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Friday, July 31, 2009

Why Employer Funded Health Insurance is So Corrosive

In an earlier post, I gave my policy ideas for fixing our health care system. In my hypothesis, I made the point that the nexis of many of our structural problems in health lie in the fact that employers are the ones that overwhelmingly provide health insurance. I think it's important to expand on what exactly is so corrosive with having a system in which employers provide health insurance for their employees.

First, we've all likely heard politicians bemoan the fact that someone can't "take their health insurance with them" when they leave their job. Of course when someone bemoans this problem, they are bemoaning the wrong problem. After all, the reason that employees can't "take their health insurance with them" when they leave their job is because their employer is the one that negotiated the insurance deal. The insurance plan is the property of the company not the employee. Of course, the employee can't take their plans with them since the plan isn't their property. So, the problem isn't that employees can't take their insurance with them, but that we have employers provide insurance for their employees. The second reality causes the first problem.

Then, we've all heard of the so called gold plated insurance plans. These add hundreds of billions in medical costs yearly because they cover just about any medical procedure including regular check ups. Imagine how large automotive costs would be if everyone had car insurance that included oil changes, tire reallignments, and new windshield wipers. One of the reasons that health care costs are so expensive is that the patient is rarely a consumer. That's because most patients have nearly all hospital visits covered entirely by someone else. Patients never question the costs of tests, procedures, and everything else related to their visit. That's because they don't pay for it anyway. If car insurance covered oil changes, oil changes would become exponentially more expensive. That's because no one would ever question the cost of the oil change.

So, why are so called gold plated insurance plans so prevalent? They are provided by employers. In fact, they are often used as part of the selling point to recruit potential employees. Since health insurance isn't taxed, the employee has absolutely no motivation to get anything but a gold plated health insurance plan. Since employers provide most health insurance plans, gold plated plans become the standard. By doing so though, we also create a system in which costs are simply unsustainable.

Finally, employer funded health insurance also contributes to the enormous power of the insurance companies. That's because the patients become by standards in the health process. The insurance is provided by someone else. As such, the one in a position to control the insurance companies, the patient, has little power to control them. The patient can't leave the insurance company if they are unhappy. It wasn't their choice to use the company in the first place. It was the choice of their employer. I have documented several cases of corruption by the insurance companies against doctors. In fact, an insurance company insider once admitted that it's standard practice to shred doctor's bills. That's because they've found that only 80% of doctors notice that they haven't been paid. (likely because doctors are so busy that they don't always keep good track of their bills) The check against waste and corruption is the patient. If an insurance company mistreats your doctor, the patient leaves and finds another insurance company. Of course, if the insurance company is chosen for you, then you can't leave. The system of employer funded health insurance encourages more power in the hands of the insurance companies and less power in the hands of the doctors, and that's what leads to this waste and corruption.

So, it is for these reasons that I believe that our health care system won't be fixed until we find a way to lessen the influence of employer funded health insurance. Once again, here are my recommendations.

1 comment:

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