Alabama Healthcare Market: Structure, HMOs, and Capitation

Overview of Alabama's Healthcare Delivery Structure

The health sector is an important part of the country's economy. It is estimated that health spending accounts for about 16 percent of the country's GDP (Gross Domestic Product). It is also estimated that health expenditures account for between 25 and 33 percent of some state budgets across the country. Multiple policies and regulations guide the many subsectors within the healthcare sector, and several regulatory authorities oversee various aspects of healthcare delivery. Local, state, and federal governments, as well as private professional associations, all play a role in regulating healthcare delivery.

Alabama's healthcare delivery structure entails the drafting, passing, and implementing of regulations, policies, rules, and laws to manage the state's healthcare system. The system includes services delivered by healthcare workers who prevent illnesses, diagnose and treat conditions, provide mental healthcare, and treat injuries. It also encompasses multiple diverse but related sectors, including health information technology, pharmaceuticals, and insurance. In Alabama, as in many other states, employers have almost always been the largest source of health insurance for individuals. This is partly because employers are granted an income tax exemption when they make payments for their employees' health insurance. Federal and state governments are also a significant source of health insurance, as they jointly provide coverage through Medicaid for individuals with low income. Additionally, the federal government provides health insurance for the disabled and the elderly (Ballotpedia, 2016).

Alabama self-funds all its health plan offerings. This means that instead of purchasing insurance, Alabama pays insurance claims using employee out-of-pocket contributions and state contributions, while an insurer administers the benefits. In 2013, 24 states across the US had health plans with no deductible; Alabama was not among them. With respect to private insurance, individuals obtain coverage either through the individual market — by purchasing their own insurance — or through their employer. Because health costs have risen over the last decade or more, insurance premiums have also increased. Between 2000 and 2014, insurance premiums for plans sponsored by employers — including those sponsored by local and state governments — increased by 144% for individuals and by 161% for families. However, the rate of premium increases has slowed over the last few years (Ballotpedia, 2016).

Competitive Forces in Alabama's Healthcare Market

Competition in healthcare delivery exists in many healthcare systems around the world, though its meaning is not always clear. First, competition in the healthcare sector is not synonymous with service provision by private providers, because competition can also be created among public providers — as is the case within the British National Health Service (NHS) system. In systems such as the NHS, benefits expected from competition — such as better quality and lower costs — were anticipated to arise automatically from providers competing for contracts offered by commissioners or purchasers. Second, private sector providers can be publicly funded and compete with publicly owned providers. Third, price-based competition is not the only form; for instance, when the NHS introduced fixed prices for services, non-price competition focused on care quality emerged. Consumers also stimulate competition by exercising the choice of where to seek care. Fourth, the design of most healthcare systems frequently limits the extent to which competition can exist, as providers often compete for the market rather than for individual patients (Goddard, 2015).

Alabama's healthcare delivery system contains many of the same competitive forces found in other states. The system is characterized primarily by private insurers, with most residents insured through their employers or via private plans they have purchased themselves. Compared to the rest of the nation, the percentage of uninsured people in Alabama is slightly lower. Among age groups in Alabama, those under 19 years of age have the lowest uninsured rate at 4.3%, while among ethnic groups, Hispanics have the highest fraction of uninsured persons at 34.6%. Four of the state's counties — St. Clair, Elmore, Dale, and Blount — require at least ten full-time equivalent (FTE) physicians to achieve optimal access to care. Ensuring that healthcare services are accessible, affordable, and available to everyone in the state would significantly improve Alabama's health outcomes.

Competitive forces are also shaped by efforts to enroll the uninsured population through the Affordable Care Act marketplace. While the ACA should increase the number of insured residents in the state, it will not automatically guarantee increased access to care for everyone (Alabama Public Health, 2018).

Conclusion

Alabama is working to increase access to quality care for all its citizens and to provide better, more affordable health services. All residents of the state need health insurance, and the state offers a comprehensive plan designed to extend coverage to everyone. This is critical because any citizen can fall ill or sustain an injury, which — without insurance — can deplete their savings and limit their access to needed services. Health coverage ensures that all medical bills, both routine and high-cost, are addressed, protecting residents from financial hardship while promoting overall health and well-being.

References

Abduljawad, A., & Al-Assaf, A. (2011). Incentives for better performance in health care. Sultan Qaboos University Medical Journal, 11(2), 201–206.

Alabama Public Health. (2018). Access to care. Retrieved from https://www.alabamapublichealth.gov/healthrankings/access-to-care.html

Alguire, P. (2019). Understanding capitation. Retrieved from https://www.acponline.org/about-acp/about-internal-medicine/career-paths/residency-career-counseling/guidance/understanding-capitation

Ballotpedia. (2016). Healthcare policy in Alabama. Retrieved from https://ballotpedia.org/Healthcare_policy_in_Alabama

Doran, T., Maurer, K., & Ryan, A. (2017). Impact of provider incentives on quality and value of health care. Annual Review of Public Health, 38, 449–465. https://doi.org/10.1146/annurev-publhealth-032315-021457

Goddard, M. (2015). Competition in healthcare: Good, bad, or ugly? International Journal of Health Policy and Management, 4(9), 567–569. DOI: 10.15171/ijhpm.2015.144

Infinity Benefit Solutions. (2020). The advantages and disadvantages of offering HMO insurance. Retrieved from http://infinitybenefitsolutions.biz/the-advantages-and-disadvantages-of-offering-hmo-insurance/