Why is United States still struggling with heavy health insurance costs? What is driving the changes in health insurance industry? What does the future hold for the insurance industry with US ranking relatively poor when it comes to health care delivery? Trying to make sense of US health insurance landscape understanding business models; let’s take a look.
US health insurance costs
It is true that the health care spending in the U.S. still remains No. 1 by a large margin when compared with other advanced industrial economies.
US spends approximately $7,662 per person, more than 2.6 times the OECD average per 2014 data devoting a 16.9% of its GDP to health care.
Despite the heavy spending, US ranks poorly on health outcomes and the healthcare costs continue to rise beyond reason even with Affordable Care Act gaining momentum.
U.S. doctors are engaged for a good time each day with paperwork of insurance companies in spite of employing ‘scheduler’ who oversees the approvals and connect with someone working on the insurer’s end. This involves a lot of cost and time.
Health insurance has employed about 460000 in U.S., a growth that no other industry has witnessed in 2012.
The expenditure on paperwork that makes hospitals run in America amounts to $218 billion per year.
The hospitals' administrative costs consume a1.43 percent of the entire American economy for the billing specialists and schedulers services.
What is contributing to the costs?
Health insurers function more like intermediaries between the employers/government/individuals that pay for health and care providers that deliver the services.
It costs a lot of money for healthcare providers requiring to deal with various insurers, each following its own regulations and protocols depending upon the requirements. Same is the case for insurers that transact with multiple providers. Spending time on learning rules and procedures of the organisations becomes inevitable.
The accumulation of administrative overhead and the complexity in accessing timely care in such a model adds to the woes.
While health spending in America is reaching $3 trillion, there are not many changes with insurance delivery model in spite of the projections that the system is doing no good at all but adding to the woes of doctors and patients.
Is care efficient with such costs?
Not a good picture if we look at the mortality or life expectancy among other factors that determine US ranking in health outcomes.
If the care is not efficient then where is the money going?
There is widespread attention about news of insurance companies around rejected claims and coverage denial.
Center for Medicare and Medicaid services found that “in 61 percent of audits, insurers ‘inappropriately rejected claims’ for prescription drugs” according to a recent audit of plans with Medicare Advantage. And it was observed that in more than half of all audits, the receivers and providers of care were not provided with the information about or adequate rationale for the denial of coverage by insurers.
Doing away with the insurance intermediaries
The pressure of market competition and the need to bring down costs will push health care systems to offer insurance by themselves looking at intermediaries as a disadvantage.
The working model in delivering insurance and care at one go increasing the ease of access while reducing costs has already been demonstrated by few organisations like Kaiser.
Kaiser, by assuming the roles of health plan administrator and care provider, made sure that administrative costs with health care are brought down by doing away with insurance intermediaries.
Re-inventing business model
A retrospective approach is required to move ahead with changes by re-inventing business models. The first thing would be to examine the model in existence and why is it failing to produce desired output irrespective of the costs.
Let’s take the case of Stanford University which has its own medical school, hospital, and doctors. Money is sent on behalf of employees who use Stanford Medical Center services, to Blue Shield, a health plan provider.
The money received by Blue Shield is sent back to Stanford for the services rendered to Stanford employees. Why are we adding to cost of intermediation while no value or purpose is derived out of the process?
And why does any firm would want to let go of the old procedures especially in this age of constant changes with the advent of Affordable Care Act?
Not everyone is covered by Affordable Care Act, and the game of insurance may change completely with US being the advanced industrialised economy relying heavily on private insurers to administer much of the health care payment system.
It is estimated that 2.5 million people across companies of all sizes will be enrolled in health insurance through so-called private exchanges in 2014.
The law in US is designed to provide coverage for full-timers working with firms employing 50 or more full-time equivalent workers, beginning 2015.
While Obamacare is certainly driving the changes in health care delivery, there are things within the law, and IRS regulations that can be changed to improve portability
The US health care system is going to witness major revolutions with growing take-up of private exchanges.
The approach of delivering a portable health insurance intending to serve groups and individuals alike aimed to bring down costs and improve health outcomes is gaining importance.
Working new models of business that adapt to change quickly is the need of the hour. And the change in delivering health insurance by reducing administrative cost overhead and eliminating the need of insurance intermediaries is going to be tapped.