What Health Insurance Options Might Exist?

What Health Insurance Options Might Exist?
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Making the Healthcare Debate Understandable

Part Three of a Four-Part Series

Context: Parts One and Two

Part One of this series clarified differences between the delivery of healthcare services and how we fund the insurance to pay for them. Part Two addressed why it’s hard to understand (let alone control) medical services costs and outlines the Patient Protection and Affordable Care Act’s purpose and patient protections regarding services and payment.

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Healthcare and insurance in America are costly. Studies have shown that the U.S. pays more per person for healthcare than any other country, but gets a poor return on that investment. The journal Health Affairs reported in 2016 that among 11 developed countries, the U.S. ranks last in terms of the proportion of citizens covered and the quality of health outcomes, especially for low-income adults.

Efforts to replace the ACA have focused more on lowering costs than on preserving patient protections. Compromises intended to broaden support among Congressional conservatives have centered on allowing state “waivers” from existing mandates. One result would be millions of people priced out of the private insurance market, including over 52 million people with pre-existing conditions and millions of non-group buyers facing higher premiums and lifetime coverage limits. “High risk” pools, a state option posed for covering pre-existing conditions, is another term for “high-deductible” (high-cost) insurance.

As we grapple with the ongoing healthcare debate, it’s important to understand alternatives for funding healthcare costs that might improve coverage, cost, and health outcomes.

Private Insurance

Many Americans purchase medical insurance from “private” health insurance companies, either individually or through their employers. Typically employees obtaining coverage through an employer pay less than in the individual market when employers pay a portion of the premium for each individual or family covered. In addition, large employers can often negotiate lower prices because the risk of high claims is spread across a large pool of insureds: healthier employees offset the claims costs of sicker ones.

In both the individual and the group private insurance markets, the premiums are set to cover not only subscriber medical claims but also the insurer’s administrative costs, including executive compensation and any dividends owed to shareholders for publicly traded companies. To prevent cost-shifting of insurer administrative costs onto subscribers, the ACA requires that at least 85% of collected premiums be applied to medical claims.

Healthcare providers like doctors and hospitals also incur administrative costs to meet insurance companies’ varied submission requirements. These costs drive up their bills to you and to insurance carriers.


A second major insurance provider (serving 55.5 million in 2015) is Medicare, which is administered by the Federal government’s Center for Medicare and Medicaid Services (CMS). Like private group insurance, Medicare premiums are based on the combined experience of all of the members. Enrollees support Medicare through payroll taxes while they work (subsidizing those who are receiving benefits) and then pay modest premiums to purchase Medicare health insurance after they reach age 65.

Even though older people may draw more on healthcare services, the costs of Medicare coverage, even when combined with popular “supplemental Medigap coverage” purchased from private insurers, are appreciably lower than the price of comparable coverage purchased on the private market.


Sixty-nine million people (including eligible low-income adults, children, pregnant women, elderly adults, and people with disabilities) purchase health insurance through Medicaid. Costs are partially paid by sliding subscriber premiums based on family income, with the remainder subsidized through a combination of state and federal government resources.

The ACA qualifies this population to receive subsidies, based on income, to allow purchase of private health insurance. Each state administers its own program in accordance with federal standards and with Federal funding support.

For families with incomes too high to qualify for Medicaid but unable to afford private coverage, the Children’s Health Insurance Program (CHIP) provides federal matching funds to the states.

Uninsured People Using Hospital ERs Get Subsidized Care

Hospital emergency rooms (ERs) are among the most expensive care providers, since they are staffed to serve people experiencing trauma and other emergency conditions. Since 1985 they have been required by law to serve anyone, regardless of their insurance status or ability to pay, for emergency conditions.

For the uninsured, service costs may remain as unpaid medical debt for years, or they may be treated as “uncompensated care” on the hospital’s records. In the end, uncompensated care costs for the uninsured are factored into other hospital fees, so all who go to the hospital end up subsidizing uncompensated costs by paying more for hospital-based services.

Private Insurance vs. Single Payer?

So looking forward, how should we pay for healthcare insurance?

As the nationwide healthcare debate continues, the debate about private insurance vs. single-payer programs (like Improved Medicare for All and TriCare, veterans’ coverage) will become more prominent and heated.

In 2014, several public health experts examined the proportion of costs in our multi-payer healthcare system that goes to healthcare services vs. administrative costs. Their article (published by Biomed Central in the US National Library of Medicine) calculated that billing and insurance-related (BIR) costs totaled around $471 billion in 2012, with the largest portion incurred by private insurers and medical providers. The authors estimated that a single-payer system could reduce BIR costs by nearly 80% and cut total healthcare spending by nearly 18%. Perhaps such a system could use those savings to insure more people rather than cutting benefits to those needing life-saving healthcare services.

Massachusetts has long been a leader in both medical and healthcare insurance reform. In keeping with that tradition, some bills have been filed in the Massachusetts legislature to examine the relative costs and benefits of private insurance vs. a single-payer system. The final article in this series. Part Four, will explain healthcare financing bills that are under consideration in the Massachusetts legislature and offers ideas to provoke other states’ healthcare idea banks.

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