Health Insurance
Health Insurance is a type of insurance whereby
the insurer pays the medical costs of the insured if
the insured becomes sick due to covered causes, or
due to accidents. The insurer may be a private
organization or a government agency. Market based
health care systems such as that used in the United
States rely on private medical insurance.
Individual and family health insurance plans are
usually described as either "indemnity" or
"managed-care" plans. Put broadly, the major
differences concern choice of healthcare providers,
out-of-pocket costs and how bills are paid.
Typically, indemnity plans offer a broader selection
of healthcare providers than managed care plans.
Indemnity plans pay their share of the costs for
covered services only after they receive a bill
(which means that you may have to pay up front and
then obtain reimbursement from your health insurance
company).
There are several different types of managed-care
health insurance plans. These include HMO, PPO, and
POS plans. Managed-care plans typically make use of
healthcare provider networks. Healthcare providers
within a network agree to perform services for
managed-care plan patients at pre-negotiated rates
and will usually submit the claim to the insurance
company for you. In general, you'll have less
paperwork and lower out-of-pocket costs with a
managed care health insurance plan and a broader
choice of healthcare providers with an indemnity
plan.
Private health insurance
Health insurance is one of the most controversial
forms of insurance because of the conflict between
the need for the insurance company to remain solvent
versus the need of its customers to remain healthy,
which many view as a basic human right. This
conflict exists in a liberal healthcare system
because of the unpredictability of how patients
respond to medical treatment. Suppose a large number
of customers of a particular insurance company were
to contract a rare disease costing 10 million
dollars to fight for each patient. The insurance
company would be faced with the choice of either
charging all its future customers astronomical
contributions (thus losing customers and going out
of business), paying all claims without complaint
(thus going out of business) or fighting the
customers in an attempt to deny the costly treatment
(thus outraging patients and their families, and
becoming a target for lawsuits and legislation).
There are further economic problems with private
health insurance. Asymmetry of information about a
persons health and behavior is likely to lead to
adverse selection and moral hazard. In essence,
those seeking health insurance are likely to be
those with existing medical problems or high
likelihood of future medical problems and those who
take out insurance may engage in risky behavior,
such as smoking and excessive alcohol consumption,
which they otherwise would not. These problems may
lead to 'good' insurance risks being priced out of
the market or even insurance being uneconomical to
provide. With publicly funded health insurance the
good and the bad risks are all included in the
coverage and the same moral hazard applies. Further,
every risk must subsidize the unhealthy, and those
that take care of their health have no opportunity
to avoid this subsidization. More on private health
insurance...
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Health Maintenance Organization (HMO)
A health maintenance organization (HMO) is a
prepaid health plan. As an HMO member, you pay a
monthly premium. In exchange, the HMO provides
maintenance care for you and your family, including
doctors' visits, hospital stays, emergency care,
surgery, lab tests, x-rays, and therapy.
A health maintenance organization arranges for
this care either directly in its own group practice
and/or through doctors and other health care
professionals under contract. Usually, your choices
of therapy, diagnosis, doctors and hospitals are
limited to those that have agreements with the HMO
to provide care. However, exceptions are made in
emergencies or when obviously medically necessary.
Because HMOs receive a fixed fee for your covered
medical care, it is theoretically in their interest
to make sure you get basic health care for simple
problems before they become serious. Often, the HMO
shifts the financial risk for your care to the
doctors they contract with by paying a fixed monthly
payment for each patient under the doctors care.
This is called "capitation". Any treatment a patient
receives under this system decreases the HMO's or
the doctor's income. This replaces a possible
incentive under a fee-for-service system to provide
unnecessary care, with an incentive to do too
little. HMO coverage typically includes preventive
and early detection care, such as office visits,
immunizations, well-baby checkups, mammograms, and
physicals. The range of services covered vary in
HMOs. Some services, such as outpatient mental
health care, often are provided only on a limited
basis, and more costly forms of care, diagnosis, or
treatment may not be not covered.
In some HMOs, doctors are salaried and they all
have offices in an HMO building at one or more
locations in your community as part of a prepaid
group practice. In others, independent groups of
doctors contract with the HMO to take care of
patients. These are called individual practice
associations (IPAs) and they are made up of private
physicians in private offices who agree to care for
HMO members. You select a doctor from a list of
participating physicians that make up the IPA
network. These organizations are typically also
capitated. (See above) If you are thinking of
switching into an IPA-type of HMO, ask your primary
doctor if he or she participates in the plan.
In almost all HMOs, you either are assigned or
you choose one doctor to serve as your primary care
doctor. This doctor monitors your health and
provides most of your medical care, referring you to
specialists and other health care professionals as
needed. In HMO terminology, you are known as a
"member" and a group of members under a physician's
care is known as a "panel". Members usually cannot
see a specialist without a referral from their
primary care doctor who is expected to manage the
care the panel receives.
Medicare/Medicaid
In the United States, health insurance is made
more complicated by Federal Medicare/Medicaid
programs, which have had the unintended consequence
of determining the price of medical procedures. Many
suspect that these prices are set independently of
medical necessity or actual cost. A physician who
refuses to accept a Medicare/Medicaid payment will
be banned from accepting any such payments for a
number of years, regardless of the reason for
rejecting the payment or the amount offered. In
either case, this means that private insurers have
little incentive to pay more than the government
does.
To read an additional article on "Private Health Insurance Is Available"
Click Here.
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