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A History of the Insurance Industry and the HMO Plan
August 10th, 2005

HMO Act plan a  history of insurance industry

Nixon approves HMO act 1973

After calling our new doctor to make an appointment for our child, one of the first questions asked was "do you have insurance"?   I have to wonder what maze of billing the doctorís office must go through to get paid.  

Last year the Grocery Store clerks went on strike for 139 days in Southern California for "lost medical insurance benefits" due to rises in health insurance costs.  It is not an uncommon trend to pass more financial responsibility to the employee.

How did we end up with an ever increasing cost for health insurance?  How did the insurance company become what it is today?  It is an interesting history. 

The Health Insurance Industry was given power by government laws and now they have become so powerful that they not only have a strong presence in creating new laws, they also are making doctors and hospitals comply with their standards. The Health Maintenance Organization (HMO) was designed by the government to eliminate individual health insurance.

 

 In 1942 the individual was discouraged from purchasing health insurance plans by offering a tax deduction to the employer only and not the employee.  In 1965 congress created Medicare making individual health insurance obsolete for those over the age of 65.  In this time frame total costs for insurance went up as doctors and patients alike used the system to there benefit. 

The over use of the system caused rates to go up and in the late 1960ís it was starting to become difficult for a person to afford an individual health plan.  In 1973 President Nixon approved the HMO act that the left wing was promoting to help make insurance available to everyone.  Only Kaiser Permanente was an HMO in 1969 and most of the members where encouraged to join through their union.  The belief of the new HMO act was to encourage lower cost insurance to everyone.  At this point of the implementation of Medicare and the HMO act started the beginning of a much larger problem of unaffordable individual health insurance.

The managed health care plans were subsidized by the government which created an abundant amount of deals from insurance companies to lure the businesses to buy the new discounted low cost HMO plans.  The businesses dropped the individual health plans and offered only the HMO insurance for their employees.

In the 1970ís, doctors where strong armed into joining with the HMO plans by being told that the insurance company would get their own doctors and take all your current patients away.  Since a great many of people now were on HMO due to their work, there was reason for doctors to be concerned.   Doctors joined so they would not lose their patients out of fear the insurance company would ruin their practice.  The Insurance company would add more and more rules each time the doctorís contract was to be renewed, and since the majority of the patients had HMO plans they accepted the conditions.  If the doctor refused the new terms they were at risk for losing their patients as well as their income all at once, so they agreed to see more patients, to confidentiality agreements, and for more services requiring pre-approvals.

In the 1980ís the insurance companies started to invest in real estate deals.  Unfortunately, this risky non-conservative investment flopped when the savings and loan industry crashed along with real estate values.  Because of the poor judgment in risky investments, insurance companies started to come up short to cover claims.  When this budget failing happened, the insurance companies started to deny claims submitted to them saying they were too expensive and doctors as well as the patients were not fighting back.  Because the insurance company has gotten away with the denied claim process so well, they have continued to do this as part of the operating procedure. 

 

Insurance companies have come out of the slump and are more profitable than ever.  In 2004, Healthnet had a net income of 42.6 million; the year before in 2003 they had a net income $234 million dollars.  So these companies are profiting at providing insurance.  Is health insurance best left to a for profit business?  Insurance premiums have increased dramatically over the past few years.  In 2004 the average increase to premiums 11.2%, the previous year was 13.9%.  Compare this against current inflation rate of 3.51 % and it is blatant the excessiveness of charges by the insurance providers.  The average amount spent on healthcare each year for a person is $5,000.  This is twice as much as some of the industrialized countries.  Canada for instance has a 60% lower cost per person spent on healthcare, the also have a longer life expectancy than the US. The California Public Employees' Retirement System is one of the largest buyers of health insurance and in 2003 accepted a 25% increase in premiums and another increase of 18% in 2004.  One way businesses are trying to afford this excessive increase is by changing policies to higher deductibles and to have the employee pay more of the cost.  This is forcing some with families to skip the insurance because it is so expensive.

Emergency rooms are seeing more people coming in with critical problems because they are putting off going to see a doctor for preventative medicine.  In 2003 some 45 million people in the US were uninsured.  Many others have substituted less expensive plans that have higher deductibles and fewer benefits. 

Experts that research the health industry say that the rising cost is also attributed to a fragmented industry.  There are so many different doctor groups, insurance providers, benefit administrators, drug companies, hospital groups, medical equipment providers, and health care unions all trying to make as much as they possibly can.  Medical industries including insurance companies have seen increased profits over the last few years.

Medical insurance is necessary in the US only because doctors donít easily offer cash discounts, they will offer discounts to those with insurance only because the insurance company has an agreement.  Medical treatments can be expensive for major health issues and health insurance can help alleviate the expense for the insured.  One trend some doctors are offering is a cash only practice. A website called simplecare.com is banding together cash only doctors to offer discounted visits.  It will be interesting how insurance will resolve to become affordable again for everyone as the HMO act originally promised.

If you have any comments about this article please email me.

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By Nicole Wilson
Best Syndication Staff Writer

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Copyright 2005 Best Syndication                                            Last Updated Saturday, July 10, 2010 09:46 PM