What are some common problems with private health insurance?
It’s generally accepted in the insurance industry the private health insurance is better than the public alternative. However, private health insurance does have some common problems that contribute to the ever increasing cost. If these problems could be solved, more people would be able to afford health insurance costs.
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The issue of health insurance and universal coverage is one that garners much debate all across the country. Americans tend to believe everyone should have health insurance coverage. Yet the reality is that medical care costs money and someone has to pay for it. Thus it becomes easy to blame health insurance companies when things don’t go as we planned.
Cost of Health Insurance Increasing
Why does the cost of health insurance keep going up? Many people don’t realize that one of the biggest culprits causing health insurance rates to rise so quickly is the structure of our current health insurance environment. When it comes to health insurance options there really are only two: health maintenance organization insurance (HMO) and indemnity type of health insurance coverage. The latter is a type of policy very similar to what you have for your car, in that is is protection against financial loss in the event of some catastrophic circumstance in the future.
HMO health insurance pays for the catastrophic costs and also all the routine costs such as regular doctor visits, vaccinations, and so forth. The HMO Act of 1973, which was the legislation that officially codified HMOs under federal law, essentially required insurance companies to provide comprehensive coverage to all patients regardless of need.
The HMO Act of 1973 is such a widespread mandate that it has driven up costs by eliminating competition among insurance companies and forcing them to provide coverage that is completely unnecessary.
Consider the fact that every time you go to your primary care physician for treatment of a cold or other type of minor infection, both the doctor and your insurance company must make a profit in order to stay in business. The cost of keeping them in business falls on you. The fact that Americans use their HMOs for even the most minor problems is adding significantly to the cost of health insurance.
Other Issues With Private Health Insurance
Are there any other issues with private health insurance? Two of the other big issues with private health insurance involve cost shifting and fraud. Cost shifting is the principle under which unpaid healthcare costs are shifted from the uninsured to private insurance carriers. According to the Congressional Budget Office there was approximately $35 billion worth of unpaid healthcare costs in 2008.
In terms of health insurance fraud, the FBI reports that it costs the health care industry about $80 billion per year. Two examples of fraud would be a doctor billing an insurance company for services never rendered and the consumer using his prescription drug coverage to purchase medications he then sells on the black market.
Every time a healthcare practitioner or consumer engages in health insurance fraud it adds to the cost everyone else pays for health insurance.
Lack of Coverage For Preexisting Conditions
What about lack of coverage for preexisting conditions? Lack of coverage for preexisting conditions is often touted by proponents of universal healthcare as the main reason why government needs to get involved in the healthcare industry. However, a concern is that if the law requires health insurance companies to cover preexisting conditions, a person might be more likely to avoid purchasing health insurance until they had a serious health problem.
Thus, a health insurance company might end up paying claims for which that person had not contributed to by paying premiums. This scenario, if repeated often enough, could put the health insurance company out of business.
The idea of is that the government will step in and take care of this problem. There is no way to tell if this will be better than private health insurance. If a universal federal healthcare system begins covering preexisting conditions without requiring substantial premium payments it too will eventually run out of money. By not covering preexisting conditions insurance companies are forcing individuals to purchase health insurance before they have a problem.
Private health insurance is by no means perfect. However, the current system is one of the best in the world. The United States holds its own in medical innovation, medical technology, lifesaving procedures, and overall quality of care. Eliminating private health insurance could create more problems than it solves.
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