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Illuminations

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In which we answer reader mail, explain the difference between health care and insurance, and confront a challenge.

We get letters…

Alan asks us to expound on the difference between “health care” and “health insurance.”

At first glance, this may seem self-evident, but unfortunately, some (many?) who debate the current health care delivery and finance system(s) fail to differentiate. And that, by the way, sums up the distinction: providers like doctors, hospitals, pharmacists, etc deliver health care services; insurers (insurance carriers, Medicare, etc) help to pay for these services. So when you hear (silly) statements like “my insurance company won’t let me have the operation,” be aware that this is a logical fallacy. That is, one’s insurance company has absolutely no control over whether or not (or even where) you receive medical care. It simply determines how much, or if at all, to pay for these services.

Kelley is curious about our statement that "employers do not pay for health insurance." Actually, this is really a matter of perception versus reality. Folks who are covered under a group plan at work, and whose employers “subsidize” that insurance, believe that the employer pays some (or even all) of the premiums.

Nothing could be farther from the truth:

Companies – businesses – pay neither taxes nor insurance premiums.

Companies do collect (sales) taxes, and pass them on to the states in which they do business. They also include any business taxes due in the price of the product or service. They pay employees a portion of their salary, and forward the balance to the insurance carrier (and/or state government).

They do not actually pay the taxes, nor the insurance premiums.

How’s that, you ask?

When Joe was hired, his employer budgeted $60,000 for his compensation: $50,000 is paid to Joe as wages, and the other $10,000 is sent to the insurance company and various government agencies (and, of course, some is to defray the costs of vacation and sick days, etc). Thus, money that would have gone to Joe in the form of increased wages instead goes to the insurance company (or government entity, etc)

And finally, loyal reader Lin accuses us of  “(t)aking a single episode of care and demonstrating a hypothetical savings through elective engineering.” This was in response to last week’s example of what happens when one suffers a catastrophic claim under a HDHP (High Deductible Plan). He (she?) engages in a little “selective engineering”  himself, by pointing out such plans’ inherently large out-of-pocket expenses, while neglecting to mention the concomitant premium savings.

Reason I bring this up is to underscore what those who oppose CDHC (Consumer Driven Care) unfailingly omit from their calculations: that these plans usually (but not always) generate substantial premium savings, which more than offset potential OOP exposure.

Please keep the cards, letters and comments coming!

Next week, we’ll fulfill our promise to Dr Steve, and take a look at the current state of “transparency” in health care pricing.

Be Well.

Henry Stern, LUTCF is an independent insurance agent in Dayton, OH. A licensed Continuing Education instructor for Ohio and Kentucky, he has well over 20 years of experience in “the biz.”  He blogs every day (or so it seems) at InsureBlog.

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from InsureBlog on Sun, 07/09/2006 - 10:33am

This week's column is up at The Medical Blog Network. We answer reader mail, and set a commenter straight.



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