when they are healthy so the premiums are affordable and hope that they can afford the escalating premiums as their health decreases.

  • gary

    I have a friend who has great health insurance. This friend goes to the doctor (not exaggerating) 2-3 times per month at least for ailments and illnesses. Now, if this friend had to pay a large deductible like me he/she would not go. I find that people who have great health insurance tend to abuse it. I wonder if the rest of us pay for those who have great group health insurance. Those folks go all the time because the co-pay is almost nothing. I think that needs to be changed. People do not need to go to the doctor for every single cough, cold, sneeze and ailment. Sometimes you need to take a couple aspirin and go to bed. Simple as that.

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  • Anthony

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  • HIP

    Wow! a very good article. It gives all the benefits and shortages about health insurance.

  • David Schwartz

    This article is really puzzling. It says a whole bunch of things about health insurance that are rather obvious and not problems at all. Then in the last paragraph, it makes a lot of false claims.

    For example, you need not have faith that your insurance carrier will be there when you need it. You can evaluate the financial stability of insurance companies before you choose one.

    As for health insurance being hard to afford if you are sick, it is only because health *care* is more expensive if you are sick. This is not an effect of health insurance, it’s true of just about everything. Guess what, 30 gallons of gasoline cost more than 10.

  • financeblogger

    I agree with the Blogger and several of the comments that there are problems with the nature of health insurance in the US. The government and the health insurance industry are looking at the problem of over utilization of health insurance resources. Some carriers are providing incentives for healthy living lifestyles. One of my carriers provides discounts on several life insurance products for good lifestyle and for doing things like loosing weight. HSA Health insurance plans provide a financial incentive for not over utilizing health coverage and provide a financial disincentive for running to the doctors with a simple case of the sniffles.

    I feel it is also important to realize that nationalizing health care is not a simple or a good solution either. The countries that have done that deal with massive explosion of health spending in the economy and in most cases Restriction of access is usually implemented. In the UK and In Canada access to specialists can be severely restricted. In the UK it can take 10-12 months to get an appointment with a specialist. Is that what you want to see happen in the US. I doubt it! You will also have cases where a healthy senior would be denied care for a problem but that an obese drug addict would be able to get care for. I am not condemning someone for an addiction problem or obesity but there is some element of choice there. They have made at least 4 major bad life style choices in this hypothetical situation. They have decided to become a drug user, they are over eating, they are almost certainly not making healthy eating choices when they do eat and they are typically not getting nearly enough exercise. It is possible to do something about all four of these bad choices.
    If you get help and work on those four problems several things will happen. Your health will imprrove, you insurability and rates will improve, your life expectancy and you quality of life will improve.

  • Much of healthcare insurance is operated by indemnity insurance companies who alone determine “medical necessity” for payment of care. Behavioral healthcare is often “carved out” from physical. In the 1st decade of McMCO operation, physical healthcare expenditures dropped 7%, while BHC diminished 54%. Some of my colleagues refer to this as “mangled care”. Michael Moore’s documentary accurately notes how we got here & it’s adverse consequences. I show “Sicko” in many of my college courses.

    And risk-sharing is now transformed into risk-shifting onto clients & clinicians!

    Rich

JC, MD

Dr. JC is a medical doctor who has a passion for health promotion and education.

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