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Current state of Health Insurance-How Did We Get Here

Tuesday, May 31, 2022 8:59 AM | Denise Downing (Administrator)

Submitted by TAC Benefits Group

What is the first thing that enters your mind when you hear the term “health insurance” or “Healthcare”? Whether you are an employer, a CFO, a HR professional, or an employee, the answer across the board is “it’s expensive”. Are you as an employer, a CFO, a HR professional, or an employee happy with that answer? Probably not.

So how did we get here? More importantly, how do we get control of these costs that are spiraling out of control?

Let’s start with how we got here.

In the early days of medical care in the U.S, patients paid the doctors or facilities cash. The initial purpose for “hospital insurance” was for better cash flow for the hospitals. The first Health Insurance plan was established in 1930 in Dallas, TX. The cost was $6 per month and the plan paid $5/day in the hospital. This is known as an indemnity plan.

In the 1930s doctors only knew how to manage disease but did not have the technology to cure diseases. That began to change in the next decade due to advances in technology which continues to grow exponentially to this day.

So in short, insurance and technology both have had a substantial impact on health care cost. These rising costs of healthcare began almost immediately. In 1930 Americans spent 2.8 billion on healthcare - $23/person/year in claims, healthcare was 3.5% of the GDP. Fast forward to 2015 when Americans spent 3 trillion, $9,536/person/year, making up 15% of the GDP.

In the 1970s PPO plans and HMOs were introduced. PPOs would direct patients to a network hospital or physician to reduce the patient’s expense and pay a pre-negotiated fee to the doctor. HMOs paid the doctors a monthly stipend for each patient who was under their care. The pricing of hospital claims has been a shell game ever since. Hospitals have created chargemasters that have no rhyme or reason. A colonoscopy can be $500 in one facility and $6000 in another facility within the same geographical proximity.

In spite of the introduction of pre-negotiated contracts and HMO contracts with physicians and facilities (PPOs, HMOs, POS, EPO’s) from 1996 to 2011 medical rates rose 190%. On March 23, 2011 the Affordable Care Act became law. The intent of the law was to get more young and healthy individuals who would receive a subsidy to purchase the insurance. The thinking was with younger healthier people enrolled in the health insurance pool the cost of health insurance would stabilize. Not so, since ACA has become law, health care rates continue to rise at a rate of 138% from 2011 to 2021. From 1996 through 2021, health insurance premiums have risen an untenable 328%.

Where do we go from here?

Many are waiting for the government to fix the healthcare cost crisis. However, they are a big part of the problem. Hospital lobbies and physician lobbies have worked very hard to keep the government out of their business. Below is just a short list of political contributions from the 2018 election.

2018

  • American Medical Association = $20,417,000
  • Blue Cross Blue Shield = $23,604,221
  • American Hospital Association = $23,927,842
  • Pharmaceutical Research = $27,989,250

This is just a few of the industry lobby groups that have a firm grip over our politicians.

It’s up to the public sector, the broker community, employers, and employees to fix the problem. This group of individuals and businesses must take control of the costs. The way this is done is through transparency of costs and receiving detailed claims data. Transparency will give your employees the tools to find providers with the best outcomes and the best pricing. Data will provide your broker with the information they need to help manage your claims and to negotiate a fair renewal.

One way to get this information from the insurance companies is to badger your Washington representatives to fight for transparency from the providers and facilities, and to push back against the carrier lobbies to provide employers with data.

The other way to achieve transparency and data from your health plan is to work with your broker on programs that achieve this goal. 


TAC Benefits Group

www.tacbenefitsgroup.com

(215) 663-8000


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