The Five Functions Of Health Insurance
The Health Insurance Association of America defines health insurance as coverage for sickness, injury, disability, dismemberment, accident, and accidental death. As of 2017, families in the United States had to shell out an average insurance premium of $18,764 through an employer-sponsored health insurance plan. This was a 3% increase from what they had to pay in the previous year. In 2016, the healthcare expenditures of the top 5% of the health spenders in the United States were estimated to be around $50,000 per individual. For the bottom half, the average health expenses came to around $276. People belonging to both groups avail a health insurance policy, but the benefits they receive are quite different from each other. Have a look at the five functions of health insurance.
Financial People Who Have Suffered Catastrophic Health Events
A health insurance policy is protection from catastrophic events that can be unpredictable and financially draining. The costs of treatment can be beyond the means of many individuals. The cost of drugs for the treatment of cancer or multiple sclerosis can be estimated to be over $10,000 every month. This is an amount that can burn a hole in the pockets of most Americans. If there is an organ failure, a transplant can cost hundreds and thousands of dollars. Policies that have been incorporated to improve this particular function of health insurance comprise yearly expenses, ending limits of lifetime benefits, and making sure that people having pre-existing conditions continue receiving health coverage.
Negotiating Health Services
Insurers providing health coverage utilize their market power to get price concessions from healthcare systems or to select and omit high-cost healthcare providers from their network. Patients who have health coverage can avail the benefits that these discounts offer while paying for these services from their own pockets. Policies introduced to improve this function of health insurance have effects on the negotiating capacity of hospitals and clinicians who fall in the network.
Medicare is known to fix payment rates through fee schedules, instead of letting the healthcare systems push up their prices based on their market leverage. As per the ACA or Affordable Care Act, insurers are encouraged to build narrow networks comprising hospitals and clinicians to help commercial health plans get lower rates based on an increased negotiating capacity. The negotiation ability of an insurer is strengthened through insurance company consolidation.
Improving the Quality of Hospitals and Clinicians
The insurers, be it commercial or government, have enhanced the measurement efforts to supervise and bring around a betterment in the quality of hospitals and clinicians. There are quality ratings that can help patients, as well as health plans, choose hospitals to get admitted to. Aside from that, certain hospitals have been excluded from offering services based on a quality benchmark. You can find quality ratings in the case of Medicare Advantage plans. Medicare decides based on adequate expertise and volume and can limit any hospital from conducting the transcatheter aortic valve replacement procedure. Policies dealing with this function emphasize comprehensive quality measurement.
Pushing People to Stay Healthy
For the last ten years or so, health insurance providers have tried and tested the benefit designs that can push people to stay healthy. The experimentation includes reducing the premiums for people who sign up for health clubs or quit smoking. VBID or Value-based Insurance Design is another example. Under the policies of VBID, people have to pay a minor amount or nothing from their pockets for beneficial health services, for example, preventive services and medications that can prevent any complications arising out of diseases such as diabetes.
Small Usage Fees but Broad Access
It’s a known fact that in theory, the main purpose of health insurance plans is offering protection from unpredictable catastrophic events. However, a health insurance policy is more similar to a club membership rather than a car insurance policy. By paying an amount every year, beneficiaries can access services that are either free of cost or cost a small amount. For example, routine check-ups. Services such as this are not unpredictable. Policies that focus on the club membership function are aimed at customizing policies in a way that people can get access to them.
This list of health insurance functions excludes a significant number of people. To be specific, it excludes round about 29.3 million Americans who haven’t signed up for a health insurance policy.
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