A Properly Structured Single Payer and the Concept of Health Insurance

What is insurance and why do we have it? https://www.lloyds.com/lloyds/about-us/what-we-do/what-is-insurance

Insurance is the main way for businesses and individuals to reduce the financial impact of a risk occurring. Regarding the concept of risk, running a business of any kind involves a certain amount of risk. Whether it’s the risk of fire, the risk of damage to exported goods or the risk of natural disasters, all these incidents will have a financial impact on your business if they occur. This is what the term ‘risk’ refers to. Most businesses take small steps to manage the effects of risk. For example, by installing smoke alarms and sprinkler systems to reduce the damage caused by fire or by installing security alarms to deter thieves. However, business owners also want to protect themselves against the financial consequences of something untoward happening, and this is where insurance comes in. In effect, the business can transfer the risk away from themselves and on to someone else.

This transfer of risk is the basis of all insurance.

When things go wrong it can be expensive and so, for many of these eventualities, insurance is there to take the financial risk on our behalf.

A business that provides insurance agrees to take on risks on behalf of a company or individual, in exchange for a fee. It does this by providing the business or individual concerned with an insurance contract, sometimes called a ‘policy’.

This policy will cover a person or business for many of the costs they have to meet as a result of a risk occurring and provides the policyholder with some security should the worst happen.

The fee an insurer receives from a policyholder (in return for their policy) is called the insurance ‘premium’. This premium, and the terms and conditions of the policy, are based on the likelihood of the risk happening and its value.

The insurer collects premiums on a number of policies and pools these funds, which it then invests to increase the amount of money held. Should any insured person or business make a claim on a policy, the insurer will pay out on that claim from the pool of funds.

The insurer is in business to make a profit and will be hoping that the total premiums it receives in any one year, together with any money it can make through investments, will exceed the total claims it has to pay out.

What is health insurance? http://basics.ibx.com/what-is-health-insurance/

Health insurance is a way to pay for health care. The word ‘care’ refers to the medical services covered by your plan. When you choose a plan, you will receive materials that explain your benefits so you know what types of services are covered. Health insurance protects you from paying the full costs of medical services when you’re injured or sick. Just like car insurance or home insurance, you choose a plan and agree to pay a certain rate, or premium, each month. In return, your health insurer agrees to pay a portion of your covered medical costs. Payments by your health insurance are typically based on discounts they negotiate with doctors and hospitals.

Each plan is different, but you can usually find a plan to cover preventive care, like doctor visits and screenings, as well as hospital visits, ER trips, and even prescription drugs. Some plans cover vision and dental, but you may need to purchase these plans separately.

Health insurance is a type of insurance coverage that covers the cost of an insured individual’s medical and surgical expenses. http://www.medicalnewstoday.com/info/health-insurance/

Depending on the type of health insurance coverage, either the insured pays costs out-of-pocket and is then reimbursed, or the insurer makes payments directly to the provider.

In health insurance terminology, the ‘provider’ is a clinic, hospital, doctor, laboratory, health care practitioner, or pharmacy. The ‘insured’ is the owner of the health insurance policy; the person with the health insurance coverage.

In countries without universal health care coverage, such as the USA, health insurance is commonly included in employer benefit packages and seen as an employment perk.

Is health insurance coverage a human right or another product one can buy? In some countries, such as the United Kingdom or Canada, health care coverage is provided by the state and is seen as every citizen’s right. It is classed along with public education, the police, firefighters, street lighting, and public road networks, as a part of a public service for the nation.

In other countries, such as the USA, health insurance coverage is seen somewhat differently.With the exception of some groups, such as elderly and/or disabled people, veterans and some others, it is the individual’s responsibility to be insured. More recently, the Obama Administration has introduced laws making it mandatory for everybody to have health insurance, and there are penalties for those who fail to have a policy of some kind.

An understanding of basic health insurance vocabulary is important. https://www.medmutual.com/For-Individuals-and-Families/Health-Insurance-Education/Health-Insurance-Basics/What-is-Individual-Health-Insurance.aspx

Deductible: This is a set amount you have to pay toward your medical bills every year before your insurance company starts paying. It varies by plan and some plans have no deductible.

Premium: This is the amount you pay your health insurance company to keep your coverage active. Most people pay their premium monthly.

Coinsurance: This is the percentage of your medical bill you share with your insurance company after you’ve paid your deductible. Unless you have a policy with 100 percent coverage for everything, you have to pay a coinsurance amount. For example, if you have a $100 doctor’s bill and your plan covers 80 percent of it, your coinsurance amount due to the doctor’s office is 20 percent, or $20.

Copayment (or “Copay”): Your copayment, or copay, is the flat fee you pay every time you go to the doctor or fill a prescription. It’s usually a relatively small dollar amount. Copays do not count toward your deductible.

Remember the insurers want to make a lot of profit and calculate that

  • the total premiums it receives in any one year,
  • the money it makes through investments,
  • the money it avoids paying out via deductibles, coinsurance, copays, and other gimmicks such as less or no drug, vision, dental, and complicated chronic illness coverage,
  • the financial pressures (reductions in reimbursement) placed upon hospitals and doctors to be part of their provider network,
  • interference with the doctors’ practices, for example, by placing difficult to hurdle roadblocks for specialty referrals and sophisticated diagnostic testing and treatment,

will all result in huge revenues and profits.

One would think that the concept of free-market sale of health insurance across state lines would, by the force of competition, reduce the cost of health insurance for individuals. Another quagmire of legalese results from the specific insurance regulations in each state. http://www.naic.org/documents/topics_interstate_sales_myths.pdf

Can you imagine the thicket of thorny state laws from 50 states being negotiated to achieve this concept of health insurance being sold across state lines? I laugh when I think of 50 sets of state politicians, each set as buffoonish as the all-talk-no-action pols in Washington, DC, battling to avoid having their own little world of health care finance control being threatened. There will be state court battles up to the states’ supreme courts and onto federal court battles all the way up to our Supreme Court, the highest court in the land. Such great fun for lawyers, politicians, lobbyists, and legal pundits across the USA.

Let’s assume that the concept of selling health insurance across all state lines flies through in one fell swoop. What would there be then, maybe three or four or more surviving companies competing? What would they be competing for? They aren’t competing for individuals’ health care, i.e., doctor logo patient relationships. They are competing for individuals’ dollars for payment to administer payment of health care bills and to make a lot of profit for doing so. The way insurance companies make profit is to pay out less than they take in. The profit incentive along with the force of competition make dollar garnering directly affect the functioning of doctor logo patient relationships. See the list of profit making mechanisms above and connect the dots. The result is that the major fear people have about “socialized medicine,” the payer directing their medical care, happens in our “non-socialized” system.

Health savings accounts (HSAs), (another free-market business idea), are tax-advantaged medical savings accounts available to taxpayers in the United States who are enrolled in a high-deductible health plan (HDHP). https://en.wikipedia.org/wiki/Health_savings_account

The funds contributed to an account are not subject to federal income tax at the time of deposit. HSA funds may currently be used to pay for qualified medical expenses at any time without federal tax liability or penalty. My views about HSAs are as follows:

  • they’re probably okay if you have enough money to deposit into the account to pay the high deductible and expenses for non-covered illnesses, which may only be part of what you pay before the insurance company has to shell out any money,
  • HSAs also have associated account management fees. Some might say, “Oh, that’s only three dollars a month or so and the fee is justified for the work of managing the account by whoever manages it.” Well, let’s say there are 20 million HSAs in America each with an account management fee of $3 per month. That’s a nice business earning 60 million dollars per month labeled as a free-market based solution to our health care woes.

Many, maybe most, people really can’t afford the high deductibles, and although the account management fee sounds minimal on an individual basis, for a lot of people every dollar counts. There will still be a large population of people who just can’t afford to participate, and some sort of other plan will have to be made for them, which results in the financial discrimination in our health care system not being eliminated and the resentments of having a large number of Americans labeled as indigent, poor, requiring entitlements remaining.

Do you really think the concept of health insurance should continue? I say it should not continue. I say a properly structured single payer is the correct answer for our American health care system to move forward.

R. Garth Kirkwood, MD




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