Whither Private Health Insurance? Self-Destruction or Rebirth?

By Reinhardt, Uwe E.; Davidson, Richard J. et al. | Frontiers of Health Services Management, Fall 1992 | Go to article overview

Whither Private Health Insurance? Self-Destruction or Rebirth?


Reinhardt, Uwe E., Davidson, Richard J., Dowling, William L., Kraus, Irene, Schramm, Carl J., Miller, Marianne, Frontiers of Health Services Management


SUMMARY

The American public increasingly finds itself disenchanted with the system for health care financing in this country. Three forms of reform proposal are examined: those that place the locus of primary responsibility for health insurance coverage on the individual, those that would rely on employer mandates with patients and government bearing the residual responsibility, and those that lodge chief financial responsibility with the government, and act as primary agent for cost control. The second approach, government-mandated employer-provided health insurance, appears to be the most politically viable at this time. However, that option is likely to be acceptable to the business community only if the mandate is coupled with additional regulation of private health insurance. Specifically, private health insurance in such a system likely would be based on mandatory open enrollment, community-rated premiums, and all-payer reimbursement, under which every payer pays a given provider the same fee for the same service.

Imagine the following scenario: You and a group of colleagues are invited to a dinner at which the spirits--bourbon, gin, and chardonnay--flow like water. Eventually all of you are too impaired to drive home. Instead, you play a game called "Building America's Health Insurance System."

Would you, even in the most inebriated state, ever hit upon the idea to construct for our fine land a health insurance system that

* Ties the health insurance coverage of an entire American family to one particular job in one particular company in a way that causes the family to lose that coverage should the family's breadwinner lose that job

* Grants high-income families a higher tax subsidy toward the purchase of health insurance than it grants low-income families(1)

* Leads Americans to hold on to jobs they loathe, merely to have health insurance

* Tells families without employer-provided health insurance that their premiums will be sky high, should one or several members of the family be stricken with chronic illness

* Sometimes simply denies families or small business firms with chronically ill members any health insurance coverage

* Leaves some 35 million Americans completely without health insurance, among them many hard-working adults and some 10 million children

* Tells a family stricken with illness and without health insurance first to pauperize itself thoroughly before society will stretch out a helping hand in the form of Medicaid(2)

* Has members of uninsured families die at a much higher rate from given illnesses than similarly situated families that do have insurance coverage

* Allows private insurance carriers that cover individuals or small business firms to eat up over one-third of the premiums they collect in the form of commissions, administrative overhead, and profits

* Saddles doctors, hospitals, patients, and business firms with a claims process whose sheer waste of paper and time is unmatched anywhere in the world

* Costs some 40 percent more per capita than does Canada's health system, the second most expensive health system in the world

* Has the executives of even large American business firms now humble themselves in testimony before the U.S. Congress with their lament that they simply cannot control the cost of providing their employees with health insurance and that they therefore cannot compete effectively anymore in the international marketplace.

If this is the system you prefer, then you have your wish, for the preceding does describe well-known features of our nation's health insurance system. The system was cobbled together over the years by a partnership among America's business executives, labor leaders, and government officials who never thought very deeply about the long-term consequences of their design. Alas, the proverbial eggs they laid in the process now have become the proverbial chickens coming home to roost. …

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