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Jun
29
Market Competition: American and International insurance
Posted on Jun 29, 2009 by Sergio Ulloa (G+)
Despite the fact that recent polls show approximately 72% of the American populace are in favor of a government-sponsored health insurance plan and the common sense idea that sooner would be better than later, the legislative leaders of the country seem to have instead let the discussion drift into politics. Various Democrats have proposed plans either involving a public plan, an individual mandate to force people to buy insurance (probably with some form of government subsidy), or some kind of reform with a "trigger", whereby if the market for health insurance does not rectify itself within a period of time then a public plan would be introduced. On the flipside, Republicans leaders have put forward a plan for health insurance reform which, to be fair, is somewhat less than substantive as it does not include any numbers or data.
While most of Washington has been consumed by the bickering, not all have been sitting on their hands. After an investigation by the New York attorney general's office as well as a congressional investigation, it came to light that American insurance companies have been using a database run by Ingenix, a subsidiary of managed health care company UnitedHealth Group, that allowed many American insurers to routinely underpay U.S. doctors and hospitals for out-of-network care administered to American patients, ultimately saddling average Americans with the remainder of the costs. A separate congressional hearing has landed some insurers in hot water over the practice known as recission, where they have revoked some individuals' coverage based on medical history after the individuals' had already paid their premiums.
The Ingenix database worked by taking claims data submitted by its customers, the insurers, and developing payment rates for out-of-network medical services. Here's the rub, the insurers were found to have been cleaning up their claims data before sending it to the database by removing many high costing data points. Ingenix itself would then use highly suspect statistical analysis to arrive at rate estimates for how much insurers should pay for medical services provided by medical facilities not in their insurance networks. The end result being that the reduced cost of the initial data, along with statistical tweaking, forcibly and falsely pushes down the amount they have to pay on a claim and also increasing the amount the patient has to pay out of pocket.
On top of all this, Americans are paying more than ever for health insurance and health care. A report from the U.S. Department of Health & Human Services shows that not only are rising premiums a concern, but deductibles, the amount of money you must pay for medical expenses before insurance covers the rest, and copayments, the amount of money you pay each time you see a doctor, have also risen steeply over the years. Average deductibles for families have risen in price by 30% over two years and the number of people with employer-based insurance and copayments over US$25 rose from 1 in 5 to 1 in 3 between 2004 and 2008. So what exactly is wrong with local American insurance policies that are causing such problems?
One reason is because of the way the U.S. health insurance market is set up to begin with. Because each state is entitled to a large amount of self-governance, there are, in effect, 50 different markets, each one is its own particular mishmash of state and federal rules, and each one quite distinct from the others. In and of itself this isn't a problem, however, it does make it easier to gain a majority of market share. A recent report shows that there have been 400 mergers involving health insurance companies in the last thirteen years. The result of this has been that 94% of American statewide health insurance markets are now considered "Highly concentrated" by U.S. Department of Justice guidelines. By the aforementioned guidelines, a market can be considered as "highly concentrated" if more than 42% of the market's share is controlled by one company. Experts have noted that healthy competition in the market place is a key way of keeping costs and premiums down.
Thankfully, this is not a problem for companies providing international insurance policies. As we saw earlier, local American policies, much like local health insurance policies everywhere, are restricted in their choice of medical facilities and doctors based upon the insurer they have and the network of medical facilities that will accept their coverage. Most international health insurance plans do have two areas of coverage, one being worldwide, and the other being worldwide excluding the U.S., due to the fact that the cost of health care in America is so high. Still, international health and medical insurance plans will generally afford you access to any hospital or doctor of your choice and pay your claim up to the limits of your policy. Even a policy excluding coverage in the U.S. will often provide emergency coverage if you are traveling through the country.
The fact that the vast majority of international health and medical insurance plans' give you access to global network of participating medical facilities means that insurers have access to similar networks and must work for market share through offering products that compete through benefits and costs. This keeps down the price of premiums as well as out of pocket costs like deductibles and coinsurance.
The constant competition for customers in the international health insurance marketplace means that customers are as important to insurers as the insurance is to the customer. In order to provide products that are attractive to customers over the long term, international health and medical insurance plans are community rated and guaranteed renewable for life. Being community rated means that each age groups' premium is based upon the average cost to insure the most average of people. Basically, should you develop a costly or chronic condition, you are guaranteed to be able to renew your insurance for the rest of your life if you wish, without having your premiums raised significantly every year due to your claims history.
While local health insurance plans in America and elsewhere may initially appear cheaper, often times they end up being cumulatively more expensive as people age or if they fall seriously ill causing their premiums and out of pocket costs to rise. Because of a more fluid, open market in the international health insurance industry, the inflation of insurance costs to consumers is kept down and plans have become more competitive over a longer period of time.