Raising Women’s Voices

Reports about health insurance shed light on problems that need to be solved

Posted in Affordability, DC Reform, Reports and Studies by raisingwomensvoices on July 21, 2009

Two reports have come out of the Commonwealth Fund this week, both addressing important reasons we need health care reform now. One (Failure to Protect: Why the Individual Insurance Market is not a Viable Option for Most US Families) is about the failures of the individual market and the kind of reform that is needed to keep these families covered and provided for. This report describes the status of the 16 million Americans (6% of the under 65 population) who have individual-market health insurance coverage. The study found that 64% of those in the individual market spend $3,000 or more per year on premiums and out-of-pocket costs, as opposed to 20% of those with employer-sponsored health insurance. In addition, 51% of those in the individual market spend 10% or more of their yearly income on premiums and out-of-pocket costs compared to 29% of those with employer-provided insurance. Adults who have individual-market insurance have less comprehensive coverage (they are more likely to not have prescription coverage or dental insurance) and they have higher rates of benefit restrictions and problems with coverage. They are significantly less satisfied with their insurance in comparison to populations with other kinds of insurance.

This study is important because recently due to the economic slow-down more employers have been dropping coverage for employees or moving to lower cost plans for their employees. Since most states limit public insurance to children, pregnant women, those with low incomes, and the elderly, many individuals need to strike out on their own and find coverage in the individual insurance market. They then end up having to pay more out-of-pocket costs and higher premiums, in addition to higher deductibles. According to the Commonwealth Fund;

“These findings indivate that the individual insurance market in its current form does not provide a viable alternative to employer-based group coverage.”

The survey found that 47% of those that went into the individual market to find coverage said it was very difficult or impossible to find a plan that fit their needs. This was even higher for the group that had poor health (60%). Also, 57% of people found it very difficult or impossible to find a plan they could afford (again, higher in the population with poorer health – 70%). 73% of those surveyed in the study did not end up buying a plan due to the barriers.

The other report released recently (How Health Care Reform Can Lower the Costs of Insurance Administration) offers insight into the problem of private insurance costs, specifically administrative costs. The report states that $265 billion could be saved over ten years with the proposed national health care exchange and the increased utilization and availability of public plans. This money would be saved because there would be less marketing and underwriting, less claims administration, less time spent negotiating provider payment rates, and lower commissions to insurance brokers.

“The McKinsey Global Institute estimates that the US spends $91 billion more per year on health insurance administrative costs than it should, given its size and wealth.”

Most of this money is spent by private health insurance companies, where 12.4% of costs are administrative compared to 6.1% by public plans. In addition to reducing these administrative costs, the national health exchange would help lower this huge amount by increasing the transparencies of insurance products and streamlining the plan purchase/enrollment process.

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