Healthcare Insurance - Essay Example

Healthcare Insurance Healthcare Insurance Factors influencing demand for health insurance As Schneider (2004) opines, two fundamental factors influencing the demand for health insurance are ‘uncertainty’ and ‘risk aversion.’ Today, various chronic diseases like diabetes and emergence of new diseases are on the rise. Most of those risks can have serious and far reaching impacts on people’s health. Admittedly, people today are really concerned about their health risks. Despite the recent federal healthcare reform, drug costs are mounting and this situation imposes huge burden on ordinary people, particularly uninsured individuals.

In order to manage the growing uncertainty regarding future health risks effectively, people increasingly choose health insurance. They believe that healthcare insurance would assist them to minimize future health expenses to a great extent. As Cameron and McCallum (1995) point out, ‘income’ is the major potential element determining the demand for health insurance. It seems that low and high income groups are less likely to purchase health insurance. Low income groups may not have potential financial background to purchase health insurance whereas high income groups are reluctant to buy insurance due to increased tariffs.

Price of the insurance and tax treatment of insurance are the other important factors affecting demand for health insurance (Avitabile, 2009). When the price of the insurance increases, the demand decreases, and once the price of the insurance drops the demand increases. The same trend is observed in case of tax treatment also. If the government or other competitive organizations adopt a strict approach towards tax treatment, the demand for insurance falls. In contrast, if the healthcare insurance is offered at concessional tax rates, more people will be ready to purchase it.

This is a clear illustration of law of demand. It is also identified that healthcare expenditure may be a crucial element influencing the demand for insurance. Middle income groups may consider their past health expenditure data before making an insurance purchase decision. Finally, age also affects the demand for healthcare insurance. As compared to old aged people, youngsters are less likely to purchase healthcare insurance as they believe that they are less vulnerable to diseases.Evolution of health insurance market in USIn the late XIX century, health insurance began to be available in the form of accident insurance in the United States (Obringer & Jeffries, n.d.).

The trend continued until the end of the XIX century, and regulators considered health insurance as disability insurance. Before the US federal government introduced the medical expense insurance, people had been expected to pay health expenses out of their own pockets. This system was known as fee for service business model. The traditional disability insurance was gradually transferred into modern health insurance programs during the middle to late XX century. By the beginning of the XXI century, large number of private insurance providers entered the US health market.

Most of the private insurance companies offered comprehensive insurance coverage programs but at higher costs. In order to save people from the excessive exploitation of private insurers and to provide them with affordable insurance packages, President Obama enacted the Health Care and Education Reconciliation Act of 2010 (The White House). This law greatly changed people’s attitude towards governmental health insurance, and today majority of the people are protected by this government sponsored healthcare insurance system.

ReferencesAvitabile, C. (2009). The health insurance puzzle in Europe: The role of information. CSEF. Retrieved from http://eprints.ucl.ac.uk/18804/1/18804.pdfCameron, A. C., & McCallum, J. (1995). Private health insurance choice in Australia: The role of long term utilization of health services. Retrieved from http://cameron.econ.ucdavis.edu/research/EH95preprint.pdfObringer, L. A., & Jeffries, M. (n. d.). Understanding health insurance. TLC. Retrieved from http://tlc.howstuffworks.com/family/health-insurance1.

htmSchneider, P. (2004). Why should the poor insure? Theories of decision-making in the context of health insurance. Health Policy and Planning 19(6), 349-355. Retrieved from http://www.microfinancegateway.org/gm/document-1.9.30242/51207_file_Why_Should_the_Poor_Insure_Theories_of_Decision_making_in_the_Context_of_Health_Insurance.pdfThe White House. President Obama Signs Historic Health Care and Education Legislation. Retrieved from http://www.whitehouse.gov/the-press-office/president-obama-signs-historic-health-care-and-education-legislation