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There is a belief that insurance companies should compete across state lines because increased competition will result in lower prices. This may be true to some degree, but the increased competition between insurance companies will not address the basic problem.

The cost of health care drives the cost of health insurance. Insurance company profits are not the primary problem. Competition may or may not lower the profit each insurance company makes per policy, but even if profit were eliminated we would still have health insurance policies that cost too much.

EveryInsuranceDiscount.com offers a interesting spin to increase competition amongst insurance carriers. A free online insurance quote tool. A search model similar to Lending Tree. The Insurance Tool allows online allows online insurance shoppers to compare up to 7 free quotes to find the best insurance discounts online.

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Would we end this crisis if health insurance prices went down 5% and everything else stayed the same? In fact, 5% is a lot more than many companies make per policy.

Of course large insurance carriers make tons of money because of their volume. However, when you divide that profit by the number of policies you will have a pretty modest figure. You would have a figure that will have little impact on the national health care crisis

Increased competition isn’t necessarily a bad thing, but it could have unintended consequences. It could temporarily drive prices down for those who buy new policies but drive prices up for those who stay with their old plan.

Let’s talk about a fictional state where there is only one insurance company. This insurance company has a monopoly, but it is also regulated. 80% of the money it takes in has to be paid for providers of medical services such as doctors, hospitals and pharmacies.

This means that they can only overcharge by some figure that is less than 20%. Remember they are spending 80% to care for their policyholders. Out of the 20% come all other costs including payroll, real estate costs, administration, paperclips and everything else.

Let’s call this company “The Old Insurance Company.” The Old Insurance Company sells one policy series and has 100 policyholders who have no dependents. Each policy costs $100 a month. This means that the company pays an average of $80 per person per month.

“The New Health Insurance Company” can provide the same level of coverage for $60 a month while spending $48 to care for their policy holders. Why is this?

Ten of “The Old Insurance Company” policy holders are very ill and are responsible for most of their carrier’s expenses. “The New Health Insurance Company” won’t have to deal with that level of expenses for several years. They will have plenty of time to raise their rates before their expenses climb.

This is not because of the age of the policyholders, it is based on the age of their underwriting. Virtually no one has a heart attack or a stroke within one year of buying an underwritten policy.

The old company has clients in their fifties and sixties who were perfectly healthy when they applied in their twenties and thirties, but who now are very ill. They will not be able to lower their prices to compete with the new company.

“The New Health Insurance Company” will selectively take on new clients. It won’t take the unhealthy costly clients from “The Health Insurance Company,” but it will happily take on the healthy ones who want to get a competitive health insurance plan. This will drive The Health Insurance Company’s prices up as they spread the cost of the unhealthy policy holders over a smaller number of policy holders. It could even force them out of business and thereby eliminate the only company willing to insure their unhealthy clients!

I know what you are thinking. We should force the new company to insure everyone regardless of their medical history. This won’t work. If we keep the new company from cherry picking that will open up an entirely new can of worms that I will discuss on another post.

Tweaking our present system won’t work. It might make things a little better, but we still have a crisis.

Health Insurance Options After Losing Your Job

If you were a full-time employee, chances are health insurance was one of the benefits available to you. If you chose to take advantage of this benefit, you probably understand that it can be a pretty important benefit to have. While you paid a portion of the premium, it is usually much less than you would have to pay on your own since your employer typically splits the cost.

But what happens when you lose your job or decide to retire before Medicare kicks in? For many people, this can be a big problem. Most people will have the following options to consider:

• Enroll in your spouse’s plan if married.
• Utilize COBRA coverage.
• Find and compare health plans.
• Seek early-retiree coverage if available.

Compare Popular Health Insurance Plans Online

If you worked for an employer that offered health benefits, when you decide to retire early or lose your job, it becomes quickly apparent how valuable that benefit was. Generally, when an employer offers health insurance coverage, the premium costs are split between you and the employer. Whether it is $20 or $300 per paycheck, you’re generally only paying a portion of the total premium in a large group plan. So, what happens when you are no longer employed and eligible for these benefits?

Your Options for Coverage

When you terminate service with your employer, regardless of whether or not it is voluntary, you probably won’t be able to remain on the employer’s group plan unless the termination comes with some sort of severance package. Even then, the duration of coverage is typically limited to a few months.

Your first option, if you’re married, is to check with your spouse’s employer to see what type of health coverage is available. Typically the employer-sponsored group plans will be the most affordable, so that should be your first resource. If that isn’t an option, you should also check with any associations or professional organizations that you or your spouse may be a part of as they can sometimes offer group plans.

Under the Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA), most employers are required to provide continuing coverage through their plan that can last for up to 18 months, or in some special cases, as long as 36 months. With COBRA you are required to pay the entire premium for the group policy plus any administrative costs.

For example, if you were paying a $50 premium for your health benefits bi-weekly, and your employer was paying the remaining $100 of the premium–under COBRA you would be required to pay around $150 every two weeks, or about $300 per month to continue that coverage.

Finally, if you aren’t eligible for COBRA or would like to explore other alternatives, you can explore individual health insurance policies. Unfortunately, individual policies can be expensive, and they may require a physical examination and may not cover preexisting conditions which would be covered by a group plan.