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Administrative costs: the price of giving consumers more choice

Private health insurance expenses not related to direct care services continue to rise, according to the Kaiser Family Foundation. "From 1999 to 2002, the most recent four-year period reported, administrative cost per enrollee rose 52 percent," the foundation says in its report, Trends and Indicators in the Changing Health Care Marketplace, 2004 Update.

While the government information reported in this document gives pause, John Sheils, vice president of the Lewin Group, says that backers of private health insurance shouldn't get too distraught. Administrative costs buy what people want: choice.

"We love having options," he told Managed Care magazine last year. "So I think it would be a mistake to simply dismiss higher administrative costs on the grounds of inefficiency or adding nothing of value. They enable choice, and that's important."


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