Health Insurance Basics

Our Current Situation - The national debate over health insurance seems destined to continue for some time. Let's review some basic facts about our current situation.

- Over 45 million Americans are without health insurance, and the majority of them are full-time employees.

- Over 1 million mostly middle-class families file medical bankruptcy each year, yet 75% of them had employer-sponsored group health insurance when they first became ill.

- The average annual cost of employer-sponsored group health insurance is $14,000 per person. And yet you can purchase your own family plan for an average annual cost of $3,264.

- The single most important factor in the cost of an individual policy is the state in which you live. For example, it costs an average of $98 per month in Illinois and $503 per month in Massachusetts.

- The cost of health benefits exceeds profits for most of the Fortune 500. It adds over $1,500 to the cost of every car sold by GM.

- The largest monthly expense in most senior households is prescription drugs. 24% of the prescriptions written are not filled because of price.

- Many seniors who have saved up hundreds of thousands of dollars for retirement live to see their assets wiped out by medical or nursing care expenses not covered by Medicare.

How We Got This Way - Going back to World War II, wage and price controls prohibited pay increases for workers. To allow increases without repealing these controls, Congress exempted employer-sponsored group health insurance from controls and from taxation. This created a tax advantage for group health insurance, and it became almost universal by the mid-1960s.

With consumers not demanding competitive services (such as with auto insurance), the medical industry developed thousands of new treatments and drugs. Some of these were powerful, but others were not effective or economical. In any event, they were developed in the absence of a competitive market, and sold to corporate and insurance company executives, not to the American consumer.

Since 1960, U.S. healthcare costs have risen from $27 billion annually to over $2 trillion today, far exceeding the rate of inflation. The average length of employment has fallen from 25 years to only 4 years. Employers have little incentive to spend precious benefits dollars on preventive practices, the benefits of which won't show up until the employee is long gone or retired.