How To: Health insurance in the US

Today, we would like to inform you about something many of our readers have asked us about: health insurance in the United States. While in Germany, most people have statutory health insurance, the system in the US is mostly a competitive one. This can be very confusing. So we would like to give you a short overview so you may safely find your way through the insurance jungle.

Private health insurance The vast majority of US citizens in privately insured. There isn't a lot of regulatory framework, the government only steps in where it is absolutely necessary.

Private health insurance is mostly offered in the form of a group insurance by the employer, including all family members. This insurance offered by the employer is, however, optional. Almost all bigger companies, but only 65% of small and medium-sized companies offered health insurance for their employers in 2004. Only 7% of people under 65 had individual, not employment-based health insurance in 2004. The reason is that individual insurance is very expensive.

Same as in Germany, private health insurance is offered by companies under private law. The insurance premiums are mostly paid by the employer and are tax-free. They are based on the employee's risk structure and usually higher for smaller companies than they are for bigger ones.

Benefits usually include both inpatient and outpatient treatment, prevention and, in part, dental treatment. Long-term illnesses are usually not very well covered. Over the past years, the range of benefits was reduced further (e.g. supply of pharmaceuticals) and co-payment increased, to shift the costs from the employer to the insured employee.

Privately insured Americans are also reimbursed by their insurances, same as in Germany. This means, the insured closes a contract with the service provider of his or her choice and receives a bill for any services provided. Doctors may basically ask the prices they think are appropriate. The insured forwards the bill to his or her insurance company. The insurance company will reimburse the insured for the full sum minus deductibles.

Medicaid This government program was introduced in 1965 with a law by the separate US states and the federal government. With 41 million recipients of benefits (almost half of them under 21), Medicaid is the largest insurance program in the US.

This government program covers roughly 10.5% of the American population. Medicaid is meant to provide health care for pregnant women with a low income and families with children, as well as senior citizens in need and disabled persons. The number of Medicaid insured persons increased especially in the first half of the 1990s. A problem is still the coverage for children of poor families. Even though more than three quarters of uninsured children would be eligible for Medicaid coverage, the take-up rate is still very low.

The carriers of this program are the federal government and the separate US states. Minimum coverage must include inpatient and outpatient treatment as well as certain qualified care services. Coverage of dental treatment, medication, health care products etc are discretionary to the individual states. This means that the level of coverage varies greatly from state to state.

Medicare Medicare insures roughly 39 million Americans. It is meant for people over 65 and their dependents, and also invalids and most people with chronic kidney diseases.

Medicare is a federal insurance. The obligatory premium is taken out of the employee's social security contributions. Employers and employees pay 14.5% each, self-employed persons 2.9%. This means, the insured mostly have to pay very high deductibles. One quarter of the optional part of this insurance is paid as a fixed premium per person per month. The other three quarters are paid through taxes. The optional part of Medicare means high deductibles to be paid by the insured, usually up to one fifth of the insured's income.

The obligatory Medicare coverage includes inpatient diagnoses and treatments. This also includes necessary after-treatment, inpatient care and, possibly, outpatient medical care. The optional part mostly covers outpatient examinations and treatment, certain prevention measures and select health care products. To close the vast gaps in this insurance, other private insurances are necessary.

Problems The US system is facing two great problems. First, there are many people who do not have insurance coverage. Secondly, the US health system is very expensive.

One huge problem in the US is the high number of uninsured people. Many employers do not offer group insurances for their employees. And then there are unemployed people, dependents, low-wage earners who, due to their income, do not qualify for the above described Medicaid and people who are uninsurable due to pre-existing conditions. A private insurance is very expensive and unaffordable for most people.

In addition, the US have the by far most expensive health system of all industrialized nations. Health expenditure per capita is considerably higher than in all comparable countries. In 1998 and 2000, it was 13% of GDP.

A debate is going on about what exactly is causing this. Some say it is due to cost-driving elements such as inefficient services, wrong incentives for the providers, and the technical improvements that are necessary to remain competitive.

Others blame the high costs for protection against compensation claims. They say that high consultation costs, movement of specialists and the fact that doctors stop practicing are a direct consequence of the continuously increasing premiums for professional liability insurances.

In the state of Arizona, the premiums have increased by 16% in the last year alone. Now, the limit for compensations is to be regulated by constitutional law in that state.

With this measure, doctors are hoping for lower premiums for professional liability insurances as well as a revaluation of the medical profession. More than 30 states already have limits similar to this.