Is Your Insurance HEALTHY?

There should be a better way to keep our families healthy...

Let's begin with terminology. The generally accepted definition of an "insurable event" - be it a traffic accident, a house fire, or an earthquake - is something that (a) comes without warning; (b) is very unlikely to happen and (c) is definitely undesirable. Now try to apply this definition to any routine health maintenance event like teeth cleaning or annual physical and you will discover that the very term HEALTH INSURANCE contains a built-in contradiction.

From financial considerations, any INSURANCE system works best when the fewest number of participants actually use it (i.e. make claims). This way an insurer makes profit and is able to lower the premium which, in turn, brings more paying participants who are happy NOT TO USE the insurance, especially if it does not cost them too much. Remember, we are talking about real insurance and truly "insurable event" - something that is definitely undesirable. On the contrary, the HEALTH CARE system works best when the most people use it (i.e. get checkups, tests and vaccinations). The financial structure and goals of the two systems are incompatible.

It was in an attempt to reconcile these differences that the concept of managed care was developed. Unfortunately, that system satisfies nobody. It enrages health care practitioners and consumers alike when it limits or denies payments on the grounds that the particular treatment or service is not medically necessary. It also frustrates insurers by mandating payment for routine services, whether they are really necessary or not.

There's another basic problem with the current system: it's the assumption that health care is a benefit of employment. So if you are unemployed, self-employed or employed by someone who lacks the negotiating power of big businesses - health insurance is not for you. Even if one has an employer provided coverage, recent premium hikes can price him/her out of the range of affordable health insurance. Why? Unlike virtually any other commodity, contracts for health care services are negotiated not by the affected parties (physicians, hospitals and consumers) but by insurers and employers.

The list goes on, but even without considering numerous other "symptoms" it should be clear by now that the current fundamentally irrational HEALTH INSURANCE system is designed for conflicts and lawsuits rather than providing the best health care at the best prices.

So, is there a common-sense solution to this crisis? The answer is YES, but it's not universal. The right solution for you and for me may vary due to the different circumstances, health care needs and risk tolerance. It is important to realize, though, that each of us should be able find that optimal balance!

To begin with, we must recognize that we are dealing with two different levels of health care needs and must cover those needs with two separate tiers of payment. One level is catastrophic illness - and for that, insurance is the answer. Policies that carry a high deductible (say, $5,000 a year) are relatively inexpensive, even when the coverage is very high ($1 million or more) or unlimited. That is because most people do not get catastrophic illnesses or injuries.

The second level comprises health maintenance and routine medical procedures. For these, insurance is not the answer. Instead, there are two alternatives. One is for people to pay these costs out of pocket, the way we now pay for many other routine needs. There are number of benefits to this approach, including no managed care and less paperwork. For many people, coming up with the cash to pay routine medical bills, especially if they know that any major illness or injury would trigger a backup insurance plan, would not be difficult.

For others, however, it would. Fortunately, back in the 1980s, the idea of so-called patient advocacy via health care savings programs was born. The availability and popularity of these programs is picking up year after year, as more and more people, unable to get or afford health insurance, are discovering them for the first time. These programs negotiate prices with health care providers on behalf of their members. Since they represent large groups, the resulting discounts are usually the same that the hospitals and physicians give to big insurance companies. But this is where the similarity with old health insurance model ends.

With health care savings program, it's a patient, not an insurance company, who pays the bill. This seemingly minor adjustment makes a world of difference. It benefits medical providers because they get paid "on the spot" without enormous paperwork and disputes with insurance companies. It also benefits individual consumers who get access to the discounted "insurance rates" without having to pay high premiums. Yet most importantly, the entire system appears to be financially sound and socially viable.

Unlike traditional insurance model, the patient advocacy actually encourages people to seek medical help as soon as the need arises thus preventing "little aches" form developing into life-threatening illnesses and financial disasters. Monthly membership fee is affordable and no one can be turned down because of a pre-existing condition. Many of such programs also allow their members to contribute money to medical savings accounts. Federal law makes this an attractive option, because medical savings accounts are tax deductible or not taxable, as long as the funds are used to pay for health care.

Five years from now, average health insurance premium may well exceed a car payment and a mortgage payment combined together. There is, however, a way to keep our families healthy without jeopardizing financial security. This writing was intended to assist the reader in finding that right solution by providing a better understanding of the ever-changing situation and available options.

Copyright (C) by Irina 2003.