Funny Logic
In Colorado, there is underwritten health insurance and there is guaranteed issue health insurance. Underwritten health insurance has a much lower cost structure because they aren’t covering pre-existing conditions at all or without covering the cost with a premium increase, so it costs much less if you can qualify for it. Employers that are paying for their employees health insurance are required to purchase non-underwritten (guarantee issue) health insurance so they won’t be tempted to discriminate hiring based on health conditions.
Because underwritten (individual/family) health insurance is so much less expensive, it’s the best choice for self-employed people who can qualify. But self employed people who don’t qualify because they have health conditions have the option of getting a business group of one policy (BGO1). But (usually) only people with expensive health conditions sign up for a BGO1 because there is such a difference in price. This makes these types of plans very expensive when all of the people insured on them are using the heck out of the benefits.
Well, I had a client call this morning to sign up for a BGO1. I happened to ask her what her health conditions were that she needed this type of policy. She said they were perfectly healthy, but they get a BGO1 because they can deduct the premiums. (They are a corporation, so they can’t deduct individual health insurance premiums) And it’s such a big deduction that they can’t justify not having a BGO1.
Even after I showed her that an underwritten policy would cost around $270/month and a similar BGO1 would cost around $740/month, she couldn’t stand losing that deduction. She even said her accountant gave her this advice. I bet he also tells her not to pay off her mortgage early because a mortgage is a good deduction.
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The small group tier rating has actually caused increased premiums for small groups. The healthy discount band ratings are actually a sham used to increase premiums on insurance rates. I had Anthem BCBS HMO as a BG1, before this policy took effect. I paid $270 a month. For the first year that this law went into effect, Anthem then raised the standard basis rate to some ridiculous level, and I kept the exact same plan and did NOT have a change in age. They still increased my rates 15 percent to $327 and told me that I was getting a ten percent discount for being a “healthy” member. What Anthem actually did, was offer ZERO discounts compared to the previous year, and then raise my rates by 15 percent. For those deemed unhealthy, their rates would have been raised as much as 40 percent. There should only be standard rates that apply to everyone; otherwise, these insurance companies will use the fact that you visited a doctor a few times during the year as an excuse to level you with outrageous rate increases.