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SELECTING HEALTH CARE SERVICES: EARLY PRIVATE HEALTH INSURANCE
Our current health system began in the past century and its growth accelerated in the post-World War II era to its current massive, complex web. Hospitals became the engines of medicine during the middle of the twentieth century. Doctors became the drivers or conductors of this rapidly moving system. The system was fueled by a variety of funding sources but, chiefly, first by the growth of tax-exempt nonprofit private insurance companies established in the 1940s and later by the growth of for-profit insurance companies.
Health insurance originally consisted solely of coverage for hospital costs (it was called major medical), but gradually coverage was extended to routine physicians\' treatment and to other areas such as dental services and pharmaceuticals. Payment mechanisms used until recently laid the groundwork for the ever-rising health care costs of today. Hospitals were reimbursed on a cost-plus basis after services were rendered. That is, they billed for the costs of providing care plus an amount for profit. This system provided no incentive to contain costs, limit the number of procedures, or curtail capital investment in redundant equipment and facilities. Physicians were reimbursed on a fee-for-service (indemnity) basis determined by \"usual, customary, and reasonable\" fees. These were arrived at by comparing what a doctor charged for a service with what that same doctor charged last year for the service and with what other doctors in the area were charging. This system encouraged doctors to charge high fees, to raise them often, and to perform as many procedures or services as possible. At the same time, because most insurance did not cover routine or preventive services, consumers were encouraged to use hospitals whenever possible (the coverage was better) and to wait until illness developed to seek care instead of seeking preventive care. Consumers were also free to choose any provider or service they wished, including even inappropriate - and often very expensive - levels of care.
Private insurance companies have increasingly employed several mechanisms to control consumers\' use of insurance and to limit the companies\' potential losses. These mechanisms include cost-sharing (in the form of deductibles, copayments, and coinsurance), exclusions, \"preexisting condition\" clauses, waiting periods, and upper limits on payments. Deductibles are front-end payments that you must make to your provider before your insurance company will start paying for any services you use. Copayments are set amounts that you pay per service received regardless of the cost of the services. Coinsurance is the percentage of the bill that you must pay throughout the course of treatment (e.g., 20 percent of whatever the total is). Preexisting condition clauses limit the insurance company\'s liability for medical conditions that a consumer had before obtaining insurance coverage (i.e., the insurance company will cover everything except \"normal pregnancy\" for a woman who takes out coverage when she is pregnant; however, pregnancy complications and infant care are covered). Because many insurance companies use a combination of these mechanisms, keeping track of the portion of costs you are responsible for can become very difficult.
Group plans of large employers (government agencies, school districts, or corporations, for example) generally do not have preexisting condition clauses in their plans. But smaller group plans (a group may be as small as two) often do. Some plans will never cover services for preexisting conditions, while others specify a waiting period (such as six months) before they will provide coverage. All insurers set some limits on the types of services they will cover (e.g., most exclude cosmetic surgery, private rooms, and experimental procedures). Some insurance plans may also include an upper or lifetime limit, after which coverage will end. Although 250,000 dollars may seem like an enormous sum, medical bills for a sick child or chronic disease can easily run this high within a few years.
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GENERAL HEALTH
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