Health insurance

Health insurance is a form of insurance that helps pay for medical services,such as doctor visits, tests, and hospitalization. Private insurance companies and government agencies, like the Medicare and Medicaid programs in the United States, are the primary providers of health insurance. Health insurance ensures that people can afford medical care and protects the individual from being overburdened with enormous health care bills. Private companies charge amonthly fee, or premium, for health care coverage. Government-based health insurance is usually free and sometimes based on certain criteria, such as ageor income.

Health insurance is a relatively recent phenomenon, having emerged primarilyduring the course of the twentieth century. As early as 1883, Germany had established a government-sponsored health services system to provide care for low income people who could not afford it. Still, as recently as 1929, no insurance was available to cover the costs of hospitalization in the United States. In the 1930s, individual hospitals began to initiate health insurance plansto subscribing members in the community, often an individual company or group, such as teachers, who could receive care in the hospital providing the insurance. A "free-choice" approach to hospital care coverage (in which the insured can seek medical attention from a health care provider of his or her ownchoice) soon evolved through a consortium of area hospitals as well as through private insurance companies.

After World War II, Great Britain initiated the first comprehensive compulsory governmental health plan, which provided free medical care to any patient seeing a doctor within the system. Known today as socialized medicine, this approach has been adopted by many countries. However, in the United States, employer-based and individual purchases of private health insurance became the primary source of health coverage, although government programs do exist. Oneadvantage associated with the private insurance approach is that it offers patients a greater freedom of choice since most physicians and hospitals provide services covered by the major medical insurers, such as Blue Cross. However, relying on private insurance also has a major drawback. People who can notafford to pay for health insurance traditionally have much more limited access to services. In 1965, the U.S. government took efforts to address the problem of people who could not afford insurance when it enacted the Medicare andMedicaid programs. These programs provide care to people over the age of 65 and the poor, respectively. Other programs, such as workers' compensation anddisability, also evolved to provide for health care services and are primarily run by the individual states.

In the early 1990s, a growing debate over health care and insurance in the United States began, focusing primarily on the growing costs of health care andthe ever-expanding population base unable to afford health care insurance. The U.S. is the only Western industrialized nation without a government-sponsored comprehensive health insurance plan for its citizens. As a result, by themid-1990s, the U.S. spent 40 percent of its Gross National Product (GNP) onhealth care but still nearly 40 million people were uninsured. Statistics such as these led to a proposal by President Clinton to establish a federal program that would ensure coverage for nearly all U.S. citizens. This proposal was opposed by many in the health care industry, including the medical and insurance professions, who viewed government interference as an encroachment of "free-choice" for both patients and health care providers. No legislation wasenacted, and the health care insurance debate continued.

It has been argued by many that socialized medicine reduces health care costsand provides insurance for all. But others argue that socialized medicine erodes the quality of health care and stifles new approaches and quality improvement in health care services. However, in 1997, ten million children in theUnited States had no health insurance. As a result, they either went withoutcare or sought services in hospital emergency rooms, a costly and ineffectiveuse of health care resources.

As a result of the debate over health care and health insurance, new approaches have arisen to contain costs. By the late 1990s, managed care had become the dominant mode of providing health care services and insurance in the U.S.Ideally, this approach would allow consumers to pick and choose insurance plans while avoiding government price controls and the rationing of health careservices. However, the managed care approach has resulted in less freedom ofchoice in health care because people must seek care from physicians and hospitals associated with their particular managed care plan. It has also failed to address successfully the issue of the uninsured.

Managed care health insurers typically attempt to control the rising costs ofmedical care with the following implementations:

  • Provider networks consisting of a group of doctors, hospitals, and other health-care providers who agree to treat health plan members at a reduced rate of payment.
  • Utilization management in which medical professionals review proposed hospitaladmissions, surgery and other procedures to make sure they are necessary andappropriate.
  • Case management in which the health plan works with thepatient and/or doctor to coordinate care and arrange treatment.

Managed health care differs from traditional, or indemnity, insurance in thefollowing ways:

  • The patient must either use the providers in the plan's network, or suffer reduced benefits if he or she chooses to use a providerwho does not belong to the network.
  • The patient must consult a primary-care physician to obtain a referral before he or she can be seen by a medical specialist.
  • The patient must obtain the health plan's approval prior to admission to a hospital (except in emergencies).

When considering a change in managed care plans, the health care consumer should keep in mind that no two plans are ever exactly alike, and be prepared toexperience a fair amount of frustration when attempting to make comparisonsbetween plans. Considerations that the consumer should keep in mind when making a change in health plans include:

  • Whether the health care providerto be seen in fact accepts new patients from the health plan.
  • Whether a referral is required before being seen by a particular provider.
  • Whether there are any restrictions on the in-network providers or hospitals that the primary care physician can refer you to.
  • Whether the plan's physicians are salaried or paid a fee based on service. Salaried physicians are less likely to economize on service or overtreat patients, but a fee-for-service arrangement provides physicians with an incentive to provide as much treatment as is necessary to restore the patient's health.
  • Whether theprimary care physician receives a financial incentive not to make patient referrals.
  • Whether the primary care physician receives a fixed monthly payment for each plan member he or she receives, regardless of how many timeshe sees the patient.
  • Whether the plan provides for continuing coverage should the plan member move outside the plan's service area or become unenrolled in the plan due to loss of a job.

If a plan member has a problem with his or her health insurer, the health plan will generally give the member several options for reaching some resolution. The first option is usually to talk informally with the health plan's customer service department. If this doesn't achieve the desired result, many plans have a grievance procedure in place that allows the plan member to file a formal complaint that will be reviewed by health plan administrators. If the grievance procedure does not yield satisfaction to the plan member, most states allow the plan member to take the complaint to state regulators of the health insurance industry. But conflict of interest is sometimes a problem. In California, for example, where the Department of Corporations has in the past been responsible for the regulation of the health care industry, a growing awareness that that Department was merely a toady to the health insurance industry led the governor of that state to create a new state agency to regulate health care plans.

There are three types of managed care currently available in the United States. Health Maintenance Organizations (HMOs) offer treatment through their ownnetwork of doctors, sometimes in the plan's own facilities. HMOs rarely allowsubscribers to use non-HMO providers. Managed indemnity plans allow plan members to see any doctor, but generally require prior approval for hospitalizations and some outpatient procedures. Preferred Provider Organizations (PPOs)allow subscribers to see any health provider, although financial incentives encourage the use of in-network providers.

One major problem with HMOs is that it is nearly impossible for the consumerto evaluate the quality of care provided by a managed health plan. The National Commission on Quality Assurance (NCQA), which was created by the managed care industry to accredit HMOs and other organizations, has offered little help in this regard. Although the NCQA keeps tabs on such statistics as the number of physicians who are board certified, it does not measure such benchmarksas effectiveness of treatment. Over 95 percent of the respondents to one survey indicated they wanted more information about the financial incentives HMOs offer their physicians to reduce costs. Managed care plans can dismiss physicians who order more tests or hospital days than a plan considers "normal."And some plans have gag rules that prohibit full communication between doctors and patients, or antidisparagement rules that prohibit a doctor from makingcomments critical of the plan.

And it cannot be argued that the managed care industry is losing money. In 1996, for example, the CEO of Oxford Health Plans, Inc., drew a salary of $29,061,599, excluding stock options. The CEO of CIGNA Corporation made $11,568,410, and the President of Aetna, Inc. earned $7,394,506. In brief, the 25 highest paid HMO executives made $153.8 million in annual compensation, with an average compensation of $6.2 million and a medium compensation of $4 million.

In 1999, California joined Texas and Georgia to become the third state to adopt legislation to allow patients to sue their HMOs if they are substantiallyharmed (with substantial harm defined as loss of life, loss or significant impairment of limb or bodily functions, significant disfigurement, severe or chronic pain or significant financial loss) by a health insurer's decision to delay, deny or alter necessary treatment. The California law will also requiremanaged-care plans and other health insurers to provide a second opinion when a patient requests it, and to cover contraceptives, cancer screening and treatment of diabetes and mental illness. The governor of California stated that his intention in signing the legislation into law was to "...put medical decision-making back where it belongs: in the hands of doctors and patients."

In an apparent bow to widespread dissatisfaction with the managed care system, the UnitedHealth Group, the nation's second largest health insurer and insurer of 14.5 million people, in late 1999 announced that it would no longer allow HMO managers, many of whom have little or no medical expertise, to overrule doctor's decisions about what procedures and services are medically necessary for the treatment of patients. In announcing its decision, UnitedHealth noted that it had been spending more money to scrutinize and deny questionabletreatments than the practice saved.

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