Health Insurance System in the US

Health Insurance System in the US - The Way It Works and Its Flaws

As of 2023, a doctor’s visit for Primary Care specialist without insurance would cost $203, while with insurance, the cost drops to $119 (Slobin, 2023). Insurance is a contract that transfers the risk of financial loss from an individual or business to an insurance company. They collect small amounts of money from clients and pool that money together to pay for losses.

There are two main categories of insurance: Property and Casualty insurance (P&C) and Life and Health Insurance. P&C Insurance provides protection to businesses and individuals for losses related to their belongings or assets, both physical and financial. Life and health insurance protects people from financial loss due to premature death, sickness, or disease.

Insurance uses probability and the law of large numbers to determine the cost of insurance premiums it charges clients based on various risk factors. The rate must be sufficient for the company to pay claims in the future, pay its expenses, and make a reasonable profit, but not so much to turn away customers. The more likely an event will occur for a given client, the more insurance companies will need to collect to pay the anticipated claims.

Healthcare in the United States is very expensive. A single doctor’s office visit may cost several hundred dollars and an average three-day hospital stay can run tens of thousands of dollars, or even more, depending on the type of care provided. Most of us could not afford to pay such large sums if we get sick, especially since we do not know when we might become ill or injured or how much care we might need.

The following are three important questions you should ask when making a decision about the health insurance that will work best for you: Where can I receive care? What does the plan cover? And how much will it cost?

There are six important insurance terms and concepts that you will need to learn before signing up for insurance products.

First, out-of-pocket expenses refer to the portion of your medical expenses you are responsible for paying when you actually receive healthcare. The monthly premium you pay for care is separate from these costs.

Second, deductible is the amount you pay each payment cycle before the insurance company starts paying its share of the costs. If the deductible is $1,000, then you would be responsible for paying the first $1,000 in health care you receive each payment cycle, after which the insurance company would start paying its share.

Third, copayment or ‘copay’ is a fixed, upfront amount you pay each time you receive care when that care is subject to a copay. Plans with higher premiums generally have lower copays and vice versa. Plans that do not have copays typically use other methods of cost-sharing.

Fourth, coinsurance is a percentage of the cost of your medical care. Like copayment, plans with higher premiums typically have less coinsurance.

Fifth, out-of-pocket maximum is the most cost-sharing you will be responsible for in a payment cycle. It is the total of your deductible, copays, and coinsurance. This does not include your premiums. Once you hit this limit, the insurance company will pick up 100 percent of your covered costs for the remainder of the payment cycle.

Lastly, the terms ‘covered benefit’ and ‘covered’ are used regularly in the insurance industry, but can be confusing. A ‘covered benefit’ generally refers to a health service that is included (i.e., ‘covered’) under the premium for a given health insurance policy that is paid by, or on behalf of, the enrolled patient. ‘Covered’ means that some portion of the allowable cost of a health service will be considered for payment by the insurance company. It does not mean that the service will be paid at 100%.

However, the United States does not have a uniform health system and has no universal healthcare coverage. The health disadvantage of the U.S. relative to other high-income countries has grown into health disparities in health services.

The United States medical system, although renowned for its leadership in biomedical research and cutting-edge medical technology,  faces significant issues such as preventable medical errors, poor amenable mortality rates, and lack of transparency in treatment. Additionally, high costs of care and lack of insurance coverage for low and middle-class families have led to social and economic discrimination in healthcare services. 8.4%, or 27.6 million Americans of all age did not have health insurance in 2022 (Centers for Disease Control and Prevention, 2023).

 Medical expenditures, such as pharmaceuticals and medical supplies, have increasingly become unaffordable for marginalized communities. Therefore, paying medical bills and other medical costs have become high out-of-pocket expenses.

The good news is, that broad changes are taking shape. For example, payers of health care are increasingly incorporating the concepts of social determinants of health into the way they think about compensating for healthcare services and providing incentives for health care service providers. Improving healthcare quality can be viewed on both a macro and a micro-level, since it includes collecting data and analyzing patient outcomes, focusing on patient engagement, and collaborating with different organizations to provide access to health care.

Works Cited

Invest program: How insurance works. Invest Program | How Insurance Works. (n.d.). https://www.investprogram.org/students/insurance-in-real-life/insurance-works.aspx#:~:text=Insurance%20is%20a%20contract%20that,Property%20and%20Casualty%20insurance%20(P%26C)

How U.S. Health Insurance Works. Vaden Health Services. (n.d.). https://vaden.stanford.edu/insurance-referral-office/health-insurance-overview/how-us-health-insurance-works

Chemweno, J. (2021, July 21). The U.S. Healthcare System IS BROKEN: A national perspective. Managed Healthcare Executive. https://www.managedhealthcareexecutive.com/view/the-u-s-healthcare-system-is-broken-a-national-perspective

Centers for Disease Control and Prevention. (2023, May 16). U.S. uninsured rate dropped 18% during pandemic. Centers for Disease Control and Prevention. https://www.cdc.gov/nchs/pressroom/nchs_press_releases/2023/202305.htm#:~:text=8.4%25%20or%2027.6%20million%20Americans,or%2033.2%20million%20in%202019

Slobin, J. (2023, October 24). Doctor’s visit cost with and without insurance - updated 2023: Mira . Mira Health. https://www.talktomira.com/post/the-cost-of-a-doctor-visit-without-insurance