Hsa 500 assignment 3

Assignment 3: Health Care Costs

Joshua D. Goldsmith

Dr. Queensberry

HSA500

November 18, 2013

The cost of health care has a significant effect on the U.S. economy. Over the years, health care costs have been steadily increasing. Health care spending has surpassed the growth rate of the U. S. gross domestic product. Inflation and growth in population have not been able to keep up with the rising costs of health care. Since 1940, health care spending per capita has increased to a rate of growth of 12.2%. In 2004, spending on health care amounted to an estimated $2 trillion dollars. This accounts for 16% of the U.S. GDP. Rising health care costs and spending is expected to continue in coming years. By the year 2015, health care spending is expected to reach 20% of GDP. The U.S. spends significantly more on health care than any other comparable nations. Inflation, employment, and per capita GDP are affected by increases in health care costs. Businesses, governments, and households are feeling the effects of increasing health care costs and spending.

Taxes are collected by state, federal, and local governments to sponsor public health insurance programs. Businesses provide health insurance coverage to employees. In an attempt to reduce costs, governments are making public health insurance harder to acquire. Eligibility for Medicare and Medicaid has become more restricted. Businesses are reducing employment to reduce health care costs. Employers are hesitant to hire full-time employees because of the requirement of health insurance coverage. Companies are spending more on health care costs than energy and raw materials.

Health care spending has positive and negative effects on economic growth. Health related jobs have increased as a result of increased spending on health care by businesses, households, and governments. Since 2001, 1.7 million jobs have been added in areas of pharmaceuticals and health insurance. Health and productivity of workers in the U.S. has improved. Economists believe rising health care spending could in turn improve overall health of Americans and increase labor market productivity. The rate of uninsured households has increased due to high cost of health insurance premiums.

There are three main types of health insurance plans provided in the U.S. Americans have a choice between a PPO(Preferred Provider Organization), HMO(Health Maintenance Organization), or a POS(Point of Service) plan.

A PPO is a plan offered by a private insurance company. The plan involves the use of health care providers and facilities belonging to specified network. Discounts are extended to those seeking care within the network. If a consumer wishes to seek treatment from a provider outside the network, rates are generally higher and only a portion of the amount due is covered by the insurance plan. A primary care doctor does not have to be designated under a PPO. PPO plans do not require a referral to see specialists. A deductible is payed under a PPO plan to cover yearly cost of health care to the consumer. A co-pay is way for consumers to pay a percentage of service covered per visit. The PPO pays the remaining balance. PPOs cost more compared to other plans because of having to pay deductibles and co-pays.

A HMO plan is less expensive than PPO and other insurance plans. Smaller co-payments are required per medical visit. HMO does not involve having to pay a deductible. Medical providers are less accessible under a HMO. Only physicians and treatment from in network providers are covered under HMOs. HMOs typically have more restrictions than PPOs. A primary care doctor must be designated under a HMO insurance plan. Instead of paying for individual services provided, the consumer must pay a set premium. HMOs offer a wide range of benefits including preventative care. Health care costs are contained under HMOs by negotiating provider discounts.

A POS plan is plan designed to model characteristics of both PPOs and HMOs. A primary care physician coordinates a consumer’s care. Care can be directed by the consumer at the “point of service”. Similar rules apply when seeking care from health care providers with a specified network or if one decides to seek out of network treatment. A majority of care received under a POS plan will come from a HMO network of providers. POS plans offer the most freedom of choice of health provider by the consumer.

Over the next 30 years, PPOs will continue to be the most popular of the insurance plans offered to businesses and individual consumers. PPOs will gain more participation in the near future surpassing memberships numbers of both HMOs and POSs. HMOs will see a reduction in growth and citizens will be less attracted the rules and restrictions of HMOs. HMOs will remain cost effective and promote reduced health care costs. POSs will gain more popularity among consumers seeking custom plans that will cover in and out of network providers based on need.

There are standard principles insurance companies are expected to abide by in order to deliver insurance plans suitable for the public. The ultimate goal of insurance is to provide security and protection to the insured for any future occurrences after a contract is entered. Consumers should never misuse this financial safety net. Supplying false information may violate terms of the insurance contract. The principles of insurance include the principle of contribution, loss minimization , cause proxima, subrogation, insurable interest, upmost good faith,and the principle of indemnity.

I do believe private insurance companies follow these principles when designing plans for consumers. The insurer and the insured are both acting in good faith towards each other. Insurance companies provide accurate information to plan holders and ensure the information is clear and concise regarding the contract whether it be a PPO or a HMO. Private insurance companies are not liable if an individual provides false information. Insurable interest states that the individual seeking health coverage must have interest in securing health benefits to promote a healthy lifestyle. Private insurance companies follow the principle of indemnity by agreeing to compensate the insured individual for specified health coverage. I believe private insurance companies are not primarily concerned with profit but with offering adequate protection against loss.