OVERVIEW I. The Role of the Private Sector in Health Care Financing • The public interest is best served by the continued full participation of private health insurers in health care financing. • Vigorous competition among health insurers which today protect some 83 per cent of the population spurs improved services, broader benefits, and greater innovativeness in responding to consumer needs. An all-government health care system, lacking in the discipline of competition, would be less efficient and less responsive to innovation and change, while at the same time ending freedom of choice, fueling inflation, and creating a radical disruption of a complex economic and social system. II. The Role of Government in Health Care Financing • Given appropriate Federal legislation which encourages competition, and assures nondiscrimination among all types of carriers, the private health insurance business can respond more effectively to the needs for comprehensive coverage for all citizens and the control of health care costs. • Government should establish minimum benefit standards for group and individual health insurance plans, with tax deductions for qualified plans and reasonable premiums in relation to benefits. • Proper exemptions from anti-trust legislation should be provided insurers in order to permit the development of state pools for coverage of low income groups (subsidized by government) and medically uninsurable individuals, as well as to effect cooperative cost containment. III. Present and Future Role of Health Insurers in Cost Containment As a means of containing costs, insurance companies have improved benefit plan design and administration, stimulated innovative health delivery systems, and supported cost and quality control legislation. • Further steps are required to control cost increases which could result from the establishment of a national health insurance program. IV. The Role of Health Insurers in Promoting Quality Controls • Private health insurance directly or indirectly affects the quality of health care through benefit plan design and underwriting, claims practices, and investment decisions. • New approaches to quality control require better ways to measure quality, and collective action by health care providers, health insurers, government and consumers. V. Cost of Administering • Independent studies of Medicare claim costs have revealed private fiscal intermediaries are more efficient and have lower expense ratios than the Social Security Administration. Comparison of the privately run Federal Employees Indemnity Benefit Plan with Medicare also shows a lower expense ratio for private carriers. Very large private health insurance groups operate at well below Medicare expense ratio. VI. Multiple Choice in Health Care Benefit Plans • The public interest is best served by enabling consumers to choose among alternatives the health insurance protection best suited to individual needs. • Many historical factors have contributed to the growth and need for diversity of health care benefit plans. • A greater degree of uniformity under national health insurance would be desirable, so long as standardization does not become excessive and thereby stifle innovation and experimentation. VII. National Health Insurance: • Patient cost-sharing would reduce the total cost of national health insurance and discourage overutilization of limited health care resources. 6 • The cited disadvantages of cost-sharing-deterrent of necessary care and red-tape costliness-are open to serious question and are also offset by the positive effects. VIII. Health Improvement • Health education has the potential for keeping people well, lowering health care costs, and reducing work days lost through illness. A private, nonprofit National Center for Health Education has been created to stimulate the development of more effective health education programs within the private sector. • The health insurance industry is playing an active role in health education through financial support of the National Center for Health Education and through other initiatives in this broad area by individual insurance companies. I. THE ROLE OF THE PRIVATE SECTOR IN HEALTH CARE FINANCING In the United States today, some 83 per cent of the population*-more than eight out of ten people-have some form of private health insurance. Equally significant, 87 per cent of those with private health insurance have coverage sufficient to protect them against catastrophic illness—either through insurance company Major Medical Expense Insurance plans, high benefit basic plans, the major medical-type plans of Blue Cross-Blue Shield, or other arrangements such as Health Maintenance Organizations. Benefits for health care expenses paid by private health insurers have increased by over 500 per cent since 1960. The average benefit per insured individual is growing at a much faster rate than the cost of medical care, an indication that the quality as well as the quantity of health insurance coverage has improved. This performance underlies the belief of the health insurance business that the national interest is best served by the continued full participation of the private sector in the financing of health care. The present system has many strengths, and one of the major ones is competition among the large number of private health insurers in the United States. Insurance companies, Blue Cross-Blue Shield plans and prepaid group practice plans are all an integral part of the system, each spurring the other to better administrative and claims service. These competitive pressures also make the private sector more sensitive to innovation and change required by new modes of medical treatment and the expectations of the public. Illustrations of private insurer responsiveness to public needs include the enormous recent growth of catastrophic plans with high or unlimited maximum benefits, together with limits on the amount of out-of-pocket co-payments, as well as the development of new types of benefits such as dental insurance, and coverage for vision care, mental illness, drug abuse, alcoholism, and home care services. On the other hand, in a government-run health care system the discipline of competition is not present. *Reference here is to the civilian, resident, noninstitutional population of all ages. At the beginning of 1975, some 172 million people in this population grouping had private health insurance protection. 7 Implicit in the pluralistic approach is the concept that no single means of health care financing would satisfy the requirements of all consumers. Government monopoly or control of financing substitutes a monolithic response which is unsuitable for the highly individualized health care needs of the American people. Government, by its nature, is not a risk-taking enterprise-because it has nothing to gain-and this in itself stifles initiative. There is, nevertheless, a major risk involved in a government takeover of health care financing the step may be irreversible. Once in place, a Federal program would be extremely difficult to control and virtually impossible to dislodge. The Profit Factor With the impressive growth of private health insurance, one might expect profits to have kept pace. This is not the case. Even in years of relatively stable prices competition has had a dampening effect on profit. In recent years, the escalation in medical care costs has caused large losses for many companies. For the industry as a whole, as insurance spokesmen have pointed out in testimony before Congress, "profits of private health insurance companies during the last six years, while varying from company to company, have averaged less than 1 per cent of premiums.' Realistically, private health insurance is and always will be a lowprofit business. This in itself provides a strong incentive to companies to achieve profits, however low, or certainly to avoid a loss which would result from inefficient administration. The Impact of a Government Program on Private Health Insurance A few national health insurance proposals would either eliminate insurance companies from the medical care insurance business, or restrict them to administrative functions. Insurance company managements do not welcome these approaches. The reasons the industry desires to remain in the business of underwriting medical care—even at a low profit margin-are several. For one, the insurance company approach to marketing both group and individual insurance is to offer a complete line of products and services for financial protection. To abandon one element in this package of financial protection in the face of low profits and government takeover attempts would reduce insurer credibility and goodwill |