Insurance Never Intended to Cover Costs of Routine Care

BY PETE HOLLER
SPECIAL TO THE HERALD COURIER
The true purpose of insurance is protection from catastrophic loss. 

This is accomplished with large numbers of participants contributing small premiums relative to the high-dollar risk assumed. Traditional insurance with its deductibles and cost-sharing has been corrupted and confused by HMOs, PPOs and small co-pay plans that actually offer pre-paid health care.

THE PERCEPTION of entitlement with the assumption that someone else (employers or the government) should provide unlimited care is driving costs up at an unsustainable rate. This has contributed to a general lack of responsibility by our population for its own health. There are expensive and bad consequences (poor health) that result from bad behaviors – tobacco use, drinking to excess, overeating, lack of exercise and excessive use of medications are a few examples. 

Imagine the concept of entitlement applied to food. If the government implemented a program that allowed every citizen to pay just $25 when they go to a grocery store, how much food would people put in their cart? The growing demand would drive the costs for food higher and higher.
 
This is what has happened with HMOs, PPOs and low co-pays in health care.  Most people have no idea what the costs are for office visits, diagnostic tests, prescription drugs, CAT scans, surgery or hospital stays. They know what their co-pays are but rarely do they ask what a treatment will cost – because someone else (insurance company, employer or government) pays most of the bill.

Our present system insulates people from the true cost of unhealthy behaviors. 

APPROXIMATELY half of the entire cost of health care in the U.S. results from avoidable behaviors. If proper motivation was provided, like lower costs for responsible behavior, the costs of providing insurance protection would be dramatically reduced. The insurance industry has extensive experience in pricing risk. For decades, smokers have paid higher premiums for life insurance because statistically, as a group, they don’t live as long as non-smokers.
We need to return to a concept of health insurance as protection from catastrophic loss. The high-deductible health plans (consumer-directed plans) with health savings accounts are a step in the right direction. This concept puts every consumer in a position to spend his or her own money for smaller bills, routine care and prescriptions. Insurance protection would be for major surgery, long hospital stays or catastrophic illness. Good health and healthy behaviors are rewarded by allowing consumers to accumulate funds for future protection in health savings accounts on a tax-favorable basis. 

As behaviors improve, dollars saved are reallocated to help the poor and “uninsurable” in our society. The number of Americans who are “uninsurable” is really in the 6 to 9 million range, about 2 to 3 percent of our population.  These are people we need to identify and help. 

The current inflated number of 46 million uninsured makes the problem appear insurmountable. More than half of the 46 million are either uninsured by choice or only temporarily without insurance because they are between jobs. Many are young people who don’t think they will get sick (they are usually correct, but they are subject to accidents and occasional catastrophic illness and need protection). Others have access to coverage through an employer plan or they could purchase coverage through their own means. Others will find that they are eligible for Medicaid. And, sad to say, many are illegal immigrants.

AMERICA HAS the best health care system in the world. Our health care system does not “cause” these problem behaviors. A government-induced entitlement mentality and our misguided insurance system have compounded the problem by masking the true cost of unhealthy behaviors.

Ultimately, the will of the American people can save or destroy the quality of our health care system. There are many who believe only the government can solve such a complex problem. But the government has not even faced up to the fact that Medicare and Medicaid are grossly underfunded.

These programs have contributed to the attitude of entitlement and the expectation that no matter how unhealthy you become, if you reach age 65, the government will take over paying for most of your health care costs. These programs force doctors and hospitals to charge others more just to pay for what the government has promised but can’t afford.

The system has to change, and it has to change soon. The solution will be found in changing behavior and providing incentives for every person to do their part so all can be served. A government solution will perpetuate the same old sense of entitlement and will result in unhealthy behaviors becoming even worse.

Pete Holler, of Bristol, Tenn., is president of SBS Services and has worked in the insurance industry for 32 years.

Editor’s note: Second in a series of local perspectives on the health care crisis.