Is the U.S. Health Insurance System on the Brink of Collapse?

There has been a lot written about the U.S. Health Insurance industry since the fatal shooting of UnitedHealthcare CEO Brian Thompson. Like the article from USA Today “Seven reasons health care costs more in America” (December 16, 2024) accurately highlights key issues, but like many other articles that have been written, it fails to address the vulnerability of the U.S. health insurance system.

To understand why the U.S. Health Insurance System is about to collapse on itself, its critical to understand the fundamentals of insurance.?

The U.S. Health Insurance system isn't built to handle most members filing claims; In fact, any insurance, weather you’re talking about health, home, auto or even life insurance works on the principle of mitigating risks.

Insurance is meant to protect against catastrophic events, with companies betting that only a small number of policyholders will face such events. This allows them to collect premiums as profit while paying minimal claims. On the flip side, if widespread disasters occur, such as California wildfires or Florida hurricanes, the surge in claims can make the insurer unprofitable, forcing it to either fail or exit high-risk markets.

The flaw in the U.S. Health Insurance system is that Americans are aging as a whole population, and to make matters worse, there are fewer Americans being born to replace the aging population.? According to the U.S Census Bureau, by 2034, the United States is projected to experience significant demographic shifts, with older adults expected to outnumber children under 18 for the first time in U.S. history.

As the U.S. population ages and as more claims are filed, the health insurance industry responds by raising claim denial rates, due to fewer younger individuals to balance the costs – KFF Health News.

Many Americans lack awareness of the healthcare system's flaws and are easily swayed by special interest groups that push misleading claims, such as "Private healthcare is more efficient than government systems."

This couldn’t farther from the truth. In 2022, U.S. healthcare expenditure was approximately $12,742 per person, nearly double the average of other wealthy countries, which stood at $6,850 per person” – PGD Foundation.

Despite higher spending, the U.S. often lags behind other industrialized nations in key health indicators: The U.S. has the lowest life expectancy at birth among high-income countries. – Commonwealth Fund.

How do we fix the problem?

There are a couple of approaches that could be considered.? One solution could be what Senator Bernie Sanders had suggested, “Medicare for All”. A lot of Americans recoiled at this idea as “Socialism”.

I’m not sure how this is Socialism since most working Americans are paying for a healthcare system that you can’t use until your 65. That’s right, you don’t have to look any further than in your paycheck to see a deductible for Medicare!

In fact, most American’s don’t realize that you can’t get Medicare (at 65) if you haven’t paid into the system for 40 quarters – or 10 years. So, paying for healthcare that you can use today seems much more reasonable alternative.

Another alternative is having a regulated non-profit administrative system to manage healthcare in the U.S. Unlike traditional not-for-profit companies, which generate profits without shareholders, these non-profits would operate transparently and focus solely on public benefit. They would utilize government-published provider costs and procedural codes through an open exchange, achieving several key objectives:

1. Eliminating costly licensing fees to the American Medical Association (AMA) for Current Procedural Terminology (CPT) codes that are critical to reporting for administrative purposes such as claims processing.
2. Removing the AMA’s influence on setting doctor reimbursement rates for Medicare.
3. Abolishing the distinction between in-network and out-of-network providers.

These regulated non-profit administrators would ensure full transparency by publishing payment details for all providers, including hospitals and other institutional providers, fostering trust and accountability within the healthcare system.

Under this system, individuals would no longer need to purchase health insurance through their employers. Instead, members would contribute premiums to a tax-free spending account. Unused funds at the end of the year could roll over, minus a small administrative fee. The more members a regulated non-profit company serves, the lower the administrative fees, making the system more efficient.

The goal is to allow younger, healthier individuals to "bank" unused premiums for future use when they are older and likely to need more healthcare services. Unlike current health insurance companies, the non-profit administrator would not profit from unused premiums, ensuring members retain control over their contributions. This system promotes long-term financial security and independence in managing healthcare costs.

Providers would be paid for outcomes based upon standards that are published by the International Consortium for Health Outcomes Measurements (IHOM). This model would adopt the consortium best practices to assure that members premiums are not frivolously being wasted on unnecessary procedures.

The American people are going need to come to grips with replacing the current health insurance-based system with either a government or non-profit lead healthcare system.? The current Health Insurance model has overwhelmingly demonstrated that it’s flawed for an aging America. Having either a government or non-profit transparent healthcare system would be a truly win-win situation for the American people and the people who server in the health care industry.