Abstract
Chapter 4 describes the demand for, and consumption of, insurance by different groups in the health economy. This chapter describes the supply of, and production of, health insurance by different groups in the health economy. The chapter begins with an examination of the supply functions for health insurance markets. Markets have a supply side that responds to consumer demand for a product. The quantity of any good supplied is a function of price—producers supply more at higher prices. Suppliers also have a “willingness to accept” in that there is a minimum price they will set for any good. In the context of health insurance, the key decisions of suppliers is whether to bundle the two services health insurance provides—risk management and third-party payment. The chapter then describes the role of four different types of health insurance suppliers: health insurance companies, healthcare providers, employers, and governments. Health insurance companies produce health insurance as their primary purpose. They also supply a number of different groups, including individuals, providers, employers, and government. Health insurance companies are also diverse in terms of their organization form, size, and geographic scope. Healthcare providers are also discussed as an important provider of health insurance. Healthcare providers were responsible for some of the original forms of insurance, such as prepaid hospital coverage, and they continue to provide significant healthcare risk management services to individuals and health insurers. Finally, two of the groups that demand group health insurance, employers and governments, are considered as health insurance producers. Both employers and governments can choose to provide health insurance directly rather than purchase insurance from a health insurance company. In practice, many employer and government plans choose to provide risk management directly while outsourcing third-party payment services to health insurance companies. The choice of whether to be a health insurance producer or consumer motivates the study of matching supply and demand, which is the subject of Chap. 6.
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- 1.
Some of the systems that exist do have intellectual protection. For example, the Current Procedural Terminology (CPT) code system that is used as the basis for reimbursement for outpatient and physician services is owned and copyrighted by the American Medical Association (AMA). Ownership of this system is both lucrative for the AMA and a mechanism by which the AMA’s physician members exercise substantial influence over the reimbursement system (Roy 2011).
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- 3.
As of the time of this writing, Aetna and Humana merging, as are Anthem and Cigna and Centene and HealthNet (von Ebers 2016).
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Lieberthal, R.D. (2016). Producing Health Insurance. In: What Is Health Insurance (Good) For?. Springer, Cham. https://doi.org/10.1007/978-3-319-43796-5_5
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