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Why Is Health Insurance so Complicated?



Why is medical health insurance so sophisticated, whereas automobile insurance coverage and life insurance coverage are so easy? Can medical health insurance be extra like, nicely, insurance coverage? Lanhee Chen, fellow on the Hoover Institution, explains.
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Script:

Americans carry many alternative types of insurance coverage. There’s automobile insurance coverage, dwelling insurance coverage, life insurance coverage, even pet insurance coverage . . . Most of those insurance coverage insurance policies work nicely and are pretty priced. But there’s one evident exception: medical health insurance. Only medical health insurance turns into extra sophisticated and dearer on the similar time. So, the plain query is: why?

To reply this query, we have now to begin at the start. What is insurance coverage? It’s fairly straight-forward: You pay a month-to-month price which gives monetary safety in opposition to unexpected, typically catastrophic, occasions. People purchase owners insurance coverage, for instance, to guard themselves from the monetary loss incurred within the occasion of a fireplace, a flood or theft. Because tens of millions of individuals are paying into the insurance coverage pool, the pool has sufficient cash to cowl the unfortunate particular person whose home does burn down.

And since insurance coverage is supposed to share threat, it solely stands to cause that higher-risk people should pay extra to be insured. Someone who has had two accidents goes to pay extra for automobile insurance coverage than somebody who has by no means had an accident. Why? Because their monitor file signifies they’re extra prone to have one other accident.

But whereas insurance coverage gives a bulwark in opposition to unexpected loss, it doesn’t defend in opposition to routine bills. Car insurance coverage protects you within the occasion that you simply wind up in a automobile wreck or your automobile is stolen, but it surely doesn’t cowl routine upkeep like oil adjustments, changing brake pads or tire erosion. Why? Because everybody wants routine oil adjustments, new brake pads, and new tires. So, there is no such thing as a threat to guard in opposition to.

Health insurance coverage in America works very in another way. Many of us have medical health insurance plans that aren’t insurance coverage in any respect. They’re actually pre-paid well being care plans. They cowl routine check-ups, much less severe sicknesses, and recurring bills like prescription drugs along with defending you from a well being catastrophe. All of this has made healthcare way more costly and complicated than every other type of insurance coverage. That is true whether or not you get your insurance coverage via your employer, via the federal government, or for those who pay to your personal plan.

The Affordable Care Act, often known as Obamacare, was handed on the promise that it might repair these points and produce down healthcare prices. But it has really made the issue a lot worse.

First, it restricted the number of medical health insurance plans personal firms may supply. It did this by mandating that each plan needed to cowl the identical set of ten well being advantages, together with preventive care, maternity care, psychological well being care, and contraception.

Second, Obamacare prevented insurers from charging premiums based mostly on the chance they had been assuming. An individual with a a lot increased threat of getting sick couldn’t be charged greater than an individual with a a lot decrease likelihood.

These two facets of Obamacare – requiring all insurance policies to have sure coverages and never permitting insurance coverage firms to cost extra for riskier shoppers – brought about the value of insurance coverage to rise dramatically. In Arizona, for instance, the value greater than doubled between 2019 and 2019 alone.

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21 Comments

  1. Good vid, but you glossed over that part at the very end about "doing the compassionate thing" for people with preexisting conditions without them having health insurance. How exactly? The money has to come from somewhere.

  2. There should be a subject in school called life skills which teaches about insurances, finances, taxes and life saving skills. For someone coming out of college and bieng bombarded with these "adulting" issues, it's easy to get disoriented. Parents should also contribute.

  3. Lanhee Chen, you did not answer the issue or pre-existing conditions and not all pre-existing conditions are preventable. If someone has Crohn’s disease that is probably a genetic disorder and not preventable. If the patient requires the use of a biologic such as Remicade he needs insurance to cover the expensive medication. The price of Remicade is fixed by the pharmaceutical company and there is no competitive pricing among providers. If his medical insurance denies him coverage for having a pre-existing condition then he faces bankruptcy for the high cost of Remicade and without treatment he will die a slow painful death or perhaps will lose most of his bowels to surgery which will also bankrupt him. Lanhee Chen, medical insurance coverage is not like other insurance coverage. If a Crohn’s patient cannot get his medication from competitive pricing he has no choice but to face bankruptcy and eventual loss of his colon or even slow death. Our current system of for profit insurance companies can only provide for the healthy and not for the chronically ill. Without a publicly funded Medicare type of provider the private for profit insurance companies will not assume the cost. Lanhee Chen your solution does not work for unpreventable pre-existing conditions.

  4. If you force someone to buy a product, but don't force the product to work, you'll end up with an expensive product with little benefit, every time.

    I have a product called "wishing you happy day." Now imagine you're forced to pay for it.

  5. Health insurance, when Obamacare was supposed to only make insurance companies provide coverage for pre-existing conditions turned into this kind of situation and Trump has not been successful at repealing this mess and replacing it with simpler health insurance policy something that is simple such as health insurance companies cover for pre-existing conditions and can operate around state borders. Everything else is unnecessary. It gets to the point where none of those secretaries who work there know the prices, it is all hidden in that secret spreadsheet.

  6. Perhaps you should address why insurance is needed in the first place. How did medical care go to such high cost? Why can't hew-mons pay for whatever they need out of pocket?
    The free market would've kept prices low and insurance but government created the "need" fot insurance in the first place.

  7. Just a question here. Why is healthcare a "for profit" industry? Don't get me wrong I am not against capitalism, as long as it is reasonable. But what I see is large investment firms buying up hospitals, and creating a conglomerate simply to increase profit for their investors. And remember, there is a difference between healthcare and health insurance. Before the ACA, people with no insurance could go to a emergency room and get health care. True, the taxpayer ended up paying for it. But under the ACA, people who couldn't afford the insurance premium were given vouchers to pay. The taxpayer supplied the vouchers. The ACA simply provided a way for the taxpayer money to go to the insurance companies.

  8. US Healthcare is in a way idiotic. Good Healthcare for all should be high on the list of the government's top priority for the list. Therefore a government collected but not government run levy to fund essential healthcare services like all that goes into running ambulances and hospitals. Doctors, Nurses, and Ambulance staff should be paid a living wage. Also the US needs to strip away bureaucracy from saving people's lives and do all they can to stop it seeping back in.

  9. The affordable Care act made the healthcare system pretty similar to Singapore's healthcare system (you know, the best healthcare system in the world,) in structure. Just nationalize the system and let insurers work anywhere in the whole country and remove PBMs, and the system will be much better.

  10. Hello Mister Lanhee Chen,

    I agree with most of your aspects but I have to say that prevention is not a useless benefits of health insurance. This can save a lot of money than doing any prevention. I also think that the price of health care is the problem. I think the problem is the price that hospitals and doctors charge. If medical treatment would be cheaper, medical care would be less expensive. Today health insurance is a business. Some companies forgot that health insurance was initially made to support people that cant pay medical bills. Another thing i want to say is that you didn't give give a clear answer to people with pre-existing conditions. I hope that the goverment of the U.S will find a better solution soon.
    Greetings from Germany. 🙌🤨🇩🇪🇺🇲

  11. Wasn’t the question “why is it so complicated” not “why is it so expensive?” It’s complicated because there are companies that refer to their service as “third party administrators” and “benefit managers” who have no business being in business and get paid to provide no service whatsoever that inflate costs. I’m willing to pay more if it means more people get the care they need, but this video is misleading by putting the blame entirely on the ACA. It’s the industry’s managerial structures that’s to blame (in my opinion).

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