Health Insurance Analysis

Introduction

The ability to access quality healthcare is linked to the amount of money that one can spare to access this healthcare. To many individuals the best way to have access is through taking on a medical cover from an insurance broker. The advantage of this method is that one is sufficiently covered in the event of an unplanned illness that has the capability of draining one’s resources dry. However, not many Americans can seamlessly meet their insurance premium rates mainly due to a combination of different factors that impede on the ability to make payments. Such factors include unemployment, lack of enough resources, and refusal by insurers to cover them due to existing medical conditions or the continual increase in premium rates that have pushed many away from insurance. Take the state of California for instance, out of a total state population of 36 million, the number of the uninsured stands at 18.45% with the amount projected to rise by the next fiscal year.

The number for those under HMO plans is even lower at 15.7 million residents. The advantages of insurance can clearly be seen when one considers the average annual inpatient rates for a premium sponsored employee that costs $741. On the contrast, the average annual inpatient expenditure for an uninsured California resident stands at $2,250 for the same treatment plan. However, the fact that many California residents are increasingly lacking the capability to meet premium payments means that the cost of medical cover for the average California resident will continue to rise. This paper looks into the how a major insurer operating in California, the American National Insurance Company (ANICO), is trying to address the current challenges facing the sector in the state. These challenges are further compounded by the nation’s increasing loss of faith in insurance with the average California resident rating insurers at 3.7/5 for their services (eHealthInsurance, 2012).

Insurance firm

The American National Insurance Company (ANICO) is one of the major players in the insurance sector in the US and operated under the American National Family of Companies. The company operates in 50 states in America plus Washington D.C. and other American territories such as Puerto Rico (ANICO, 2012). By the end of the fiscal year 2011/2012, the company employed over 3,000 employees throughout the country. By 2011, the insurer had a net asset base of over $17 billion generated revenue of over $2.1 billion and had an equity base in excess of $3.3 billion (American National, 2011). ANICO does not only specialize in health insurance, but also has significant interests in other forms of insurance ranging from motor vehicle, property insurance, life insurance, reinsurance among others. In health insurance, ANICO provides group, personal or a mixture of both group and personal insurance.

Similar to other insurance companies operating in California, the health insurance wing of the firm faces the challenge of holding on to their premium holders. The reason for this stems from the fact that the increased financial difficulties have seen many employers cut down on employees, which has consequently meant less policy holders (American National, 2011). The same has also resulted as a result of the increasing unemployment rate in the state of California similar to other parts of the country. Lack of income generating activities by the policy holders has seen many of those with insurance fail to honor their premium payments. This environment of economic gloom and rising unemployment rates has also meant that the ability to attract new policy holders by insurance firms has greatly diminished. Another challenge insurers are facing is that of trying to convince potential clients to forego other economic demands for insurance policies (ANICO, 2012). This is especially difficult given that many individuals do not rank getting insurance covers at the pinnacle of the needs, instead the little money that they have has been ear marked for more urgent needs such as mortgage payments.

In order to rejuvenate interest in insurance products, ANICO has tried to come up with more attractive products that are aimed at attracting more individuals. The insurer is trying to restructure its premium rates payment plan from the normal monthly rates to include weekly payments. By doing this, the insurer aims to make the payment of premiums to become less of a burden by giving its customers a more user friendly and flexible plan (American National, 2011).

The other alternative has been to offer custom insurance products such as insurance for outpatient services only. This has been instrumental in attracting those who feel that they waste their resources by paying full cover prices for services that they feel they do not require. Other products include offering temporary insurance to employers who do not have permanent staff or who sparingly use their staff. This has been instrumental in tapping those employers who feel that labor requirements that require employers to provide employees with cover as simply being an unwarranted expense. By offering such an alternative, cover can only be provided for the duration in which an employee is in at work place as opposed to a blanket cover that may include additional cover for the family of the employee.

Proposals

My proposal for the health insurance providers is to go a step further by offering more flexible premium rates payments. In the face of diminishing profitability by insurance firms such as ANICO, what is needed is a total rebranding of the insurance packages (Quick Facts, 2012). For one, the ANICO can opt to let their policy holders to essentially determine what they are willing to pay as premiums. Based on what each consumer is willing to put forward as premiums, the firm can then have its actuaries calculate the amount of claims that each one is entitled to. The advantage of such a proposal is that even for those who are heavily constrained financially, they can still be able to get themselves a cover (Harris, 2005). The cover may not be as comprehensive or offer as much in terms of compensation but the fact that it will become affordable to the vast majority of individuals makes it an attractive option. The insurance company can also greatly benefit due to the large pull of the insured that will translate into more turnover for them (Raffel, 2007).

In order to give insurance companies an incentive to lower insurance costs, the government can choose to stand in and meet certain costs of treatment. Among the things that make insurance to be expensive are the costs of treatment, drugs and inpatient services (Harris, 2005). My proposal is that insurers can only choose to cover a specific aspect, say the treatment and consultation fees, while the government handles inpatient charges. Depending on the overall cost of medication, the patient may be required to cover the pharmaceutical charges if they are not very high. However, in instances when the cost of medication is too high, then the government may step in to provide this medication at subsidized rates. The other alternative is that the government steps in to pay or at least cover part of the costs for those preexisting conditions that insurers are skeptical to cover. This will not only increase the number of persons covered by health insurance but also help those suffering from medical conditions that without such help would probably be written off (Raffel, 2007).

The other proposal to ensure that health insurance is available to the majority is outright regulation by the government. The insurance sector has long been accused of not necessarily having the interests of the public at hand but rather of harboring their own selfish financial needs (Raffel, 2007). In order to guarantee that priority is given towards offering affordable products, the government can choose to introduce maximum limits as to how much they should charge for premiums. Although such a technique may sound draconian and in contravention to the principles of capitalism, the reality is that government should do whatever it takes so as to guarantee access to healthcare. In case such a measure seams too drastic, another alternative would be to give insurance firms tax breaks and subsidies based on the number of persons that they cover. The allure of the financial incentives will encourage insurers to come up with more competitive products at more affordable prices and thus ultimately end up covering more persons (Harris, 2005).

Conclusion

Every citizen is entitled to have access to quality healthcare and this should be irrespective of financial ability or lack thereof (Raffel, 2007). The reality however is that financial and economic challenges are greatly compromising the access to quality healthcare due to lack of health insurance coverage. The cost of medical care has consequently risen over the past few years forcing insurance firms to adjust their costs accordingly. Persons are no longer able to get coverage due to the inability to pay insurance premiums. In the face of such challenges, insurance firms such as ANICO are increasingly recording poor fiscal results (American National, 2011). The alternative has been to come up with innovative solutions such as offering new packages and adjusting premium flexibility. However, my proposals if enacted to the letter have a chance to improve on the fortunes of both the insurers and the insured. By involving government more into healthcare, the costs of care will inevitably go down while regulation of the insurance sector will undoubtedly have an impact on the amount charged on premiums.