SIC 6321 Accident and Health Insurance
SIC 6321
This category covers establishments primarily engaged in underwriting accident and health insurance. This industry includes establishments that provide health insurance protection for disability income losses and medical expense coverage on an indemnity basis. These establishments are operated by enterprises that may be owned by stockholders, policyholders, or other carriers. Establishments primarily engaged in providing hospital, medical, and other health services on a service basis or combination of service and indemnity bases are classified in SIC 6324: Hospital and Medical Service Plans.
524114
Direct Health and Medical Insurance Carriers
525190
Other Insurance and Employee Benefit Funds
524130
Reinsurance Carriers
In 2004, health care spending in the United States totaled an estimated $1.8 trillion, of which about 55 percent was private sector expenses. In the mid-2000s, more than 15 percent of the gross domestic product was dedicated to health care expenses, more than four times the amount spent on national defense. Decidedly, health care insurance is big business. More than 1,000 U.S. companies provided accident and health insurance in the United States in the mid-2000s, writing roughly $1.8 trillion in premiums. As the first Baby Boomers age into retirement, the need for health care services is expected to rise through the 2000s and beyond.
The health care costs, however, were spiraling out of control during the first half of the 2000s, and the number of insured workers fell by an estimated 5 million—likely due to the withdrawal of small businesses who could no longer afford health insurance plans for employees. At the forefront of the political agenda, Congress either had enacted or was reviewing numerous reform efforts to contain costs and provide a solution to a rapidly growing problem. Insurance companies, rebounding from the economic recession of the early 2000s, continued to look for new ways to expand their customer basis and remain competitive in the marketplace.
Accident and health insurance is provided on an indemnity basis by commercial carriers and Blue Cross & Blue Shield plans. Under indemnity insurance, the insurer pays the insured directly for any hospital or physician costs for which the insured is covered. Other providers of accident/health insurance include specialty health insurers, self-funded employer plans, and government plans. The accident and health line consists of the following categories: group, credit, collectively renewable, non-cancelable, guaranteed renewable, nonrenewable, and other individual health and accident lines.
Accident/health insurance companies may also provide service plans in connection with health care providers. Insurance companies arrange to pay health care providers for any service for which an enrollee has coverage. Under the service plan, the insurance company effectively agrees to provide the insured with health care services, rather than reimbursement dollars. Service plans offer the advantages of reduced paperwork and less financial liability for the insured.
In addition to voluntary insurance, a second type of private health insurance is managed care. Managed care plans, or prepaid health plans, increased in popularity during the 1980s and the 1990s. By the mid-1990s, managed care plans had proven their ability to control medical costs more effectively than traditional fee-for-service insurance plans. Under a managed care plan, a person can enroll in an organization that charges a monthly fee. In return for this monthly fee, the enrollee receives access to health care services from the organization. Organizations that offer such prepaid plans include Health Maintenance Organizations (HMOs), Preferred Provider Organizations (PPOs), and Exclusive Provider Organizations.
Accident and health insurance, like other lines of insurance, serves to spread the consequences of a loss that would normally fall upon a single individual over the members of a large group. It also ensures that health care providers will be paid for services that an uninsured individual would otherwise not be able to afford.
Although the concept of insurance dates back more than 2000 years, the first form of health insurance in the United States can be traced back to the 1800s, when merchant seamen paid a modest premium to obtain health care as they traveled from port to port. Health insurance as it is known today, however, is a relatively new concept that has its roots in the Great Depression of the 1930s.
The most popular form of health insurance is major medical expense protection, which insures a person for a maximum amount of loss. The insured pays a deductible, usually $100 to $500. This plan of insurance is favored because it protects against catastrophic losses yet avoids administrative burdens associated with smaller claims below the deductible amount. Critics of this type of insurance, though, believe it discourages preventive treatment and encourages inflation of health costs.
It is only since the 1960s that the accident/health industry has grown massively in proportion to other types of insurance. One of the greatest reasons for the explosion in the popularity of health insurance during this time has been the increase in benefits offered by employers.
After World War II, health insurance became a popular benefit for employees. Health insurance premiums were, and remained in the early 1990s, tax-deductible to the employer and were not taxable to the employee. Therefore, it became a cost-effective form of compensation. Also, as unions began to find it more difficult to gain wage increases for their members, health care benefits became an increasingly popular bargaining tool.
One of the primary reasons for the growth of the accident/health insurance industry was the advent in the 1970s of modified agreements that shifted a greater amount of health care risk to the employers that offered employee insurance plans. Under these agreements insurers, employees, and health...
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