The End of Health Insurance Companies

By EZEKIEL J. EMANUEL and JEFFREY B. LIEBMAN
NYT

Here’s a bold prediction for the new year. By 2020, the American health insurance industry will be extinct. Insurance companies will be replaced by accountable care organizations — groups of doctors, hospitals and other health care providers who come together to provide the full range of medical care for patients.

Already, most insurance companies barely function as insurers. Most non-elderly Americans — or 60 percent of Americans with employer-provided health insurance — work for companies that are self-insured. In these cases it is the employer, not the insurance company, that assumes most of the risk of paying for the medical care of employees and their families. All that insurance companies do is process billing claims.

For individuals and small businesses, health insurance companies usually do provide insurance; they take a premium and assume financial responsibility for paying the bills. But the amount of risk sharing that is accomplished is limited because the insurers charge premiums that vary, depending on the health of an individual or a group of employees, and use their data and market power to identify healthy people to cover and unhealthy people to exclude from coverage. (The health care law’s total ban on exclusions for pre-existing conditions will begin in 2014.)

A new system is on its way, one that will make insurance companies unnecessary.

Many health insurance companies also impose barriers — like requiring prior authorization for tests and treatments and denying payment for covered services, which forces patients to appeal — to discourage patients from using the medical services for which they are insured and to attempt to avoid paying for those services. While these barriers can reduce waste by preventing unnecessary care, they can also discourage patients from receiving care they need, as well as impose administrative burdens on doctors and patients.

(More here.)