About Rising Health Insurance Costs

In the 1960s, it was not hard to get 100 percent coverage from health insurance plans at a reasonable rates. Today, despite co-payments, deductibles and hospital controls, consumers are paying more than ever, and the prices go up every year.
Consumers want to know why their costs are rising so dramatically, and who is benefiting from these increases. With education, you have a chance to make an informed decision on how to save money on health insurance.

History

• Health insurance started out as basic coverage.

  The health insurance policy limited costs by specifying a daily benefit for hospitalization; it would provide a certain amount for surgery and a certain amount for miscellaneous charges such as X-rays.

  Ultimately health insurance plans became more aggressive offering what the industry termed
  "major medical" plans. These plans offered lifetime maximums of a million dollars. This change in coverage began to increase health insurance rates.

Considerations

• There are several social developments that have had an impact on health insurance costs.

  The legal profession routinely sues doctors. Doctors charge more to cover their malpractice insurance premiums. The premiums are expensive. These additional costs to doctors are passed on to the health insurance companies, which pass them on to consumers.

  Health insurance is complex and typically has to be sold by an agent. The distribution system to deliver the product is not efficient. Health companies pay commissions to agents. This puts the agent in a position to sell for his own benefit as opposed to looking out for the best interest of his or her client.

  There has been a shortage of nurses, which drives salaries up, causing the hospital to raise prices.

  Drug companies, knowing that health insurance companies are picking up the tab, charge large amounts for new medications. Generic brands are often not available.

  Doctors have joined hospital groups on salary, rather than be concerned about the overhead costs of private practice. This retards competition and results in prices being fixed by the medical group.

Effects

• Many business that used to provide health insurance to employees are forced to stop offering it, limit choices, or increase the share paid by employees. Fewer people have health insurance today as a result.

Warning

• Unless action is taken, people who need health insurance the most will be unable to get it.

Prevention/Solution

• The runaway increases for health insurance must be attacked from several angles.

  States must disallow plans to select existing clients based on health. They must insist that if rate increases are granted, all clients are allowed to keep their policy. This will minimize increases because there will be a better risk pool.

  Courts must stop allowing everyone to be a victim. While true malpractice should be dealt with, malpractice cases need to meet rigorous tests to be brought to court.

  Hospitals need to stop being hotels. People are there to get well. Private rooms are needless amenities that everyone pays for.

  Rising health care costs will not stop unless they are confronted.