private health insurance 101 high costs, poor choices, no guarantees
TRANSCRIPT
Private Health Insurance 101High Costs, Poor Choices,
No Guarantees
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Health insurance in America
Why insurance matters Who pays for it How private insurance works
Different types of private insurance How you get it What it costs How it is regulated
Why we cannot rely exclusively on private insurers to guarantee quality, affordable health care we can count on
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Why health insurance matters
Access to good health care Early detection/prevention Necessary health services Institute of Medicine found 18,000
Americans die each year because they do not have health insurance
Protection from financial risk Half of all bankruptcies related to health
care costs, in most cases borne by people who are insured but have inadequate coverage
Security—if your insurance is comprehensive, it should cover the services you may need at a price you can afford
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Who pays for health insurance
We are already spending what a high-quality system that covers everyone should cost – but aren’t getting it. The US spends twice as much on health care per
person than every other advanced country, all of which cover all their residents.
Public money–your tax dollars–pays for about 60% of the $2 trillion annual U.S. health care bill through federal and state governments.
Individuals and employers pay for less than 40% percent of total US health care spending.
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Where do people under age 65 in the U.S. get health insurance?
67% of those under 65 has private coverage
62% have employer-sponsored covered
5% purchase individual policies
15% have Medicaid or other public coverage
18% are uninsured
Source: KFF analysis of Urban Institute estimates of March 2005 Current Population Survey, U.S. Census Bureau.
Employer, Dependent
30%
Employer,Own32%
Uninsured/IHS18%
Medicaid/Other public
15%
Individual Policies5%
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Why private insurance doesn’t meet our needs
Only want to cover the healthy and divide the population into small groups, driving up costs
Do not want to cover costly services Cover different services varying conditions and pay
different amounts. Can change many terms of coverage whenever they please.
www.healthcareforamericanow.org
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Getting a balanced mix of sick and healthy members
Called “Risk-Spreading” Why is it important?
Equity Efficiency Security
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Concentration of health spending by Americans, 2003
24%
49%
64%73%
80%
97%
3%0%
20%
40%
60%
80%
100%
Top 1% Top 5% Top10%
Top15%
Top20%
Top50%
Bottom50%
Population Percentile Ranked by Health Care Spending
Source: KFF calculations using data from Agency for Healthcare Research and Quality, Medical Expenditure Panel Survey, 2003.
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Why private insurers don’t do it
Most insurers try to get only healthy members Rejecting sick (high-risk)
people Excluding coverage of
pre-existing conditions Charging people more if
they are high risk Design benefits so that people with costly conditions
either do not want to join or must pay high costs for their care.
The healthier their members, the higher their profits
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Private health insurance varies
All health insurance is different.
There is no standard for health benefits.
Employer-sponsored coverage: Increasingly less comprehensive Different benefits covered as well
as different costs Individually-purchased policies:
Typically still less comprehensive Less coverage of maternity, mental health
and prescription drugs Can have caps on needed services, high
copays and high deductibles as well
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Types of private insurance
Indemnity, fee-for-service
“Managed Care” Preferred Provider
Organization (PPO) Health Maintenance
Organization (HMO) Point of Service (POS)
High deductible/high cost health plans
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Private plans: No guarantees
Insurers can change terms of coverage as largely as they please : raise premiums, deductibles and copays from one year to next Change networks of doctors and other providers at any time. Decide what services they pay for and how much they pay at any time
Two million people lose health insurance every month More than 70 million people have inadequate coverage 47 million uninsured in 2007, vs. 80 million uninsured over two-
year period Choice of doctors, what’s covered and what you pay can change
with… Marriage, divorce, spouse’s death Loss or change of job Birthday (e.g. 19th) Move Change in health status
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Employer v. individual health insurance
Employer-Sponsored Insurance (ESI) Employers decide what they offer Less likely to be offered to
Employees of small firms Part time/seasonal workers Low wage workers Newly hired workers Dependents Retirees
Eligibility cannot be based on health status
Individual insurance Purchased by individuals if available and affordable Age and health status are a determining factor in
whether you can get insurance on your own
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Health conditions denied by individual market insurers
Always denied Cancer Multiple Sclerosis HIV/AIDS Pregnancy Diabetes Stroke
Often denied Overweight High blood pressure Cancer history Asthma
Sometimes denied Acne Hay fever
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What does private health insurance cover?
It depends and it’s not clear Covered benefits
Standard policy: rarely defined in law Depends on state, insurer and purchaser Benefit limits (annual, lifetime, service and cost limits)
Cost-sharing Deductibles, copays, coinsurance Out-of-pocket cost-sharing maximums, high charges on top of what the insurance
pays for out-of-network care Terms of coverage
Provider networks Care authorization/utilization review
Condition exclusions Pre-existing conditions Other conditions based on work, history etc.
Employer-sponsored insurance typically (not always) more comprehensive Individual insurance typically (not always) less so
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What does health insurance cost?
It depends Cost (premium) of health insurance depends on:
Who’s covered (age, health status & history) What’s covered (benefits, cost sharing/
deductible, terms, pre-existing conditions, limits) Insurer profits & administration costs Subsidies (premium & reinsurance) Underlying health care costs
Health Care Costs are Too High
Half of all bankruptcies in the US are due to medical costs, and three-fourths of those bankrupted had health insurance at the time they got sick or injured
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Regulation of private insurance
State is primary regulator 50 states, 50 rules Few national regulations
Regulations Ensure solvency Oversee risk spreading/
risk selection Generally very limited or ineffective
Best practices: Guaranteed issue: Must allow anyone to buy Community rating: Must charge everyone the same
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Regulation of private health insurance alone not enough
Even with good regulations, we cannot rely exclusively on profit–driven private insurers to guarantee quality, affordable health care.
To rein in costs, guarantee comprehensive benefits and financial security, we need:
A public insurance option that sets standards and drives accountability from private plans; and
Fair regulation of private insurers.
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Regulations: Employee benefits
Employee Retirement Security Act (ERISA)
Federal law that precludes states from regulating employee health benefits for employers whoself-insure
Allows joint federal/state regulation of insurance that employers buy Fully-insured plans
Does not allow states to regulate self-insured plans
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Regulations: Keeping insurance
Consolidated Omnibus Budget Reconciliation Act (COBRA)
Federal law offers temporary continuation of coverage after:
Loss of employment Change in family/dependent status: 36 months Disability: 29 months
Applies to plans sponsored by employers with 20 employees or more
Individual pays full premium and cost of administration
Very costly and unaffordable for most
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Regulations: Keeping insurance
Health Insurance Portability & Accountability Act (HIPAA)
Federal law that protects all group plans participants Employers cannot discriminate against them based on their health or
worker status Can buy individual coverage if they lose group plan coverage
So long as they have exhausted COBRA protections and switch plans within 63 day window (check) of losing group plan coverage, new insurer must cover you
Pre-existing conditions covered
Federal law does not speak to individual insurance premiums and cost-sharing
Insurance tends to be very costly
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Private insurance: Case example
All these regulations could not help Mr. Jones. Mr. Jones has diabetes. He is laid off from his job with employer-
sponsored private health benefits. His unemployment benefits are $1,150 a month His rent is $750 a month That only leaves him $400 a month for utilities, food, gas and other
expenses
He cannot afford the cost of private health insurance: His COBRA premium is $425 a month Individual insurance plans turned him down because he has diabetes
He cannot afford the cost of properly managing his diabetes: Insulin and other medications, test strips, and doctor visits cost over $400
a month
As a result, Mr. Jones developed liver problems and was hospitalized: The hospital bill was over $15,000
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We need public insurance option
What have private insurance companies done for us? Failed to offer coverage we can count on Denied health care claims Rejected people for coverage for being too
old or sick or just being a woman of child-bearing age
Charged people higher premiums based on their health history
Canceled people’s coverage after they got sick Left 47 million people without health insurance Left millions more in medical debt or bankrupt because
their health care coverage did not meet their needs
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What do private insurance companies expect of us?
They want to continue to decide how much they charge and keep making higher and higher profits.
They want to continue to decide what services they cover, under what circumstances and how much they pay and keep their decisions secret.
They want to be able to shift more of costs of care to us.
They don’t want us to have the choice of a public health insurance option.
We need public insurance option
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We need public insurance option
Public insurance sets standards, predictable costs and benefits, transparency as to what is covered and how much is paid, reins in costs, provides safety net
Public health insurance option creates competition, removes private insurer quasi-monopoly power.
Exclusive reliance on private insurers gives them monopoly, even with regulation, allows them to control costs, benefits and access
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Public insurance: Case example of how it could work
Mr. Jones has diabetes. He is laid off from his job with employer-sponsored private health benefits.
He automatically gets affordable insurance through a national insurance pool that gives him a choice of a public plan or private plans that guarantee him access to care he needs and covers the costs of his diabetes.
Mr. Jones has diabetes and gets his health insurance from the public plan in the national health insurance pool. He is laid off from his job and his insurance continues.
Mr. Jones’ premium costs are subsidized according to his income, so he gets extra help while he is unemployed.
The U.S. health care system saves moneyin the long-term by keeping Mr. Jones’ diabetes under control.
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Conclusions With private insurance, cost as well as adequacy
and availability of coverage are not guaranteed
As your health status changes and you get older, it often becomes increasingly expensive and difficult to get and keep private insurance
Government can guarantee access to affordable, high quality health care through fair insurance regulation coupled with a public insurance option that sets standards and drives accountability