Read the full memo, CAP Action
The federal government projects that Americans will spend over $2.5 trillion on health care in 2009 alone; roughly $100 billion of this goes to the cost of administering private insurance. And nowhere are those costs higher than in the individual market—that is, when people purchase coverage directly through the insurer and not through an employer.
There are a variety of reasons why the individual market is more expensive, including that insurers screen those applying for individual insurance to make sure they are a “good risk.” In other words, the insurers spend a significant amount of money to insure only the healthiest people. Sometimes called the nongroup market, more than 14 million Americans get their health coverage on the individual market.
Health reform is an opportunity to drastically reduce administrative costs in the individual market. Progressives have called for health reform where all individuals would be able to purchase coverage through an exchange in which individuals could be pooled together to purchase insurance through a common marketplace. This could greatly reduce—if not eliminate—the individual market’s extra costs. In fact, the Center for American Progress Action Fund projects that it is possible to reduce health care administrative spending by more than $3.0 billion in 2009 and more than $40 billion over 10 years if all Americans had the option—and chose to—purchase coverage through a group market, such as an exchange or an employer.
Read the full memo, CAP Action