Looking for good explanation of private health insurance

[BobTheQuestioner]

Hi, I'm wondering if anyone here can explain to me how health insurance works. It seems like most everyone wants close to full coverage, and that it's a severe travesty when one can't afford insurance. The basic flow of money is insured->company->health care provider, right? For the company model to be successful, it seems like the insurance company must profit off of some customers, and of course lose money off of other customers. Actually, for it to be economically profitable (to get back more than the normal rate of return), a lot more consumers would have to lose money than gain, especially when considered that a small population of the insured (old and sick people) are extremely costly for the insurance companies. But why would
(1) so many customers want to get full insurance when many of the healthy ones would have a net loss of money through it (when they would be better off simply with catastrophic/very high deductible health insurance only)
(2) the insurance companies want to give insurance to someone (for instance) old and possibly sick when it would clearly not be profitable? (unless forced to by the government)

Comprehensive private health insurance just doesn't seem economically viable at all in a free market because one of the parties must be getting screwed, or else the other party wouldn't agree to the contract; but then, there's also no reason for the party getting screwed to enter the contract.

Even the very term "insurance" seems kind of misleading in terms of modern health insurance; all other types of "insurance," like car insurance, homeowners' insurance (fire insurance, flood insurance, severe weather insurance), life insurance, etc., all rely on the principle that if a terrible unexpected accident happens, you aren't completely crippled financially. Something called "health insurance" I think should act the same way; something to protect you against unexpected accidents. However, what it seems most people have now (or want) is a plan that covers nearly all aspects of health care, from ordinary check-ups to braces adjustments, etc.; in other words, things that are expected, and not accidental or catastrophic. But for ordinary things like that, why shouldn't they be handled on an individual basis by the person receiving the care, without the involvement of a 3rd party company which would ultimately only be sucking money from the industry in the long run? For instance, is it viable to have insurance companies spend more than 30% of their costs just on administrative expenses? Why shouldn't ordinary, expected transactions in health care be handled the same way everything else is, with one party providing a service (ex. hospital) and the receiver patient providing funds, with no profit-seeking intermediary? In other words, why have health insurance companies, except for insurance against catastrophes?

Anything remotely approaching an explanation is most welcome. Thanks!

 

[The Scotsman]

By RICARDO ALONSO-ZALDIVAR and ERICA WERNER,
Associated Press Writers Ricardo Alonso-zaldivar And Erica Werner, Associated Press Writers – Tue Jun 16, 1:10 pm ET WASHINGTON

The insurance lobby won't be able to block a public health plan because most Americans realize they would be better off if the industry had competition, HHS Secretary Kathleen Sebelius said Tuesday as congressional committees worked to shape legislation.

In an interview with The Associated Press, Sebelius said that President Barack Obama does not want to drive health insurers out of business, but make them more competitive by offering working families and small businesses the option of a public plan without the high overhead costs of marketing, administration and profits.

"I think there is a lot of understanding that the private market has really failed to provide affordable coverage to Americans," Sebelius said. The industry has had "a lot of opportunities" to get rid of coverage restrictions and other unpopular policies, Sebelius said, and really "hasn't served Americans very well."

However, Sebelius stressed that Obama is open to compromise on the shape of the public plan, which doesn't have to be run by the government. She spoke positively of a compromise idea that envisions consumer-owned nonprofit cooperatives, like rural electricity or agriculture co-ops. They would get started with seed money from taxpayers but then compete without government control. The plan by Sen. Kent Conrad, D-N.D., may end up in a health overhaul bill to be unveiled by the Senate Finance Committee this week.

In the end, the insurance industry will blink first in any showdown over a public plan, Sebelius predicted.

"I think they understand there's a lot of momentum both in the House and in the Senate for something to pass, and they'd much rather be inside the room, having those discussions, and helping to shape it as much to their liking as they possibly can," she said.

Sebelius, the former Kansas governor and insurance commissioner, is taking on an increasingly upfront role as a spokeswoman for Obama's effort to overhaul the health care system to provide coverage for nearly 50 million uninsured and restrain costs.

The massive department she heads, Health and Human Services, is working on plans to expand coverage by signing up more people who are eligible for existing government programs such as Medicaid and children's health insurance.

In the interview, Sebelius also said that covering the uninsured could take years, even if Congress passes a bill and Obama signs it into law this fall.

Stretching out the phase-in period could make it easier to handle the costs of the bill, estimated at $1 trillion over 10 years at least, a sum that already is prompting second thoughts from some key lawmakers.

The idea of a public plan has drawn sharp opposition from the insurance industry, which sees it as a step toward a government-run system like in Canada or the United Kingdom. Business groups, doctors and hospitals also have concerns. Republicans have made the issue the cornerstone of their opposition to Obama's health care push. And while liberals enthusiastically support a government plan, conservative Democrats are leery.

Sebelius said that Obama is not trying to run insurers out of town.

The notion that a public option "is really the stalking horse" for a government-run system "is not accurate," Sebelius said.

A public plan would be offered along with private ones through a new kind of insurance purchasing pool called an 'exchange.' The exchanges would be open to individuals and small businesses, and maybe even some large companies. Sebelius said a public plan would provide a standard for affordable coverage against which private insurance can be measured, especially in underserved areas of the country.

Sebelius' comments came after disappointing cost estimates for health care legislation by Sen. Edward M. Kennedy. The Congressional Budget Office released estimates that his bill would cost about $1 trillion over 10 years and only cover about one-third of the nearly 50 million uninsured. Budget officials cautioned that these were early estimates of a bill that's only partly written.

Sebelius discounted the early estimates, while saying the administration wants to keep the cost at about $1 trillion over 10 years, with about two-thirds of that coming from shifting funds from existing health programs like Medicare and Medicaid.

While Sebelius said the "ballpark" cost for providing full coverage seems to be about $1 trillion, the budget office estimates suggested the price tag could get even bigger.

Costs are becoming a big worry for moderate Republicans the administration is hoping to win over.

Sen. Olympia Snowe, R-Maine, on Tuesday said the process that produced Kennedy's bill is "broken."

"We have a fundamental obligation to ensure this legislation does not increase the deficit and, sadly, current congressional health care reform efforts fall woefully short," Snowe said in a statement. Obama also says he wants the bill to be fully paid for.

Stretching out the length of time for providing benefits under the bill could be one way to deal with the cost crunch.

"Will something probably be phased in? You bet," Sebelius said in a question-and-answer session with The Associated Press. "It won't start the day after the bill passes." It could take until sometime during the next presidential term, which starts in 2013, she said.


http://news.yahoo.com/s/ap/20090616/ap_on_go_ca_st_pe/us_sebelius_health_overhaul

 

[BobTheQuestioner]

By RICARDO ALONSO-ZALDIVAR and ERICA WERNER,
Associated Press Writers Ricardo Alonso-zaldivar And Erica Werner, Associated Press Writers – Tue Jun 16, 1:10 pm ET WASHINGTON

etc etc Obama's administration vs. health insurance companies over public plan

What? Are you serious? Why did you just post a long unrelated article to my thread? If you would read the post that I made, you will see that I was asking for an explanation of the current insurance system, and how it could possibly work; I was not asking for people to post huge unrelated news articles from the media. Really long news articles without much relevant or substantive content (like what you posted) very often can dissuade people... people have short attention spans, you know. I didn't mention anything about public health insurance or a public plan or universal health care for a reason.

If you read what I wrote in my original post, you'd see that I don't care at all about whatever Obama is proposing or how companies react to him. I'm just trying to see how the current system could possibly manage to work. I'm not intending this thread to turn into a universal health care vs. not debate. There are probably other active threads on that, please don't hijack this one, if you wouldn't mind...

To get back on track, what do you think of the argument I made in my original post?

 

[top gun]

What? Are you serious? Why did you just post a long unrelated article to my thread? If you would read the post that I made, you will see that I was asking for an explanation of the current insurance system, and how it could possibly work; I was not asking for people to post huge unrelated news articles from the media. Really long news articles without much relevant or substantive content (like what you posted) very often can dissuade people... people have short attention spans, you know. I didn't mention anything about public health insurance or a public plan or universal health care for a reason.

If you read what I wrote in my original post, you'd see that I don't care at all about whatever Obama is proposing or how companies react to him. I'm just trying to see how the current system could possibly manage to work. I'm not intending this thread to turn into a universal health care vs. not debate. There are probably other active threads on that, please don't hijack this one, if you wouldn't mind...

To get back on track, what do you think of the argument I made in my original post?

I believe The Scotsman was merely trying to give you a couple comparisons of TYPES of insurance and how they differ.

If all you want is the simplest explanation of what insurance is... it goes like this...

An Insurance Company can mathematically & statistically estimate the likely payouts a company can expect in any given number & age group of people.

Once that is established they then add in their operational costs and desired profit margin to come up with a base premium. Then they strive to get as many people as possible (preferably younger and/or healthier people) to pay their premium payments into the insurance "pool".

Basically the healthy that don't require any or much care are paying for those that require more. But the safety net is there for all included and one really never knows when they might have a large unexpected expense that the insurance would then help cover. That's the attraction of insurance. It's a large amount of money available when you need it.

 

[BobTheQuestioner]

If all you want is the simplest explanation of what insurance is... it goes like this...

An Insurance Company can mathematically & statistically estimate the likely payouts a company can expect in any given number & age group of people.

Once that is established they then add in their operational costs and desired profit margin to come up with a base premium. Then they strive to get as many people as possible (preferably younger and/or healthier people) to pay their premium payments into the insurance "pool".

Basically the healthy that don't require any or much care are paying for those that require more. But the safety net is there for all included and one really never knows when they might have a large unexpected expense that the insurance would then help cover. That's the attraction of insurance. It's a large amount of money available when you need it. [/COLOR]

I know that... Of course I know how regular insurance works, it's just that I don't see how "health insurance," as it is now, works. Check out my original post; as I said, it doesn't seem to be economically viable. In addition, the very term "insurance" for "health insurance" is nonsensical in most cases.

Again, check out my original post.

 

[Pandora]

Health insurance should be more like car insurance. Some people want to just get liability, some want full coverage, some want a high deductible some want a low. Some want to add boats and motor homes.

The way insurance works in my state is the state forces all companies who offer insurance to cover birth control pills. A single man has no need for that. Prostate cancer and a woman has no need for that. Pregnancy and delivery issues, many people have no need for that, myself included. They are forced to cover things that some people will never need. And the price of insurance is high because of it and many companies just don’t offer any insurance at all because the state forces you to offer the silver platter coverage if you offer anything at all.

I would be happy with catastrophic insurance because I don’t almost ever go to a doctor. Another person who goes to the doctor for every hangnail might want the silver platter. But mine should cost less and the government should not be forcing my employer to cover me with things I will never use.

My work pays me less monthly income and says the rest of my payment comes with my medical insurance. They pay almost $1,000.00 dollars a month for me, just me, and I almost never see a doctor. I would rather have that $1,000.00 in my check and I can decide what to do about my own health insurance needs.

I am covered for pregnancy and delivery even though I can not get pregnant. I am covered for birth control pills, prostate cancer even though Ill never use that coverage.
I can get two pair of glasses a year, I don’t wear them. I could go on and on with all the things my employer (The Government) pays or should I say throws away every month for things I don’t use, but I sure could use the money.

 

[BobTheQuestioner]

Health insurance should be more like car insurance. Some people want to just get liability, some want full coverage, some want a high deductible some want a low. Some want to add boats and motor homes.

I agree completely that people should have the freedom to choose what kind of plan they want to get; however, I don't understand how anything other than unexpected/catastrophic/high deductible insurance could possibly work out economically. One of the parties must be losing on the deal, but if they could see they would lose on it, why would they take the plan in the first place? The only way it would make sense would be if there was some kind of unexpected factor (ex. the possibility of catastrophic injury) which would introduce randomness and enable the possibility of either party benefiting.

 

[Pandora]

I agree completely that people should have the freedom to choose what kind of plan they want to get; however, I don't understand how anything other than unexpected/catastrophic/high deductible insurance could possibly work out economically. One of the parties must be losing on the deal, but if they could see they would lose on it, why would they take the plan in the first place? The only way it would make sense would be if there was some kind of unexpected factor (ex. the possibility of catastrophic injury) which would introduce randomness and enable the possibility of either party benefiting.

I think they have plans out there like that, low monthly rates but it only covers you for catastrophic events.

People know the current way of health care is not working and is too expensive, they complain about it all the time. I think people want someone paying for every time they see a doctor instead of just the big stuff. I also think people go to the doctor far too often and for silly reasons. But usually those are people who have coverage like me that they get instead of income, or if they are on public assistance.

 

[The Scotsman]

...To get back on track, what do you think of the argument I made in my original post?

.... what argument the "I don't understand this thing called insurance".....

If you need assistance on your life choices or don't understand insurance then why pitch up on a political chat site and post a topic under "US Politics"?

...............