Benefits of Health Insurance Coverage

In the US, health care is privatized. It has been estimated that people spend a third of what they earn on obtaining health care services. For instance, a drug that is used to treat lung cancer in patients costs about $80,000 while prolonging the life of a sick person by a month when used in combination with chemotherapy. It has been estimated that, on a monthly basis, the same drug would cost $10,000 less in Europe. The cost of a drug that is used to treat kidney cancer works out to $60,000, but may prolong life by just 6 months. On an average, if a person develops cancer, the cost of medical bills can add up to a whopping $140,000. It’s evident that most people cannot afford to pay for health care on their own. Hence they rely on employer-based insurance.

Health Insurance Benefits
The current system of employer-based health insurance benefits evolved on account of the employer receiving tax deductions equal to the amount of premium paid. At present, the total cost of deductible premiums paid by all employers in the US roughly works out to $200 billion. In other words, the government is providing a subsidy equivalent to $200 billion in order to ensure that employees receive the benefits of health insurance coverage. Health insurance plans generally work in the following manner: A person is expected to pay an annual amount, or deductible, before the health insurance plan starts covering the cost of medical expenses. The insurance company pays a chunk of the annual medical expenses, while a small portion known as coinsurance is borne by the policy owner. The ratio between the expenses borne by the insurance company and coinsurance is generally 80:20 or 70:30. If the coinsurance amount exceeds the maximum annual out of pocket limit for the insured, the insurance company is expected to cover the entire annual medical expense. In addition to coinsurance, some insurance companies may expect the insured to pay a flat fee known as co-payment for every visit to the doctor. The main types of health insurance plans available to a person are: Health Maintenance Organizations (HMOs) Plans, Preferred Provider Organizations (PPOs) Plans, and Point-of-Service (POS) Plans.

Problems Associated with Private Health Insurance
Although health insurance benefits that are provided by private insurance companies seem like a good option, there are a number of problems associated with this. For instance, most people are covered under their employer’s group health insurance plan, and hence, lose their health insurance on getting laid off. The Consolidated Omnibus Budget Reconciliation Act (COBRA) gives a person the option of continuing on the previous employer’s health insurance plan, for 18 months after getting laid off, by paying 35 percent of the amount of premium; the remaining amount of premium being covered by the Federal govt. Temporary health insurance plans provide coverage for 6 months, but do not allow preventive and routine medical checks. A person may try and purchase individual health insurance, but this policy is fraught with difficulties. Unlike group health insurance, where an individual cannot be singled out and denied coverage on account of pre-existing conditions, individual health insurance plans can deny coverage on account of pre-existing conditions. Since individual health insurance policies carry a higher premium, as compared to group health insurance policies, a person who is out of a job cannot possibly afford health care. Each plan has its own set of restrictions. For instance, HMO plans cover the cost of the treatment only if the patient seeks treatment from the doctor who is a part of the HMO network. In order to consult a specialist, one needs to be referred by one’s primary care physician, who again is a part of the HMO network.

Health Care Reform Plan
Health Care Reform plan, proposed by the Obama administration, intends to reform the health care system by subsidizing the cost of health care. A $1 trillion, 10-year plan, to provide subsidized health care to Americans would be financed by new taxes and savings in Medicare. The President has already managed to persuade hospitals to reduce their expenditure by $155 bn, by reducing Medicare payments. Pharmaceutical companies have also agreed to cut drug costs by $80 bn. The plan also proposes taxing the cost of health benefits provided by the employer. The health care reform plan also includes a government insurance option for people who are unable to afford private insurance.