Reform Healthcare Insurance Industry

Health
1

Restructure the U.S. health insurance industry, addressing systemic inefficiencies and inequalities that hinder access to affordable healthcare. This proposal outlines specific changes aimed at improving consumer choice, affordability, and transparency, while reducing healthcare costs and enhancing market competition.

I. Overview of the Current State of Health Insurance

The U.S. health insurance system is deeply flawed, failing to meet the needs of many Americans. Currently, most individuals access health insurance through employer-sponsored plans, leaving millions of Americans—especially those unemployed, self-employed, or in the gig economy—without affordable coverage options. Even for those with insurance, premiums, deductibles, and out-of-pocket costs have risen significantly in recent years, contributing to financial instability and reduced access to care.

Key Issues:

• Employer Dependency: Most people receive insurance through employers, limiting mobility and freedom of choice. Those without traditional employment often lack affordable coverage.

• Limited Flexibility: Individuals are unable to freely choose who is included on their insurance plan, typically restricted to family members.

• Price Disparity: Healthcare providers often charge different prices for the same service based on whether a patient is paying with insurance or out-of-pocket, leading to a lack of market transparency and fairness.

• Profit-Driven Insurance: Insurance companies are largely for-profit entities, incentivized to prioritize shareholder profits over patient care. This model drives up costs and limits access to necessary services.

Rationale:

• Research has shown that U.S. healthcare spending far outpaces that of other developed nations, yet health outcomes (such as life expectancy and infant mortality rates) are often worse .

• Employer-sponsored insurance ties coverage to job status, which is problematic during economic downturns, leaving millions uninsured or underinsured. In 2020 alone, the pandemic caused 14.6 million people to lose employer-sponsored coverage .

• Price disparities between cash-paying patients and those with insurance have led to inflated insurance premiums, benefiting providers and insurers, but hurting consumers .

II. Key Practices of Current Insurance Companies

  1. Employer-Based Plans: Insurance is predominantly tied to employment, creating barriers for self-employed or unemployed individuals to access affordable care.

  2. Limited Flexibility in Plan Composition: Insurance plans typically restrict coverage to immediate family members, leaving out friends or extended family.

  3. Price Disparities: Healthcare providers charge higher prices for services covered by insurance than for those paid for out-of-pocket. This discourages price competition and transparency, while benefiting providers and insurers.

  4. For-Profit Model: Insurance companies operate primarily as profit-driven businesses, focusing on minimizing payouts for care and maximizing profits, often resulting in denial of care, higher premiums, and less comprehensive coverage.

  5. Complex Administrative Costs: Significant resources are allocated toward administrative costs, which account for up to 25% of U.S. healthcare spending .

III. Proposed Changes to Restructure the Health Insurance Industry

To address the inefficiencies and inequalities in the current insurance system, the following changes are recommended:

1. Decoupling Insurance from Employment

• Proposal: Allow individuals to purchase private health insurance plans independent of employment status. This would create a more flexible and equitable system, ensuring that all Americans, regardless of job status, have access to affordable healthcare.

• Rationale: In a dynamic and increasingly gig-based economy, workers should not rely on employers for healthcare. Countries with nationalized or independent healthcare systems demonstrate better health outcomes and coverage for their citizens .

2. Flexible Insurance Group Formation

• Proposal: Enable individuals to form their own insurance groups, which can include friends, family members, neighbors, or anyone they choose. Premiums should be based on the risk pool created by the group, allowing people to have more control over their insurance plans.

• Rationale: Traditional family plans do not reflect the diversity of modern households or communities. This change would empower consumers to create groups that better suit their needs, while also encouraging healthier individuals to join insurance pools, helping to reduce overall costs.

3. Ban on Price Disparities Between Cash and Insurance-Paid Services

• Proposal: Prohibit healthcare providers from charging different prices for the same service based on payment method. Services paid through insurance must not be more expensive than those paid out-of-pocket.

• Rationale: This practice distorts the free market and inflates healthcare costs. Standardizing prices would enhance transparency and drive competition, ultimately leading to lower costs for consumers .

4. Non-Profit or Public Health Insurance Models

• Proposal: Transition health insurance companies from a for-profit to a non-profit or publicly owned model. These organizations would be required to reinvest profits into lowering premiums, improving services, or expanding coverage.

• Rationale: A for-profit model creates misaligned incentives, where insurers prioritize profits over patient care. Non-profit or public models, as seen in many European countries, help to lower administrative costs and ensure that healthcare dollars are spent on actual care .

5. Transparent Pricing and Simplified Plans

• Proposal: Mandate that insurance companies and healthcare providers publish clear, upfront pricing for all medical procedures and treatments, simplifying choices for consumers. Insurance plans should be straightforward, with standardized deductibles, copays, and out-of-pocket limits.

• Rationale: Price transparency would enable patients to make more informed decisions and force providers to compete on cost, fostering a more competitive marketplace .

IV. Expected Outcomes of These Changes

  1. Increased Access to Healthcare: By allowing individuals to purchase private insurance regardless of employment, more people will have access to coverage, improving overall health outcomes.

  2. Lower Premiums: Flexible group formation and the removal of profit motives would reduce premiums, making insurance more affordable for all.

  3. Market Transparency: Standardized pricing would eliminate confusion and foster competition, driving down healthcare costs.

  4. Reduction in Healthcare Costs: The shift from a for-profit to a non-profit or public model would reduce the administrative overhead and profits siphoned off by insurance companies, ensuring that more funds go toward patient care and lowering overall healthcare expenses.

  5. Better Health Outcomes: Easier access to preventive care and reduced financial barriers to treatment would lead to improved long-term health outcomes, helping to address the obesity epidemic, chronic disease management, and other public health issues.

Conclusion

The current U.S. health insurance system is unsustainable, leaving millions of Americans uninsured or underinsured and driving up healthcare costs. By decoupling insurance from employment, creating flexible insurance groups, banning price disparities, and transitioning insurance companies to a non-profit model, the healthcare industry can become more competitive, transparent, and accessible. These changes would lead to a fairer system, lower costs, and better health outcomes for all Americans. The time to act is now, as the current system continues to harm individuals and limit access to essential care.

References:

  1. Centers for Medicare & Medicaid Services (CMS), 2021 Health Spending Report

  2. Kaiser Family Foundation (KFF), 2020 Employer Health Benefits Survey

  3. Congressional Budget Office (CBO), Analysis of U.S. Health Insurance and Healthcare Costs

  4. Health Affairs, “The Administrative Costs of Health Insurance in the United States” (2019)

  5. World Health Organization (WHO), Global Health Expenditure Database

  6. National Bureau of Economic Research, “The Impacts of the COVID-19 Pandemic on U.S. Health Insurance”

  7. New York Times, “Why Hospitals and Doctors Charge So Much More for Insurance Patients” (2020)

  8. National Institutes of Health (NIH), “Healthcare Spending and the Impact on Public Health”

  9. Commonwealth Fund, International Health System Profiles, 2021

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Wow. There’s a lot here, and I can cherry pick parts that make sense to me. It will be a tough and painful process. A few points, at a high level the reason that one-payor systems often have better results is because they’re more focused on primary care and particularly on prevention. They also have the power to keep costs down by denying care (the so-called “Death Panels”) and by negotiating drug prices down. In general, I wouldn’t expect the government to do better at something than the private market. In this case, we’ve allowed the private market lobbyists to corrupt the game, limiting the number of players and the flexibilities of the plans, to the benefit of the insurance companies and not the patients’ health or wallets. I am fine with decoupling from employment, and I support transparency in most every respect, but the biggest problem is allowing for the hoarding of claims information, the restriction of competition and the conflicting incentives of those giving, paying for and receiving care.

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Thanks for teeing this up. There’s a lot in here that makes sense. The suggestion that providers charge individuals and insurance company the same amount is not workable, unless your aim is to get rid of the health insurance industry completely. The way it works now is that providers and insurance companies negotiate for prices based on their relative leverage - as in any commercial business. For example, a provider like Nationwide Children’s Hospital in Columbus, OH, can charge almost anything they want because if a local mom has a very sick child, and she can’t take her to Children’s because it’s out of network?! That would be a huge negative for the employer who purchased that insurance plan for its employees. By contrast, an independent primary care physician may have trouble with marketing and building his practice. If he signs up with UHC as a network provider, UHC will fill the doc’s waiting room with its member/patients. That’s why if that PCP has his practice acquired by a hospital system or even a larger primary care group like Columbus Primary Care which is a network comprised of most of the area’s PCPs, part of the “synergy” of that deal will be that reimbursement rates from (in my example) UHC will increase, because UHC needs Columbus Primary Care docs to be in its network or again, it won’t have enough docs and new employees will routinely have to change doctors. There’s no way to make any of this work if every provider is paid the same, whether they have to chase individuals for payment, or can adjudicate the claim and be paid electronically. Not to mention, you still need some sort of administrator to manage the network and the payments in the network and those people need to be compensated.

The other big piece missing is the fact that the ACA is too limiting when it comes to varying premiums based on a new member’s health history as well as whether she complies with various wellness programs. As a result, healthy people pay too high a percentage of the total cost.

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Decouple healthcare insurance from employment. It happened in WWII and time has come for it to be direct to consumer like all other types of insurances.

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I like where you’re going here. Honest question … is insurance actually necessary at all? Seems like insurance limits options, prices for everything go up. If knee replacement surgery cost 60 to 100k, and the actual implant cost 1000.00… the doctor gets a chunck, everyone gets paid off. And consumers pay a higher price… if there were no insurance… prices coulnt be sky high cuz no one could afford it. Cant sell what no one will buy. So they would have to be competitive in the market. And in defence of the doctors, there must be a counter balance, where there is a cap on liability… i dont know what that number is… but im happy to have a conversation about that

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I think there should be insurance rate reductions for healthy lifestyle like working out

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And insurance decides what assessments, testing or procedures we need, contrary to what the doctor recommends. Can we include that?

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This is an idea whose time has come. I worked in Saudi Arabia where only non profit cooperative insurance was allowed (unless it was employer based, that is the employer foots the medical bills as a contractual obligation). Auto insurance is run via two man offices in each major city. The company can only invest in non interest non debt investments and is not allowed to invest in any company that has a negative debt to asset ratio. Very often you get a dividend that is more than your premium (every subscriber is a shareholder).

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I should be able to purchase health insurance like I do homeowners, auto, or life insurance - getting quotes, shopping around, and changing companies if the price/coverage is more advantageous elsewhere. This promotes competition among providers.

Decoupling health insurance from employment will also make end users/consumers more aware of the costs of healthcare procedures. This would promote transparency in the medical field as it relates to pricing, also promoting competition and keeping costs from running rampant.

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There is no simple fix, and there will never be a solution that works for “everyone”. However, I think if we were to overhaul the FDA, and overhaul the regulations surrounding big pharma and actually allowing natural medicines back in, we could drastically cut down the cost of health insurance. By decoupling from employers and allowing people to create their own insurance groups would add more competition to the market. If I wanted to start an insurance company and allow people to create their own groups, this would undercut the market and actually cause the market to bring the cost down,

There are a million other ways to add on, but I just want to be able to use health insurance like I do car insurance. (being able to add anyone I want onto my plan etc…)

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I’d like to learn more about that and see how we can implement that nationwide. No more profiting off people’s pain and suffering.

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Absolutely. The fact that insurance companies dictate what medical procedures to do first because they don’t see the value in you getting the most appropriate care is insane.

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not just working out, but there could be a myriad of reasons to lower cost for the healthy. working out, no smoking or drinking, certain communities where the level of active lifestyle is more than the sloth lifestyle. Just like rates for car insurance go up if there are more accidents in the area, it should be similar to the health of the region as well.

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This is very well written. A thought I had that aligns with insurance reform is to allow physicians to common since and efficient medical decisions. Currently, many insurance companies dictate care and add unnecessary steps to treatments which in turn drives up health care costs. This is not to say that there should not be some oversight between physicians and insurance companies to minimize abuses.

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Right now, when we face a medical emergency, we’re usually in no position to compare prices for things like ambulance rides or choose a hospital based on cost. Most of us have no idea what our care will actually cost, even when we have insurance handling some of the negotiation.

It may make sense to move to a two-layers system. The first layer would be Medicare-for-all as a foundation. This would guarantee basic healthcare for all Americans, covering chronic illnesses and major health issues. It would also provide full protection for our most vulnerable groups, such as seniors, children, and low-income individuals. Providers would be required to charge baseline Medicare rates for these essential services. This approach would make healthcare accessible to everyone and bring much-needed consistency and transparency to medical costs.

The second layer would involve private insurance to cover additional costs, premium care, or elective treatments. Hospitals would have the option to offer advanced or specialized services that go beyond the essentials, such as the latest technology or specialized drugs.

This model would also reduce administrative costs for hospitals and clinics, as standardized Medicare rates would simplify billing and reduce the time spent negotiating prices with various insurers. It would balance the strengths of both public and private sectors: Medicare ensures that everyone has access to necessary care, while private insurance gives people the freedom to access advanced care when they choose.

By making essential care universal and allowing private insurance to focus on premium services, this system could stabilize healthcare costs and improve transparency. More importantly, it would ensure that the security of a family’s future doesn’t depend on their employer or their ability to pay for insurance.