Health Insurance: The elephant in the (waiting) room

Health insurance is the worst and most expensive it's ever been

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Credit: 401kcalculator.org

The perils of owning a business are many. Among the biggest challenges is health care for principals and employees. This is a bit off topic for a tech blog but I am shocked at how little the current state of health care has been discussed since the major plan changes following the affordable care act. Health insurance today is the worst and most expensive it's ever been and no one is talking about it.

My company, which operates in New York state, was part of the first wave of restructured plans back in October 2014. At the time I spent weeks studying all of the options, carefully calculating the true cost of each plan being offered. The conclusion was always the same, we're being screwed.

Now, half way through 2015, more people are starting to become aware and affected by the new plan structures as more open enrollment dates occur. Finally after all of these months other people I know understand what I've been complaining about for the past year and are coming to the same conclusion, but still, nobody seems to talk about it.

In a typical year for a healthy person, you will pay for both your insurance premium and all of your medical expenses out of your own pocket

My problem is not with the affordable care act per se, it's with the insurance companies who took the opportunity to alter all of their plans at the same time and blame it on the affordable care act. Under the new plans, fewer services are covered and almost no services are paid for until you've covered your entire year's deductible out of pocket. That means in a typical year for a healthy person, you will pay for both your insurance premium and all of your medical expenses out of your own pocket while the insurance company pays almost nothing (they do generally cover immunizations and some preventative care).

Trickery

One of the tricks being used by the insurance companies to mask the reality is to make the terms of each plan so complicated that you can't decipher exactly what the trade-offs are for each of them. Network A, Network B, Copay, Coinsurance, In network, out-of-net, specialist, HSA, and so on. After doing the math on every option, I came to the conclusion that they are all going to end up costing about the same for a family of 4. If you choose the most expensive plans which allow for either a traditional copay at the time of visit, or no copay, the monthly premium is increased by nearly the same amount as the deductible of a less expensive plan, making it a wash if you use it at all. 

For example, a set of family plans I have in front of me:

Platinum: $1447.57/mo. (No deductible, $10/visit)

Silver: $1051.82/mo. ($3,000 deductible then $30/visit)
$3000 / 12 = $250/mo. + $1051.82 = $1301.82/mo.

Bronze: $863.75/mo ($7,000 deductible then 30% of all bills)
$7000 / 12 = $583.33/mo. + $863.75 = $1447.08/mo.

Not quite the same amount, but the copays after the deductible are higher for everything so you can easily reach or exceed the Platinum rate with the Silver plan. The Bronze plan, while relatively attractive due to its lower premium, is the worst deal here but is great for the insurance companies long term. There are of course many more options than these to muddy the waters.

I spoke to our health care representative about the options available to us and how I felt that all of them were far worse than any plan we've had to date - and to my surprise she agreed. She told me that there was basically no good choice we could make and blamed it on the affordable care act. What makes this even worse if you're a business owner (in New York anyway) is that you have to pay for your health insurance post tax! That means your insurance premium is even higher than everyone else in addition to the normal madness and the fact that you're paying for 100% of the bill. 

Meanwhile profits are soaring for the health care sector. Over the past year, a fund tracking the 13 of the largest providers outperformed the S&P 500 by 42.57%.

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Publicly traded health insurance companies Aetna Inc, Anthem Inc, and Humana Inc have each seen their stock positions rise ~90% over the past year or so and all have increased profit margins by over 30% in Q1 2015, 45% in Aetna's case. The "burden" of Obamacare doesn't seem so bad.

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The True Cost - Your Health

This isn't one big belly ache about insurance companies making money, I'm all about capitalism when it's fair. What makes this unfair is two fold:

1) You have no choice, you're required by federal law to have health insurance. There is no adequate regulation of cost vs. service level.

2) Under the new plan structure, you're punished for going to the doctor. 

I have two small children who have no significant medical issues. My wife has a rare genetic condition with her vision but is otherwise fit, and I am healthy. Previous to these new plans, if my kids were sick, I'd take them to the doctor. If I was sick, I would only go if I needed antibiotics.

With my wife's condition we would see a specialist once a year who would monitor her condition, perform a battery of tests, inform us of the latest research in the field, and assist the doctor in new experiments and studies. There is currently no cure for the condition, but it was helpful to track it and aid in the research.

$18,000/year goes to our insurance provider with a strong chance they pay for almost nothing.

Today, if my kids get sick there is a debate about taking them to the doctor. Is it worth it to pay $100 if one has a fever? Will the pediatrician do anything if you go in? When my 3 year old ate a rubber band and started complaining about stomach pain we tried to have her tough it out for a while. When she continued to complain we brought her to the pediatrician ($100) who did nothing but tell us to go get x-rays ($$$$) which came back fine. When she hurt her ankle a month or two later, same deal. When my 8 month old bonked her head, my wife rushed her to emergency care ($$$$). When it was suspected that I had the flu, I didn't want to go see anyone but had to due to the baby which could cascade into more cost. Even though I pay over $15,000/year for insurance, none of this stuff, including prescriptions, is covered until I've paid $3,000 out of pocket for the year. 

Knowing that there is no cure for my wife's eye condition, we stopped seeing a doctor for it. When she went in to her normal eye doctor for new glasses, something that traditionally is covered once a year, she found that the coverage was reduced to $5 for the visit. Seriously. $400 out of pocket later she had her exam and new lenses and glasses. Not really an optional expense. We now let her degenerative condition go unchecked and can no longer contribute to the research.

Everything I just described is pretty routine. $18,000/year goes to our insurance provider with a strong chance they pay for almost nothing. Speaking to my friends and family recently, their employer provided coverage has shifted to this model as well, resulting in crippling costs and reluctance to seek medical care.

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Comparisons and Perspective

We purchase health insurance to protect ourselves and our families from a serious accident or medical condition. In the worst cases, insurance will be a lifesaver. In the more common case, it will stretch insurance provider profits into the tens of billions per year. Comparing health insurance to other types of insurance shows just how large the gap in cost vs. benefit is.

My car insurance is $74/month and gives me $50,000 in personal injury protection, $50,000 in bodily injury or property damage protection, and even $50,000 in uninsured driver coverage. The uninsured driver coverage is basically a subsidy in the same way that the affordable care act subsidizes health care for those that can't afford it - a primary reason for rate hikes by insurance providers. All of that for $74/month.

My homeowners insurance is $110/month for $1,000,000 in coverage which includes $100,000 toward personal injury. And they actually pay out claims.

I have a $500,000 life insurance policy that costs $38/month.

Health + Dental: $1,600/month (with deductible)

Reform

Health insurance has always been expensive but it used to be something I didn't worry about. I knew that as long as I had it, I would pay a small co-pay and I would be covered. We'd go to the doctor when we were sick, we'd get emergency treatment when we broke something, we'd monitor our unavoidable conditions - we'd take our kids in routinely. Now we avoid the doctor whenever possible and deal with multiple weeks of whatever new illness the kids bring home from daycare.

When you have health insurance and you can't afford to go to the doctor, something is broken.

If purchasing health insurance is mandatory at the federal level, shouldn't oversight be a priority as well? Insurance companies should have a maximum level of profit they're able to attain before they need to issue refunds or adjust rates.  I don't mind kicking in to help subsidize those who can't afford insurance, but if I have to pay more, I don't want it to be for record profits at some insurance company. 

Health care has lost it's intended purpose. It's no longer about promoting health and preventative maintenance. It's about maximizing profit and keeping the marginally ill away from seeking medical attention. On the care provider side (hospitals, pediatricians etc.) It's about bringing in the high dollar patients, not an infant with a 105 fever or a woman with an incurable condition. 

The jarring change across the board for every plan at every insurance provider we have to choose from at the same time reeks of collusion. And we have no choice but to pay an amount similar to a mortgage payment each month for the privilege of not going to the doctor.

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