Well, with that introduction to health insurance,
here's how it breaks down in the United States.
There's about 310 million people in the country.
About 50 million, a little less than 50 million of them don't have insurance.
And doesn't mean they don't get health care services,
doesn't mean they don't go to the doctor,
or don't need a hospital,
it just means that they don't have health insurance to pay for it.
That leaves about 260 million Americans who have health insurance.
Now, that's broken down into two large groups.
One large group is people who have
private insurance and that is they get insurance through a company,
another is people who get public coverage through the government and government programs.
When we consider the private insurance side,
they are further broken down into two groups.
The first and by far the largest group of
about 150 million Americans gets health insurance through employers.
Either they're the worker or they're the family of a worker.
The benefit of employer sponsored insurance or ESI is that company pulls all the workers.
So in a company have the law of large numbers.
Now that means that large employers have a big advantage because they have more workers,
more predictable health care costs,
more likely to have some sick people and some healthy people.
Small employers are the small group market.
Actually is much more unpredictable.
If you have only nine or 10 employees in a insurance plan,
who knows who's going to get sick?
Who knows when they're going to get sick?
It's much more unpredictable and typically insurance companies build in a risk premium.
They charge more because of that unpredictability.
About 15 or 16 million Americans buy their private insurance themselves.
They actually contract with an insurance company themselves to get health coverage.
They are subject to the law of one number.
There's a small group,
an individual market and they are typically what's called experience rated.
They pay based upon whether they're healthy or sick.
Healthy people pay less,
sick people pay a lot more or don't even get
insurance because they're too high a risk for the insurance company.
This is a very volatile market and it's not easy to get insurance in this market,
and often you don't get very good insurance.
In addition to the private insurance side I
mentioned there's also the public insurance side which we'll talk about next.
On the private insurance side there are
large numbers of both for profit and not for profit insurance companies.
There are the Blue Cross and Blue Shield plans.
Many are state based and they typically are not for profit plans.
And then there are big for profit commercial insurance
which covers the majority of the people in the employer sponsored market.
UnitedHealthcare, WellPoint, Aetna, Cigna, Humana.
These for profit companies take
a premium and have three components of how they spend the money.
The largest component is paying for medical services or medical bills.
There's also a component for the administrative costs,
the paperwork associated with paying the bills.
The pre-authorization to make sure that a person really needs a test
that has been ordered and other elements of administration.
In addition, they have to have a profit at the top.
Even if they are not for profit they have to have a margin to reinvest in the company.
Now, the medical loss ratio or MLR
is the amount that an insurance company pays for medical services.
Why is it called a loss ratio?
Well, that's because it's from the perspective of
the business or the investors in a for profit company.
Every payment of a medical bill is a loss of profit.
Medical loss ratio is typically a higher one,
means that more of the premium goes to medical services,
a lower one means less of the premium goes to medical services and more goes to profit.
It's not clear how much is the right MLR,
but a lot of people think that for big employers an insurance company should pay out
at least 85 cents of every premium dollar for medical services or have an MLR of 85.
And you can see here the various different medical expenses
by the big insurance companies.
Health insurance in the United States is not cheap,
it actually cost a lot of money.
Last year the average premium for a family health insurance plan was $16,000.
And the worker contributed out of pocket an average of
$4,000 for that health insurance plan or about 25 percent,
with 75 percent being contributed through the employer.
That's 75 percent remember contributed by the employer
is not taxed as income or on the payroll for the worker.
And that's one of the advantages when an employer pays the full amount.
You can see that the health insurance system is very complex and very expensive.
Next, we're going to talk about the public health insurance program.
Medicare, Medicaid, and the variety of
other public programs to cover health care costs for different groups in America.
