What Do You Mean It's Not Covered: Health Insurance Introduction

In 1992, the cost of heath care for the nation as a whole came to $820 billion. Heath-care costs in the United States have been rising at a rate of more than 10 percent a year, several times the rate of inflation. At the current rate of growth, health-care spending will consume almost 20 percent of what is spent on all goods and services by the year 2000. Despite these disturbing trends, and the debate over health care reform that dominated American politics in 1993 and 1994, people resist treating health insurance like the commodity it is -- little different than auto insurance. There are a number of reasons for this unfocused consumer response in the heath-care market. Consumers often lack the expertise or information to decide how much care they need; they must trust their doctor to order what is best. Also, consumers with insurance don't pay the whole bill; thus, they don't respond to prices as they would with other products, and incentives to "comparison shop" are reduced. And finally, when it comes to their health, people seldom measure medical procedures in dollars and cents. They should, at least when they compare insurance policies. Like automobile insurance, major medical policies carry a deductible -- an amount you pay before the insurance company begins paying expenses. Many major medical policies also have copayments, which means you pay a certain amount of the covered expenses, typically 20 percent, up to a limit. That limit is called a "stop-loss" and varies by company and policy. After the stop-loss is reached, the insurance company begins paying 100 percent of the covered expenses.