Stanley Feld M.D., FACP, MACE
I have explained why the uninsured are billed the retail price by the hospital. The maximum discount the uninsured can negotiate and will receive is 20%, if they could determine the retail price before the service is performed.
Often the uninsured are billed by the hospitals 350% more than Medicare pays the hospitals.
Two thirds of the uninsured are uninsured because they can not obtain a health insurance policy. Many are between 50 and 65 year old and have lost their jobs. They are now self-employed. They are deemed a poor risk by the actuaries at insurance companies and do not qualify, by insurance company criteria, for health insurance. If they could get insurance they would be rated and charged a higher than usual premium. A premium they cannot afford. A concrete example is a premium of $25,000 per year in post tax dollars as opposed to $10,000 with pre-tax dollars for the same coverage in a group plan for the same age person.
The self employed individual pays for health insurance with after tax dollars. The group policy holder health insurance is paid for with pretax dollars. With present tax laws group insurance is discounted in real dollars 30%.
We have also seen that the insurance companies are required to insure all employees in a group health insurance plan no matter the risk or age of the person. The employee in a group plan cannot lose that insurance. A simple solution would be to qualify everyone for group health insurance whether they are in a group or not. In large groups the risk of illness is spread. The premiums can be lowered.
Despite the elimination of high risk patients from the health insurance pool the price of insurance and the price of hospital care is escalating beyond affordability of large corporate employers.
One can see defects in the system at a glance. If the 46.7 million uninsured were in the insurance pool, the risk would be distributed over a greater number of people and there would be more money in the system. The increased money in the system would decrease the pressure to increase prices by the insurance companies. Presently the insurance companies do not care to lower their prices. If the risk was spread and the cost to insure for illness was lowered, the insurance company might not want to pass the saving along to the customer. The customer could then shift to a health insurance company that was interested in passing along the cost savings and lowering their premium price. That company would increase the number of people in their insurance pool and would have a competitive advantage over the former company. This would set up the competitive environment I have been referring to a force companies to keep their premium pricing competitive.
In order to accomplish this, a law would be required to permit the self-employed to buy group insurance at group insurance rates with pre tax dollars. It would also require community rated prices for all and not the present individual rating system. The present system even lets the health insurance industry rate groups individually. The premium price would be level for all. Smaller companies would not be economically challenged by their adverse risk pool and could once again afford insurance for their employees. The simple insurance rule is to spread the risk you can reduce the cost to insure. Once the environment is created prices will fall and be affordable to all. There will be some who cannot truly afford the insurance. The government could not afford not to insure those people. The solution above would be market driven and would not require a new governmental bureaucracy and all the problems it entails.
Next time I will discuss why I think this logical solution has not been adopted and why hospital systems and health insurance companies have resisted this solution.