Senate Insurance Committee Informational Hearing

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Background Paper

If you have ever been sick or injured, you know how important it is to have health insurance. But most people are confused about what kind is best for them.

What types of health insurance are available? If an employer offers a choice of health plans, what should someone know before making a decision? In addition to coverage for medical expenses, is some other kind of insurance needed? What if someone is too ill to work? Or, if someone is over 65, will Medicare pay all medical expenses?
These are only a few of the questions that surround health insurance. But the confusion is amplified because there are so many kinds of health insurance. And although California is recognized as leading the nation in the evolution of healthcare, it also means the health insurance marketplace is changing so rapidly that it is hard for even knowledgeable people to stay informed.
Definition of Health Insurance:
The Merriam-Webster Dictionary defines “health” as the condition of being sound in body, mind or spirit and the freedom from physical disease or pain; and defines “insurance” as coverage by contract whereby one party undertakes to indemnify or guarantee another against loss by a specified contingency or peril.
"Health insurance" is not defined as such in California law. Instead it is usually referred to as “an individual or group disability insurance policy that provides coverage for hospital, medical, or surgical benefits,” and then it is further stated that it does not include one or more of the following kinds of insurance:

(1) Accident only.

(2) Automobile medical payments insurance.

(3) Credit.

(4) Champus supplement.

(5) Coverage of Medicare services pursuant to contracts with the United States government.

(6) Dental or vision coverage issued as a supplement to liability insurance.

(7) Dental only.

(8) Disability income.

(9) Insurance under which benefits are payable with or without regard to fault and that is statutorily required to be contained in any liability insurance policy or equivalent self-insurance.

(10) Insurance arising out of a workers' compensation or similar law.

(11) Long-term care.

(12) Medicare supplement.

(13) Specified disease or hospital confinement indemnity as defined in subdivision (b) of Section 10198.61.

(14) Vision only.
The Importance of Health:
When “health insurance” is discussed, most people currently think of the business of insurance. However, it is critical not to overlook the word “health,” because the status of our collective health directly affects how much money the insurance business must spend. And there has emerged the need to focus special attention on women’s health, rural health, children’s health and minority health.
The life expectancy of U.S. women has nearly doubled in the past 100 years, from 48 in 1900 to nearly 79 in 1996, compared with a 1996 average of 73 for men. Although women have a longer life expectancy than men, they do not necessarily live those extra years in good physical and mental health.
In 1900, the leading causes of mortality among U.S. women included infectious diseases and pregnancy and childbirth. Today, the chronic conditions of heart disease, cancer, and stroke account for 63 percent of American women's deaths and are the leading causes of mortality for both women and men. Other concerns for women include breast cancer, uterine cancer, ovarian cancer, domestic violence, pregnancy, prenatal care, menopause, osteoporosis, and HIV.
A new report by the U.S. Agency for Healthcare Research and Quality (AHRQ) says that asthma, injuries, and mental health problems account for more hospitalizations of children over five years of age than any other conditions, while preschoolers and infants need hospital care mostly for infections and birth-related problems. Youths aged 15 to 17 are hospitalized mostly for problems related to pregnancy and childbearing. The report also indicates that youths in the same age bracket who are uninsured are the most likely not to have a usual source of health care and the least likely to use office-based medical providers, such as pediatricians and family practice doctors. Other health concerns for children include dental care, diabetes, hepatitis B, HIV, kidney disease, substance abuse and the need for immunizations.
The overall health of the American population has improved over the past few decades, but minorities have not shared equally in these improvements. According to the AHRQ study, among nonelderly adults, for example, 17% of Hispanic, and 16% of African Americans report they are in only fair or poor health, compared with 10% of white Americans.
About 30% of Hispanic and 20% of African Americans lack a usual source of health care compared with less than 16% of whites. Hispanic children are nearly three times as likely as non-Hispanic white children to have no usual source of health care. African Americans and Hispanic Americans are far more likely to rely on hospitals or clinics for their usual source of care than are white Americans (16 and 13%, respectively, vs. 8%).
Race and ethnicity influence a patient's chance of receiving many specific procedures and treatments. Of nine hospital procedures investigated in one study, five were significantly less common among African American patients than among white patients; three of those five were also less common among Hispanics, and two were less common among Asian Americans.
The health of minorities is especially affected by disparities in patient care for various conditions and care settings including:

  • Heart disease. African Americans are 13% less likely to undergo coronary angioplasty and one-third less likely to undergo bypass surgery than are whites.

  • Asthma. Among preschool children hospitalized for asthma, only 7% of black and 2% of Hispanic children, compared with 21% of white children, are prescribed routine medications to prevent future asthma-related hospitalizations.

  • Breast cancer. The length of time between an abnormal screening mammogram and the follow-up diagnostic test to determine whether a woman has breast cancer is more than twice as long in Asian American, black, and Hispanic women as in white women.

  • Human immunodeficiency virus (HIV) infection. African Americans with HIV infection are less likely to be on antiretroviral therapy, less likely to receive prophylaxis for Pneumocystis pneumonia, and less likely to be receiving protease inhibitors than other persons with HIV.

  • Nursing home care. Asian American, Hispanic, and African American residents of nursing homes are all far less likely than white residents to have sensory and communication aids, such as glasses and hearing aids.

Types of Health Insurance:
Health care in America is changing rapidly. Twenty-five years ago, most people in the United States had indemnity insurance coverage. A person with indemnity insurance could go to any doctor, hospital, or other provider (which would bill for each service given), and the insurance and the patient would each pay part of the bill.
But today, more than half of all Americans who have health insurance are enrolled in some kind

of managed care plan, an organized way of both providing services and paying for them. Various types of managed care plans work differently and include health maintenance

organizations (HMOs), preferred provider organizations (PPOs), and point-of-service (POS)

The term health insurance refers to a wide variety of insurance policies. These range from policies that cover the costs of doctors and hospitals to those that meet a specific need, such as paying for long-term care. Even disability insurance—which replaces lost income if you can’t work because of illness or accident—is considered health insurance, even though it’s not specifically for medical expenses.

But when people talk about health insurance, they usually mean the kind of insurance offered by employers to employees, the kind that covers medical bills, surgery, and hospital expenses. This kind of health insurance is referred to as comprehensive or major medical policies, alluding to the broad protection they offer. But the fact is, neither of these terms is particularly helpful to the consumer. Today, when people talk about broad health care coverage, instead of using the term "major medical," they are more likely to refer to fee-for-service or managed care.
While fee-for-service and managed care plans differ in important ways, in some ways they are similar. Both cover an array of medical, surgical, and hospital expenses. Most offer some coverage for prescription drugs, and some include coverage for dentists and other providers. But there are many important differences that make choosing them confusing.

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