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Health Care Insurance in the U.S

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Health care insurance takes care of the possibility of repetitive medical costs among individuals. An insurer creates a finance structure e.g. monthly premium, payroll tax, or annual premium by estimating the overall health care risks and the system’s expenses among the target group. This works to ensure that the healthcare benefits, which are specified in the insurance terms, can be enjoyed by the client and that their costs are covered at the same time. Centralized organizations like the government agencies, not-for-profit entities, private businesses et al. are the ones who administer the specified benefits.    

A health insurance policy is a covenant between an insurance provider and a person, his/her guardian, or sponsor. The contract is renewable i.e. premiums have to be paid annually, monthly, lifelong - in cases of private insurance, and mandatory - in cases where it is a national plan. A booklet known as “Evidence of Coverage” contains the sort of insurance and the health care total that is covered in the insurance agreement.

Health insurance is included in employment benefit packages in the U.S mainly because America is a country without universal health care coverage. It is also seen as an employment perk. Some countries like the U.K and Canada provide health care coverage as a citizen’s right, but in the USA, health insurance is viewed somehow differently, and it is the individual’s responsibility to receive health care insurance coverage. This applies to everybody except the elderly, the disabled, veterans, and others of the same caliber.

The insurance coverage is covered by employer-sponsored and self-funded ERISA plan. ERISA is the abbreviation of Employee Retirement Income Security Act. ERISA plan was enacted to establish minimum standards for pension plans in private industry and provide for extensive rules on the federal income tax effects on transactions which are associated with employee benefit plans. The summary plan description is an important document that describes the entire benefits package available to an employee as required. An appeal undergoes the insurance company to reach the employer’s plan fiduciary. If needed, the fiduciary’s decision can be brought to the USDOL to review the ERISA compliance and then file a lawsuit in a federal court.

The individual who has taken insurance may have some of the following obligations towards it:

  • Premiums - the amount of money which is charged by a company for active coverage. It is determined by the age, health, and area of residence of the insured.
  • Deductible – this a sum of money which a person pays before the health insurer will provide the benefits that are outlined in an insurance policy.
  • Co-payment – this is an amount of money which the insured pays before enjoying a particular insured service. A co-payment is paid every time when the particular service is provided.
  • Coinsurance – this is the situation when an insurance company pays for the part of person’s medical bills, and that person pays for the other one.
  • Coverage limits – some policies pay up to a certain dollar amount prior to the moment when the insured starts paying for the rest personally.
  • Out-of-pocket maxima – this is the situation when the insured is required to pay for his own medical needs until they  reach a certain amount where the insurance company takes charge of the rest of the payment.

Private health insurance is a type of plan owned by the individual and is not offered through an employer or as part of a government- sponsored program.

Public health insurance provides services and medical care for certain low-income individuals and families who meet specific requirements. The government usually provides the health coverage for this type of insurance but also collects premiums. An example of this type of insurance in the USA is Medicare - a national federal social insurance program for people aged 65+ and the disabled.

Before 1920, most American people did not have healthcare but it was mainly because doctors did not know enough about diseases and their treating was of no major use, since only a few tycoons and big profile people had healthcare. As the doctors continued to learn more about diseases and effective treatment, their services became more expensive for people who required them, They also had o treat their patients in hospitals, as opposed to their homes, so as to take advantage of the technology that was still advancing. Back then, this further increased health care expenses to the highest extent when the great depression hit.

A Dallas hospital, called Baylor, suggested a non-profit system to help people in paying their hospital bills. That was the system which eventually came to be known as Blue Cross. Science, medicine, and hospitals grew tremendously, causing people to turn to it, and since its costs were not becoming any cheaper, Blue Shield insurance became popular in the 30’s.

The success of Blue Cross and the Blue Shield insurance model encouraged other players to enter the health care market. World War II caused a shortage of labor and as a means to woo labor, employers offered a health care insurance package, which became common, thus, causing the government to provide taxing incentives for other employees to do it. At this time, many other countries were moving towards national health insurance; the government paid for and regulated healthcare services.

Entry of private -for-profit insurance firms into the healthcare market brought some changes to how premiums were paid. The amount of premiums payable to the insurance company was determined on the basis of the following factors: the age of insured, pre-existing health conditions, gender, and health status. Focusing on the profit led to neglect of the sickest people and insurance of the healthiest ones. The Blues, thus, had no option but to follow suit.

In the 1960’s, health care insurance in the U.S had taken root and was in no sign of any kind of change from that. However, it did not help the people who needed it mostly: the poor, old, day laborers, workers of companies, who were not insured their employers and the jobless, who had no health care insurance. In a bid to introduce government-sponsored healthcare successfully, the government slowly started to insure their first target group - the elderly and the poor. The government also reimbursed the doctors at their normal rates for taking care of the elderly and the poor in a bid to keep them from opposing a newly proposed legislation which eventually led to Medicare and Medicaid. The bill was passed in 1965.

In addition to Medicare, Medicaid was passed as a state program to provide medical services to the indigent. Since then, Medicare has evolved into Original Medicare, which is provided by the government, and Medicare Advantage, which is provided by the private insurance firms who are contracted by the government. In 2001, Medicare and Medicaid consisted of 32% of the total healthcare expenditures in the U.S.   

In 2003, the US congress introduced the HSA (Health Savings Account), a combination of HMO/PPO/Indemnity.

 HMO means Health Maintenance Organization – an organization that provides or arranges managed care for health insurance, self-funded healthcare benefit plans, individual, and other entities in America as a liaison with health care providers on a prepaid basis. PPO, on the other hand, is a mnemonic for Preferred Provider Organization - a managed care organization of medical doctors, hospitals, and other health care providers who have made a deal with third party administrator to provide health care at subsidized rates to the insurer’s or administrator’s clients. Lastly, indemnity is a sum which is paid by one party to another as a means of compensating a specific loss that was suffered by the latter. 

HSA’s were created in 2003 so that individuals who are covered by high-deductible health plans could receive tax-preferred treatment of money that was saved for medical expenses.

However, Medicare’s explosive growth has been a major problem in the United States, and it is also likely to continue to be majorly due to the current original fee-for-service Medicare program. Health care expenditure in the United States was almost at $2.6 trillion in 2010 as compared to $256 billion spent in 1980.

Original Medicare was modeled to pay beneficiaries’ claims and guarded them against fraud in 1965, and little has changed since then. Medicare Advantage, however, assesses beneficiaries’ health and co-ordinates appropriate care. 

Health care in the neighboring Canada is a system that should be emulated by America. Health care in Canada was expanded through the Medical Care Act-Medicare whose mission was and still is to provide near universal coverage to all citizens according to their needs for health care services, irrespective of whether they can afford the services or not. In Canada, health care is funded through the public funded health care, which is a form of healthcare financing which is designed to meet the cost of most if not all of the health care needs from a publicly managed fund.

The United States and Canada had the same healthcare systems before the 60’s and 70’s, when Canada reformed its systems. As for 2011, the United States spends more money on health care than Canada on both per capita and as a gross domestic product. Spending on healthcare per capita in the US in 2006 was $6,714 as compared to Canada’s $3,678, the same year, Canada spent 10% of the GDP as compared to America’s 15.3%. The healthcare spending financed by the government the same year was 46% in the US and 70% in Canada.

In 2007, the review of all studies comparing health outcomes in the US and Canada, which was conducted by a Canadian peer-reviewed medical journal clarified that health outcomes of Canadian patients are mostly superior to the health outcomes of American people. It also shows that life expectancy in Canada is higher than in America, and that infant mortality rate in Canada is lower than in the US.

The central structural difference between the two and their healthcare involvement lies in health insurance. In Canada, the government funds its provincial governments on its healthcare expenses only if the province in question abides by the accessibility guarantees as set out in the Canada Health act, which prohibits billing people for services that are covered by Medicare. In the US, direct government funding is only limited to Medicare, Medicaid, and the State Children’s Health Insurance Program.

As it is obvious from the comparison above, it would be better if Canadaian health care system was adopted – a tested and proven system, making the ownership of a health care insurance policy mandatory and penalizing those who do not own one is a bad idea that could only grow worse. In the year 2008, a consensus bureau found that 46.3 million Americans did not have a health insurance policy, and in 2010, this number had increased significantly due to the high rate of unemployment in the country. This shows that the cost of a policy is not accessible to the people who need it the most. It is also a fact that even if a person has a health care policy it might not help him/her much due to the co-pays which can be costly to an average or a low-income earner.

The factors that determine the rate of a premium may also cause a problem to those who meet them fully. For example, a 55 year old asthmatic smoker who lives in Harlem may have to pay a higher premium than a 30 year old non-smoker who lives in Beverly Hills. This is because among the factors that are considered while calculating the premiums, there some peculiarities in the process. As for the age - the older the individual is, the more expensive the premium is; as for  preexisting medical conditions - the healthier the individual is, the cheaper the premium is;  and as for the area of residence - the safer/better the area of residence is, the cheaper the required premium from the insured is. This makes contemplate whether these premiums are really helpful. for the poor, sick, and elderly who need the coverage or for the health insurer and the government?

There are instances where a claim will not be honored by a health insurance firm. On the issue of pre-existing conditions, there is much discrimination from the insurance firms, which is questionable to say the least. If the individual seeking the insurance confirms having a pre-existing medical condition, the information might be used against the insured, in case he/she makes a claim 18 months after buying the policy. The insurance firm has the right to look back and see if the illness is directly or indirectly caused by the pre-existing condition and if that is the case when the health insurance might refuse to pay for any charges related to the condition. This will make the premiums which are paid by the insured a loss in his/her part and moreover, it might be deadly for someone with a serious illness and little cash to pay for the treatment. If the insured individual has an illness which does not have a definite cure or that whose cure is deemed experimental, the claim may not be honored.

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