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The United States health care industry is provided by many separate legal entities. The US spends approximately 15% of GDP, the highest in the world. It has around 85% health insured citizens. But it is now more market based and price driven. The global competition have made the mandarins of the American health industry to reduce their insurance costs by increasing deductibles, co-payments and trimming medical services under health insurance coverage. Every year the country spends $2 trillion on health care. Due to rising health care costs and lack of fundamental reforms, health insurance is inaccessible and expensive for many people. As a result almost 40 million Americans left uninsured and about 50 million with insufficient coverage.
How Health Insurance Works
- Premium: As health coverage the policy-holder has to pay each month.
- Deductible: It is must for a holder to pay out-of-pocket before the health plan actually pays its share.
- Coinsurance: In this a percentage of the total cost of the health insurance is to be paid rather than paying a fixed amount up front.
- Exclusions: Under this the customer generally pays the full cost of non-covered or excluded services.
- Coverage Limits: The insured person is expected to pay for specific services, in case if health plan's maximum payment limit exceeds. In other words the remaining costs of the opted health plan will be paid by the bearer.
- Out-of-pocket maximums: In this case the health plan reimburses all further costs of the members when they have actually end up paying out of their pockets.
Proposed Health Reforms
- Single Payer System: The government finances the basic medical costs of the entire population by generating revenue through taxation.
- Multi Payer System: Every citizen is insured either by individual policies or employer coverage.
- Medical Saving Accounts: Tax-exempt saving accounts are regulated and operated for health care matters.
- Tax Credits: The government provides the individuals with tax credits to purchase any private health insurance.
How do Health Insurance Companies sustain Competition?
- Big insurance companies take on the smaller ones in order to reduce competition and customer options as well.
- Adoption of electronic technology to lessen paper work, acquire faster processing, and maintaining records efficiently.
- Establishing advanced analytic techniques to have contemporary pricing models.
- Reckon business needs by adopting essential precautions.
- Quick response and effective regulatory measures to meet bureaucratic demands.
- Capability for managing risk factors in an effective way in order to win over the competition.
- Use awareness and intelligence of the customer to identify profitable consumer groups.
- Executing operational intelligence, improving optimal pricing, cutting down operating costs, and meeting or fulfilling the commitments offered at the time of service.
Win-Win Situation for Health Insurance Companies
- Insurance minimizes risk by providing a protection cover against chronic diseases or situations. People have to pay premium on monthly or yearly basis for a health plan.
- The coverage of health care is based on indemnity care through which insurance companies charge and invest premium to pay out health claims.
- These companies also earn investment profits from the premium money which they will continue to receive till the claim is actually paid for. This money is termed as float. This successful investment of float earns them huge profit even if they have paid every single penny of the premium.
- Insurance companies have developed a mechanism to control the costs of health care services by raising insurance product services referred as HMO's and PPO's.
- HMO's are like indemnity plans and charge a flat premium. They provide health care services on a prepaid basis to the individuals.
- A PPO can not be considered as an insurance product. It is a managed care that supplies the services related to health care services at negotiated discounted rates through the network of health care insurance providers.
Case Study
Health insurance is a cover that protects from the rising costs of health care. In United States according to the Census Bureau 60% of the people get their health insurance policies employer-sponsored plans. It figures out the overall risk of the expenses involved in healthcare and on the basis of the routine finance structure set monthly or yearly premium.
For Example
In 1694 Hugh the Elder Chamberlen of the Peter Chamberlen family proposed health insurance conception. Then in the late 19th century accident insurance plan was introduced and functioned as modern disability insurance. In the present times, private health insurance programs pays for almost charges of the offered health care services.
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