Jeffrey Wade
Private health insurance is a contentious issue in the US, with some arguing that it is harmful to people's health. Private insurance companies profit when people are healthy or when care is denied, creating a perverse incentive to underprovide for sick people. The administrative burden of private insurance, including confirming coverage, submitting claims, and filling out forms, also contributes to delays in care and time away from patients.
Supporters of private insurance argue that it saves Americans money by reducing overall healthcare costs. They claim that private insurers' administrative costs control and reduce medical costs, steering patients towards more cost-effective care. Private insurers are also free to experiment with new benefit designs and have an incentive to provide additional preventive-care services.
| Characteristics | Values |
|---|---|
| Administrative burden | Confirming coverage, submitting claims, filling out forms |
| Profit motive | Only profitable when people are healthy or when care is denied |
| Perverse incentives | Underprovide to sick people |
| High costs | High deductibles and other cost-sharing requirements |
| Lack of access | Lack of uniform coverage across states |
What You'll Learn
Private health insurance is linked to higher mortality rates
Another study, which used data from the 1988-1994 NHANES, found that the hazard ratio for mortality among the uninsured was 1.25, and after adjusting for various factors, the hazard ratio was 1.40. This study also found that the uninsured were more likely to go without needed care, less likely to have a usual source of medical care, and more likely to experience discontinuity of insurance.
The lack of health insurance has also been found to be associated with higher mortality from cancer and other chronic diseases. A study which examined data from the Third National Health and Nutrition Examination Survey (NHANES III) found that the risk of mortality from cancer, all causes, cardiovascular disease, and diabetes was substantially greater for those with public/no insurance compared to private insurance.
Overall, these studies suggest that the lack of health insurance is associated with higher mortality rates and that this may be due to reduced access to care, poorer health outcomes, and a greater prevalence of inflammation-related lifestyle factors.
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Private health insurance is costly and time-consuming
The cost of health insurance in the Affordable Care Act (ACA) marketplace varies by insurance company, where you live, which plan and tier you choose, how many people are covered, your age, whether you smoke, and your household family size and income. The average yearly cost of health insurance is $7,620, with monthly premiums of $635.
The average yearly cost of health insurance for a family of four is $28,000. The cost of health insurance is rising, and as salaries for American workers have increased, net pay has remained the same due to the increasing cost of health insurance.
The high cost of health insurance is driven by several factors, including:
- Wasteful systems
- Rising drug costs
- High salaries for medical professionals
- Profit-driven hospitals
- Defensive medical practices
- Varying healthcare prices
The complexity of the US healthcare system and the lack of set prices for medical services allow providers to charge what the market will bear. The cost of the same healthcare service can vary significantly depending on the payer and the geographical area.
The administrative burden of private insurance also contributes to the cost. An array of usage and billing requirements from multiple payers makes it necessary to hire costly administrative help for billing and reimbursements. These administrative costs are frequently cited as a cause of excess medical spending and can add a lot to total yearly costs.
In addition to being costly, private health insurance can also be time-consuming. The process of getting approval for a hospital admission, access to tests, or drugs can be lengthy and challenging. People with individual insurance have discovered that provider networks are becoming increasingly narrow, often excluding the best doctors and hospitals.
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Private health insurance can lead to medical bankruptcy
Firstly, private health insurance companies profit when people are healthy and lose money when they are sick. This creates a perverse incentive to underprovide for sick people. In contrast, health providers like hospitals make money by attracting sick patients as they can charge full price for their services. This results in a conflict of interest between insurance companies and healthcare providers, with patients suffering as a result.
Secondly, private health insurance often comes with high premiums, copays, deductibles, and out-of-pocket costs. These costs can quickly add up, especially for those with chronic illnesses or unexpected medical emergencies. In the US, the high cost of healthcare is a significant factor in personal bankruptcy, with an estimated 530,000 families seeking bankruptcy protection from medical bills each year. Even those with insurance can find themselves burdened with massive debt due to unexpected out-of-network charges, high deductibles, and denied claims.
Thirdly, the administrative burden of private insurance, including confirming coverage, submitting claims, and filling out forms, contributes to delays in care and time away from patients. This can have serious consequences, especially for those with mental health and substance abuse issues where timely treatment is critical.
Finally, private health insurance does not guarantee access to care. Even with insurance, patients may face long waits for treatment, be denied coverage for certain procedures, or be unable to afford the high out-of-pocket costs associated with their care. This can result in a delay in seeking treatment, which can exacerbate medical issues and increase overall costs.
In conclusion, private health insurance can lead to medical bankruptcy due to a combination of profit-driven incentives, high out-of-pocket costs, administrative burdens, and limited access to care. These issues contribute to a broken healthcare system that often fails to provide adequate and affordable care to those who need it most.
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Private health insurance can cause delays in care
The administrative burden of private insurance can also cause disruptions in health insurance coverage, which can in turn lead to disruptions in medical care and, subsequently, negative health consequences, higher out-of-pocket costs, and stress for consumers. For example, in 2018, 61% of firms offering health benefits shopped for a new health plan or health insurance carrier, and of those, 25% changed plans or carriers.
Private insurance can also cause delays in care by creating narrow provider networks, which can limit patient choice at the point of care. This can lead to surprise medical bills when patients receive care from out-of-network hospitals or doctors.
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Private health insurance has perverse incentives
Private health insurance has been criticised for its perverse incentives to underprovide for sick people. This is largely due to unwise government regulation. For example, a federal requirement states that no health plan can discriminate against enrollees based on health status. This means that plans cannot charge premiums that reflect the expected cost of care, and so health plans make a profit on the healthy and lose money on the sick.
The profit motive of private insurance companies means that they only profit when people are healthy or when care is denied. This can cause delays in care and time away from patients. For instance, insurance companies may require "prior authorisation" before a patient can be seen, even in cases where the treatment is life-saving.
Private health insurance is also associated with high deductibles and other cost-sharing requirements, which can cause problems for people paying their out-of-pocket medical bills.
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Frequently asked questions
Private insurance is bad because it is driven by profit and not the patient's health.
The profit motive leads to higher costs, reduced access to care, and poorer health outcomes.
Private insurers spend a lot of money on administration, which adds to the overall cost of the healthcare system.
Private insurance often involves high deductibles and other cost-sharing requirements, which can make it difficult for people to afford the care they need.
Private insurers may deny coverage or provide inadequate coverage, leading to delays in care and increased mortality from cancer and other chronic diseases.
Yes, one alternative is a single-payer system, such as "Medicare for All," where a public program provides health insurance for all residents, eliminating the role of private insurance companies.
