First Annual State of Health Insurance Address

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Jacques Chambers, CLU, Benefits Consultant

“My Fellow Americans!” This is the time of year when everyone summarizes the state of the union or the state or something or other so perhaps it is also a good time to take a look at the state of health insurance in this country, and see what may lie ahead. There has been no movement to adopt a national health coverage; there is no universal access to health coverage and no effective control of escalating costs. There is still no law that requires an employer to offer health insurance to its employees. Despite the problems still being faced, however, over recent years there has been legislation and some small adjustments that add up to increased access to health insurance.

Unlike most industrialized countries which typically provide some form of universal health coverage, health insurance in the United States, with a couple of glaring exceptions, is in the hands of the private insurance industry and, as such, is at the mercy of market forces and the insurance companies’ desires to realize profits. Even medical plans that are touted as “non-profit” must stay in the black to stay in business.

Today, the United States has the most technologically advanced medical care in the world, yet there are approximately 40 million people in the U.S. who have no health insurance at all. As a result they either go without healthcare or receive dramatically inferior care.

There has been some movement, however small, with the availability of health insurance. Access to health insurance, regardless of cost, has also been a problem for many. Insurance companies, being profit-making organizations, really don’t want to insure people who will cost them money in medical claims. This is why they carefully screen a person’s health history and medical condition on application for individual coverage. Such reviews prior to acceptance for coverage were also common in small employer groups, leaving many without access to any form of health insurance.

Over the past twenty years, there has been legislation that does allow easier access to health insurance for many people. Today, through a series of federal laws, one can become insured and stay insured regardless of one’s medical condition:
• A person can obtain health insurance through his/her employer regardless of health history, medical condition, or the size of the employer. (Health Insurance Portability and Accountability Act of 1996 - HIPAA)
• Once employment ends, the former worker and his/her dependents may legally remain, paying the full premium, on the employer’s plan for an additional 18, 29 or 36 months, depending on the situation. Many states also allow continuation of coverage for those employees not under the federal continuation law. (COBRA and state “mini-COBRA laws)
• Once all possible continuation coverage ceases, the person has a guaranteed right to purchase a broad individual health policy, again regardless of health condition, and to keep that policy indefinitely. (HIPAA)

Some states have gone further. Many now offer a risk pool form of health insurance for persons who are unable to purchase it due to health conditions. Many have also opened their Medicaid programs to allow coverage for children and the “working disabled.” A few states offer guaranteed issue individual health insurance at least during annual open enrollment periods. A few are exploring the possibility of a universal coverage concept.

Meanwhile, health care costs, and the cost of health insurance as well, continue to increase at a rate far in excess of the general inflation rate. Fifteen percent of this country’s gross domestic product is currently being spent on health care, a record that will surely be broken in each of the coming years. Neither the government nor the competition of the marketplace has been able to control these increasing costs for any length of time.

Historically, there were problems with health insurance when it paid benefits on a “fee-for-service” basis. The insurance company simply processed bills for services already rendered, making it much harder for them to control costs. In addition, since the insurance companies paid for each treatment the doctor provided, there was an incentive for physicians and other providers to over-treat and over-test in order to increase their incomes.

Approximately twenty years ago, the health insurance industry attempted to bring medical costs under control through the delivery system known as Managed Care. Under a Managed Care plan, the insurance company determines before treatment is given whether that treatment is “medically necessary” and if it will be paid for. Health Maintenance Organizations (HMOs) and other forms of Managed Care, such as PPOs, EPOs, etc., proliferated as they were touted as the solution to escalating costs. Today virtually all types of health insurance utilize some form of Managed Care to attempt to control costs.

While the old indemnity, or straight fee-for-service, plans encouraged over-utilization, unnecessary hospital confinements and testing which inflated medical providers’ incomes, Managed Care plans have had the opposite effect. Because they receive a flat fee (capitation) for each patient regardless of the treatment given, managed care companies now have a financial incentive to withhold and reduce care.

Insurance companies contracted with the medical providers for reduced fees and required prior authorization before many procedures could be performed. These cutbacks in payments and procedures held medical and health insurance costs down for almost a decade. Now, however, most of what could be squeezed out of medical costs has gone, and medical costs are again on the rise, increasing by double-digit percentages annually. This is causing dramatic increases in health insurance premiums.

The largest insurer in the country is the federal government, which, in addition to covering the millions of federal employees, also provides coverage for millions of people over age 65 or disabled, (Medicare), and for the “medically needy,” (Medicaid).

These three federal programs are experiencing the same rise in costs as the health insurers. Medicare beneficiaries are being encouraged to join Medicare HMOs and other private Medicare plans. Many states are forcing Medicaid recipients into Managed Care programs. At present, all are looking to hold down costs by reducing payments to providers and limiting over-utilization through preauthorization of treatments.

One new gimmick in the health insurance industry is “Consumer Driven Healthcare.” This is a marketing euphemism for “if patients have to pay more of the medical bill out of their pockets, then, they’ll try to keep costs down.” A good example of this is the new tax program called Health Savings Accounts (HSAs) which allows people to save money for medical bills and pay for them tax free provided their insurance has a deductible of at least $1,000. It will be interesting to see how well received these new products are.

The state of health insurance today is that, although there may be easier access to health insurance for many, the cost of that health insurance, due to the ever rising cost of health care, still prevents millions from being able to purchase health insurance. The number of uninsured is rising at the same time government budgetary constraints are affecting the public healthcare delivery system, and, as a result, public health plans are being forced to cut back.

Finally, there is very little actual movement for any major overhaul of the health insurance system that would make coverage available to everyone who wants it. It appears that the health insurance crisis will be around for the foreseeable future, affecting those very people who need it most.

What does the future hold for health insurance? It appears to be more of the same, a lot of talk with very little action.

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[Jacques Chambers, CLU, and his company, Chambers Benefits Consulting, have over 35 years of experience in health, life and disability insurance and Social Security disability benefits. For the past twelve years, he has been assisting people with their rights, problems, and other issues concerning benefits and disability. He can be reached at jacques@helpwithbenefits.com or through his website at: http://www.helpwithbenefits.com.]

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