Science Forums 2

[CraigD]

Originally Posted by HydrogenBond

The American Healthcare system is based on capitalism. But if one looks at how insurance works, it uses a socialist approach. In other words, everyone is required to pool their money (roughly similar amounts for similar services) irregardless of one's use of the health care system.

This is an incomplete description of how health insurance works in most states in the US, and the few other countries with which I’m acquainted.

What HydrogenBond describes is know in the insurance business as community rating modeling. Under this model, insurance premiums (payments by the insured, or, more typically, the insured’s employer) are based on the expected utilization cost of all people living in the insured’s geographic area.

Since the late 1980s, purchasers of insurance – mostly employers and brokers – have aggressively sought, among other things, to obtain the greatest insurance benefits (services) for the least money. One of the ways this has been done is to offer employers adjusted community rates based on demographic factors from age to behavioral factors, such as smoking. Another is cost sharing, where the purchaser pays a lower base rate, but must pay an additional fee based on utilization. Cost sharing is also typically passed to the insured in the form of copayments and deductibles.

The competitive pressure to provide insurance for less the traditional community rate has been intense, causing a substantial “die off” of insurance companies unable or unwilling to do so. Experts are divided on whether this change in the industry is good or bad. On one hand, incompetent companies have been driven out of business, and many jobs have been created to design and administer increasing complicated insurance products. On the other, people with “adverse demographics” – the old, or people with even minor pre-existing health conditions, are often unable to afford health insurance, and may as a result receive dangerously sub-standard healthcare.

One can, of course, completely opt-out of having health insurance, and receive very high quality healthcare on a fee-for-service basis, but such a choice is available only to a small percentage of the population, the most wealthy.

Originally Posted by jackson33

the US insurance programs are all voluntary, un-mandated and there is no government involved.

It is true that, in the US, no one is required by the government to provide insurance, and no one require to purchase it. I don’t think it’s accurate, however, to say that there is no government involvement.

Insurance companies require special business licenses in the 50 US states and the District of Columbia. Getting and keeping such a license is a lengthy and complicated process, requiring cooperation within-depth financial, medical, and ethical audits by the various state insurance agencies. The rate that the insurance company charges for its services, what services it offers, and how it advertises them must be approved in advance by the state. If the company refuses to cooperate, even absent evidence or allegation of fraud or similar crimes, state law (at least, to my knowledge, in DC, MA, and VA) permits the agencies to, through the state’s governor, seize the companies monies, close its places of business and take its records and equipment, and even jail and prosecute its officers and employees.

Although these laws exist, my experience with state regulators is that they are cooperative and helpful almost to the point of being wishy-washy. I’m aware of one business in the state of MD that has been substantially adversely audited for over 20 years, but has not suffered legal sanctions of any kind by simply claiming each year “we’re working to correct that, and expect to do so within a year”.