How many people are employed in the health insurance …

  • Q: How many people are employed in the health insurance industry in the United States? Would all of these people be displaced if a single payer system were to be enacted in the US?

    The entire insurance industry currently employs well over 2.2 million people.

    (Insurance Carriers and Related Activities: NAICS 524)

    It would be safe to assume that the health insurance industry (which is relatively labor intensive due to the quantity and complexity of health insurance claims) would be about 30% of this number, or about 660,000.

    if we opted for a single-payer system, what happens to these people?

    Also, what happens to the investors who have shares in these companies?

    And, oh yeah, insurance companies are also the biggest institutional share holders in mutual funds, mortgage loan portfolios, and the stock market.

    I’m not arguing that this industry (or any industry) should be protected, but only attempting to raise awareness of the potential economic impact of any changes.

    If we’re smart about making changes, there won’t be any impact. In fact, it will probably result in more jobs and major improvements in industry profits.

    If the private insurance industry was used to process claims as contractors for the government, they would be able to make significant revenue on this alone. This is exactly how Medicare Advantage works.

    Medicare pays private insurers to do the heavy lifting (process claims, deal with subscribers and service providers). The insurer gets a fixed amount of money for each subscriber from Medicare, and interfaces with both subscribers and health care providers on its behalf. Neither health care providers or individual subscribers need to file any claims with Medicare

    Contrary to popular opinion, margins in the health insurance industry are pretty thin, after the various internal costs are paid and claims are paid.

    Actually, by changing their business model from that of being the primary insurance carriers to that of providing enhancements to Medicare coverage and processing claims, the insurance companies would probably have better net profits.

    Additional information/Background:

    The current health insurance system in the US is a very complex mix of discount programs, group health insurance (though employers), private individually-purchased health insurance, Medicare, Medicaid, Medicare supplemental, and Medicare Advantage.

    People in the US are currently spending over $3.5 trillion a year for healthcare (insurance + taxes + out of pocket costs). This works out to over $11,000 for every man, woman, and child in the country. This about 40%-50% more than most of the other top 10 developed nations pays.

    Transitioning the cost of insurance from a largely privately-based system over to a publicly-based system is not going to be a small or insignificant challenge.

    People will all end up paying less than they are now, but the hard part will be making the necessary changes without causing a huge disruption.

    We could just just kick all of this in the ass and say that “on day X, it’s all going to be single-payer”, but before we did anything, there would be a ton of details that would need to be handled.

    The biggest “details” are: how much is it going to cost us, and how do we pay for it?

    Getting a national single-payer health insurance system off the ground is going to be expensive—very expensive.

    Just hiring the staff needed to process all of the claims is going to be a huge job.

    320 million people with an average of 12 claims a year per person, would be nearly 4.2 billion clams a year. If each clerical person could process 12 claims an hour (about 100 claims a day, or 24,000 claims per year) it would take at least 175,000 people. Adding in supervisory, administrative, and support staff, we end up needing at least 250,000 people.

    Is is realistic for us to think that we could just hire this many reasonably-qualified staff members over a few months? Seems to me that this is recipe for failure, not success.

    A better plan would be to just model the single payer insurance plan after Medicare Advantage. Companies who are now insurers would be like contractors whose job it is to handle the processing of claims. The government would just pay these private carriers a fixed amount for each subscriber on their rolls.

    Neither the service providers nor the subscribers would have to deal directly with the government to file claims. They would continue to be supported and serviced by private companies. The contracted providers would be responsible for paying claims, sending notices to subscribers, and then getting reimbursed by the government.

    Like the current Medicare Advantage programs, subscribers could get the basic package of benefits for the minimum rate, or subscribers could purchase “enhanced” benefit packages (that reduced co-pays, deductibles, and provided additional areas of coverage) for modest amounts. The private contract carrier would only be financially responsible for the difference between the government-provided coverage benefits and any enhanced coverage so the enhanced coverage could be offered at very reasonable rates.

    To sell single payer to the voting public, Democrats need a comprehensive and detailed transition plan, and we haven’t heard a thing about this from ANY of the Democratic candidates favoring a single payer-system.

    One question that I don’t hear asked (or answered) is what will happen to people who are currently receiving a group health insurance benefit from their employer?

    Employers currently are paying an average of 70% of the cost of group health insurance for their employees and about 40% of the cost for the employee’s dependents.

    I would suggest that if an employer is currently paying for employee group health insurance, the employer would be required to either pay the same amount towards the employee’s single-payer coverage premium or give each employee a raise that is equivalent to the amount that was being paid for group coverage.

    The premiums for the single-payer insurance would need to be subsidized based on annual income. Essentially, the rates would be $0 for those individuals (and their dependents) whose income was below a set level, and subsidies would gradually become smaller as the annual income got higher. The income levels to qualify for subsidies would be adjusted based on geographic location.

    All US citizens and legal alien residents and visitors would be allowed to participate. Illegal aliens would not be eligible for any subsidies, however, and failure to pay for national health insurance could be grounds for deportation (unless doing so would provably put someone’s life at risk).

    There are several reasons why a single-payer national health insurance plan would cost far less.

    Everybody would be required to participate. This drives down costs across the board because with more people participating, we don’t have to pay for those who are under-insured or not insured.

    Universal participation would mean that everybody would be able to get preventive care or timely treatment that is needed to prevent the kind of complications that can cause treatment costs to escalate to unnecessary and unreasonable levels.

    A single payer plan would give the government the ability to use purchasing leverage to drive down costs on services and pharmaceuticals.

    I have some career experience in the health insurance industry and personal experience as a Medicare participant that I can draw on to formulate my opinions, and I really think that the single payer plan (along the lines of Medicare Advantage for all) would definitely be the way to go.

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