How can we most fairly spread the total cost of care for all Americans across the whole population?  Should sick people pay more than healthy people?  Should overweight people pay more than their slender neighbors?  Should a family with six children pay more than a family with one child?  Should older people pay more than younger people?  Should people with higher incomes pay more for their health care than lower income families?  These are the sort of questions that address the issue of how to fund our current high-priced health care.  And they are a huge part of the reform debate, including all the discussions about mandatory health insurance and guaranteed issue coverage.

But value in health care is another cost issue, and one that I don’t believe has been adequately addressed in the current health care reform bills.  Earlier this year, we had to call a plumber to have some work done in our bathroom.  He did a great job, and our total bill came to $165, including parts.  A week later, our son caught his finger in a door, ending up with a pretty severe cut.  We took him to the emergency room (unfortunately it happened after the lower-priced urgent care center had closed for the evening) where he had an x-ray and got three stitches.  We’ve started to get the EOBs from Humana, and so far the total amount that we’re expecting to be billed is over $1,400 (that’s after the network negotiated discounts, and there are likely more EOBs to follow).

We have an HSA qualified policy with a $5,000 deductible, so we’ll be paying the whole bill for our son’s finger ourselves.  But that’s not really the point.  Regardless of whether a bill is paid by the patient or by the health insurance company, we all need to be asking ourselves whether we’re really getting a good value for our money.  When the average household income in America is just over $50,000 a year, does it make sense for a cut that requires three stitches to cost more than $1,400?  Health care spending in the US is 16% of our GDP, which is dramatically out of proportion with what other countries spend.  And all of those dollars being spent on healthcare aren’t available to be spent on other things like education and quality food and clean energy.

Both the plumber who came to our house and the PA who stitched our son’s finger performed a very necessary service for us.  Both are highly skilled in their areas of expertise, and we’re grateful for the work that they did.  But was the work that the PA did ten times more valuable than that of the plumber?

Perhaps the question we should be asking is not who should be paying for healthcare, but rather, why in the world are we paying so much in the first place?  Health insurance premiums will continue to rise as long as health care costs do the same.  It won’t do any good to try to address premiums without first figuring out why we’re paying so much for our health care in the first place, and doing something about it.

One of the analogies presented says that forcing everyone to carry health insurance would be like a person living in a building with pyromaniacs as neighbors having to pay for fire insurance along with everyone else – with no option to move.  I can see this argument being valid in the case of someone who works for an employer who only offers one health insurance policy to all of the employees.  Premiums in group health insurance plans typically vary by age but not much else.  So a non-smoking employee who exercises six days a week and eats vegetables at every meal will have the same premium as a same-age coworker who smokes and is obese.  The employer will pay part of the premiums, but it’s very common these days for the employees to have part of the premium deducted from their paychecks.  If the employer doesn’t offer any other options (like a higer deductible or an HSA qualified plan), the healthy employee could well become frustrated at paying for benefits she isn’t likely to use.  But it’s quite common for employers to offer a couple different choices, with a lower-cost, higher deductible option for people who don’t think they’ll need much in the way of health care.

I don’t buy the argument that people should be able to opt out completely from health insurance.  Because no matter how healthy we keep ourselves, the unexpected can still happen.  If you’ve chosen to “self-insure” and then you get struck by lightening while walking your dog in the park, who is going to pay your medical bill?  If you’re unconscious at the scene, the paramedics will load you up in the ambulance and take you to the hospital.  Upon arrival there, doctors and nurses will pour their hearts into trying to restart yours.  What if you wake up a few days later in ICU, alive, but very much in debt?  Will you declare bankruptcy, leaving the hospital to write off the bill?  That leads to higher premiums for the people who do carry health insurance, as hospitals charge more to cover their overhead – which includes bad debt.

The fact is, no matter how careful we are, no matter how healthy we keep ourselves, no matter how many veggies we eat and miles we walk, we never really know what is around the bend when it comes to our health.  Accidents can happen to even the healthiest people.  Freak illnesses can strike otherwise healthy people.  And when these situations arise for people who are uninsured, the cost is eventually borne by those who have health insurance.  Yes, the people who take excellent care of themselves are less likely to need medical care.  But less likely doesn’t translate to never.

From a personal perspective, we work hard to keep our family healthy.   Because we know that we’re very unlikely to need our health insurance for illness, we have a high deductible HSA qualified policy.  We’re willing to gamble a bit when it comes to our health care.  If something happens to one of us, we’re on the hook for the first $5000.  And because we know that our chances of needing health care are low, that’s a gamble we’re willing to take.  But our chances of needing healthcare are not zero, no matter how hard we try.  Which is why I consider opting out of health insurance all together to be a bit on the irresponsible side (unless you’re wealthy to the point that a policy that covers $5 million in claims isn’t any better than your own bank account).

Chris’ article was in the Health Wonk Review this week, hosted by Healthcare Technology News.

This is astounding to me.  If we look at all industries, only two show profits greater than 20% for 2007 (network/communication equipment, and mining/crude oil production).  Further down the list we see “Insurance: Life, Health (stock)”, with profits at 10.6% of revenues.  Stick with me here, and click on the life/health insurance industry link, where you’ll see a list of 15 individual companies.  Nearly all of them focus on life insurance, disability insurance, long term care, annuities and other retirement planning services.  AFLAC stands out as a recognizable player in the health insurance industry, but their product is supplemental, and not designed to be stand-alone health insurance coverage (and they also focus on disability and life insurance products).  From what I could determine, three other companies on the list provide some type of health insurance coverage (but seem to be mainly focused on other insurance products): Conseco, Torchmark, and American National.  Conseco and Torchmark both sell supplemental and “a la carte” policies.  American National is still a mystery after my few minutes of researching.  Their website says that they sell major medical plans as well as accident and sickness plans.  But they don’t provide any plan details that I could find, and instead direct consumers to an 800 number to talk to a sales rep.  I don’t know for sure, but I’m going to hazard a guess that health insurance isn’t their mainstay if that’s how they’re marketing it.

The industry as a whole chalked up a profit margin of more than 10% in 2007, but that was carried by the life insurance side of the industry.  Health insurance companies don’t fare nearly as well when it comes to making profits.  Far more of their revenues are eaten up by claims, which continue to grow year after year as health care costs increase.

She goes on to point out that the policy has a 24 month exclusion on pre-existing conditions, so the things that she generally has treated would not be covered for two years anyway. Her pre-existing conditions include bipolar disorder and fibromyalgia. In Colorado, bipolar disorder is an automatic decline with individual health insurance companies, so Dani obviously lives somewhere with more relaxed underwriting laws, and can qualify for a policy that will cover the bipolar after two years. A two year wait sounds like a long time, but it’s better than not being able to get coverage at all.

Then Dani makes the comparison with auto insurance. She points out that we don’t expect our auto insurance companies to pay for oil changes and brake pads (akin to doctor visits and low-cost prescriptions). Rather, for people with full coverage insurance, the insurance company will pay to fix damage that is over the deductible on the policy, and will write a check for the value of the vehicle if it is totalled. Dani notes that her truck is worth about $15,000 – and wonders about self-insuring the vehicle. If she could save up that amount in a high-yield saving account, and pay the account every month instead of the insurance company, she’d be ahead of the game. Chances are, she will not total her truck and the money will keep on growing. If she does total the truck, she can use the money to buy another one.

This scenario works very well when you’re self-insuring something with a fixed value and an absolute limit on the worst-case scenario. In this case, $15,000. You can budget how much to put away each month, and once you have $15,000 in the savings account, you can rest easy knowing that if something were to happen to the truck, you can replace it without going into debt. But what about liability insurance? There is a reason we’re all required to have liability insurance, regardless of our ability to self-insure our own vehicles. It’s because the worst-case scenario in a liability case is wide-open. It’s one thing to have $15,000 sitting around to replace your own vehicle. It’s entirely another thing to have $300,000 sitting around to pay someone else’s medical bills after you’re found at fault in an accident. And nobody wants to be on the receiving end of that lawsuit – that’s why we send our insurance companies into the ring on our behalf.

Health insurance is much more akin to liability insurance than to comp/collision insurance on a car. We really have no idea what the worst-case scenario could be when it comes to medical claims. People who choose a high-deductible (Jay and myself included) are already choosing to self-insure for claims that fall below the deductible. In our case, we have a $3000 deductible. We save money in an HSA, hoping that we won’t need to use it, but knowing that it’s there just in case. We can self-insure up to that amount.

Things that cost less than $3000 are not the reason we have health insurance. We have health insurance so that if I go over my handlebars on my bike and break my neck, we won’t lose our house. Or if one of us gets diagnosed with leukemia, we won’t have to declare bankruptcy. I’m always surprised when people present their normal medical expenses (typically below the level of the deductibles on the policies they can afford) as a reason that the health insurance will be of no benefit to them. Health insurance is a safety net. It was never designed to cover the small things. Rather, it’s there so that you can sleep easy at night, knowing that if a worst-case scenario were to occur, you could probably pay your portion of the bills within a year or so of payments. Without insurance, there are very few of us who could pay off a $500,000 bill within a year or so.

Happily, Dani mentions at the end of of her post that she has taken a job that offers full benefits, so she is no longer having to consider individual insurance. Since the plan is through her employer, it should cover her pre-existing conditions as well. But for people who are in Dani’s situation and don’t get benefits through work, make sure you consider a worst-case scenario rather than usual expenses when you ponder the option to self-insure. There are very few people who can truly afford to self-insure.

I think the most interesting post comes from David E. Williams, who shares a story he read while he’s up in Canada: There’s something about British Columbia on the Health Business Blog. David’s comment… “In British Columbia gay teens have a greater risk of pregnancy than their straight peers. Odd.”

If it weren’t for blogs, how would you find this stuff? The interesting numbers from the article David links to in his post say: “Among gay males surveyed in 2003, 17 per cent said they had been involved in a pregnancy, as opposed to only 5 per cent of sexually active heterosexual males. Thirteen per cent of lesbians said they had been involved in a pregnancy, while only 5 per cent of heterosexual girls had. For bisexual teens, 17 per cent of males and 9 per cent of females had been involved in pregnancy.”

Wow!

A must read –Healthcare Economist Jason Shafrin presents Nursing Home Residents, Hospice Care and Hospitalizations, saying, “Does hospice care decrease hospitalizations or is it the case that those in hospice care are less likely to be admitted to a hospital or use more aggressive care regardless of the presence hospice care? This post summarizes a paper by Gozalo and Miller. The authors find that hospice care significantly reduces end-of-life hospitalizations for nursing home patients.”

A must read – Julie Ferguson writes about how Workplace disabilities are on the rise at the Workers Comp Insider. She says, “Employers beware – unhealthy worker lifestyles and an aging work force are contributing to an acceleration in the rate of long term disabilities.”

A must read – Bob Vineyard writes about Margarita’s & Medicine at the InsureBlog. “So you need an operation, and maybe a vacation. Why not combine the two? InsureBlog’s Bob Vineyard has the latest on ‘medical tourism.’”

Sounds interesting, right?

Bob points out two issues with planning a vacation around an operation…
“If there are complications while in another country which require follow up treatment once you return home, who pays for translating your medical records?” and “If there are complications, how many doctors do you think are willing to go back and correct something a doctor in a foreign country did wrong?”

Joe Paduda of Managed Care Matters writes about some of the risks health insurance companies are taking… “These are big companies run by smart people, who continue to make really bad decisions. National health care reform is coming, folks, and right now you’re part of the problem, not part of the solution.”

WBL asks “Is Gold a Good Investment?” in Wealth Building Lessons. It’s a detailed post with helpful graphs for a picture oriented guy like me. This post is very interesting to me because I just saw a show on the history channel about gold and my interest is already piqued.

Silicon Valley Blogger gives us 5 Tips For Creating A Solid Investment Plan over at The Digerati Life. I found #2 the most helpful.

Eric Turkewitz writes Medical Malpractice Trial Starting For Med-Blogger from the New York Personal Injury Law Blog. “A doctor talks about his trial prep as his malpractice trial gets underway. Can his insurer disclaim on the basis of his defense being hindered, if this gets out at trial?”

Leon Gettler shows us Internal audit risk gaps over at Sox First, “Auditors say they take risk seriously but serious gaps are emerging. Fewer are confident about their risk assessments in the areas of technology, fraud and strategy. And one in five says they don’t do an annual risk assessment of their company. And that’s despite Sarbanes-Oxley.” says Leon.

Henry asks What Is Gap Insurance, and Do I Need It? at the Binary Dollar!. I actually wasn’t even aware of the need for gap insurance until reading this article. It’s got a really cool picture too!

Ben helps out with a post called “Buy Flood Insurance While You Still Can!” posted at Money Smart Life. he says, “If you think you might need flood insurance then read this article!”

Bob Sargent writes about Identity Theft Close to Home on the Insurance Agents E&O – Flood Exposure blog. “Not only should insurance agents advise their clients on identity theft exposure, they should consider their own exposure to identity theft.” Good advice!

The Israeli Speculator presents How Much Can You Stand To Lose On a Given Day? Part I posted at Israeli Speculator. He gives us good advice about how to tell how risky your investment portfolio is, and how to do the calculation (in part II).

Kurt Cobb, blogging at Resource Insights, has some interesting ideas about long term forecasting and oil prices. Given the current price of gas, it’s pretty timely.

Blogger Bruce Schneier provides some much-needed perspective on the VT shootings, and how we perceive various kinds and levels of risk to our health (and even our lives).

The aptly named Swim at Your Own Risk has some beautiful ocean scenery, and some of its dangerous denizens, in a report on where NOT to spend your summer vacation.

IT audit manager Antony Ma, blogging at Tech Risk & Security, has some disturbing news about computer security. Turns out, Symantec’s latest virus definitions may be as bad as the virii themselves.

Michael J. Panzner, writing at the frighteningly-named Financial Armageddon blog, has a lengthy but interesting look at difficult loans and the Law of Unintended Consequences.

Chris Walsh, one of the bloggers at Emergent Chaos, dissects the notion of “reasonable risk,” using identity theft as a case in point.

Steve Walters, guest blogging at The Wages of Wins Journal, touts the beauty and “purity” of betting on the horses. Really! He discusses the beauty of both the thoroughbreds themselves, and the computations that go into placing just the right wager.

Over at Brain Blogger, Navi Johal tells us about a new study linking estrogen levels with the risk of Alzheimer’s. If you’re a woman, or know any women, then you need to read this.

And check out my post here at the Colorado Health Insurance Insider called Misperception of a Free Market. I talk about how healthcare doesn’t fall into the same phenomenon of a free economy that we enjoy in so many other industries.

That concludes this edition. Submit your blog article to the next edition of Cavalcade of Risk using the carnival submission form. Past posts and future hosts can be found on the blog carnival index page.

Technorati tag: cavalcade of risk

For our phone service we used to have qwest, but then we found that Vonage would be much cheaper. So far Vonage is okay, it has its ups and downs but it’s worth it to be saving the money. If we don’t like their service, we can switch back to qwest or go to another phone company. That’s how the free market works, and it’s beautiful. It ensures that Vonage must compete to provide me with competitive service at a competitive price.

Simple huh? So why can’t we just allow that same phenomenon to work it’s wonders on the healthcare industry? That’s basically how Ari Armstrong of the Independence Institute puts it. He tells us about how he and his wife “recently obtained high-deductible individual health insurance in conjunction with a Health Savings Account.” Which is great, because HSAs are the best thing available right now.

But as a health insurance broker who has an inside view of the Colorado health insurance industry, Ari doesn’t completely understand the current health insurance market. The title of Ari’s article is “Leave Decisions on Health Coverage to Individuals”. I’m not sure how old Ari is, but he and his wife might be a lot like me and my wife. Right now, we’re young and healthy and we’ve got total control over our health care decisions. We also have a high-deductible individual health insurance plan along with a Health Savings Account.

But let me take a common example I’ve seen through my experience in the industry. Ari lives in Golden and let’s say he and his wife make a trip into Denver to go to a Rockies game. As Ari gets closer to downtown, traffic suddenly stops ahead of him on the road. Ari stops, but the guy behind him doesn’t. He’s rear-ended and suffers serious back, neck, and head injury. Luckily, the guy behind him was insured and the guy’s auto insurance paid for all of Ari’s hospital and physical therapy bills.

A year later, Ari gets a letter from his health insurance company saying they regret to inform him that they have decided to stop doing business in the state of Colorado. Ari calls up his independent broker to shop around for the best policy for him to replace his coverage. “Has anything with your health changed since the last time we talked?” his broker asked.

Ari says “Well, I’ve got several plates in my spine from a car accident and I’m on a few medications after the back and brain surgeries. But it wasn’t my fault and the other drivers insurance is paying for it.”

“Unfortunately, there aren’t any health insurance companies in Colorado that will cover you now Ari.” his broker says.

Lucky for Ari though, he lives in a state that has a taxpayer subsidized high risk pool that can offer him basic coverage, CoverColorado. (many states, mostly in the south, don’t provide this option to their residents) CoverColorado even has an HSA option, however the premium is about 3 times as much as he is paying for his current plan. That’ll be his only option for him until he turns 65 and qualifies for medicare – if it’s still around.

This is just one example of many. If Ari had coverage through his employer and the same accident happened to him. Maybe his employer goes out of business, leaving him with the option to either get another job that provides health insurance or CoverColorado.

The examples are endless. But the point is, the “individual” doesn’t have control. The insurance companies do. And if it weren’t for the government enforcing mandates on how insurance companies conduct business, it would be even worse.

Premiums for health insurance in Colorado can vary greatly, sometimes as much as 50% for similar plans. When comparing plans, be sure to look at the benefits as well as the monthly premium. Make sure your plan provides adequate catastrophic coverage, preferably at least two million lifetime maximum benefit.

2. Choose a higher deductible

The higher the deductible, the lower the monthly premium. Keep in mind, you will be responsible for medical bills out of your own pocket until this deductible is reached. However, there are plans that have copays before the deductible for office visits, prescription drugs, or accidents.

3. Add the coinsurance to your out-of-pocket total

Coinsurance is the amount the health insurance company will pay after you meet your deductible, and must be figured into your total exposure. Most companies will pay 80% of the medical bill after the deductible up to an annual maximum of typically $5000 to $10000. Medical bills in excess of this annual maximum will be covered at 100% by the insurance company. Some companies offer 50% co-insurance plans which may lower the monthly premium, but if you have a big claim, these plans can leave you with too much exposure.

Most importantly, make sure there is a limit on the coinsurance. Companies like MEGA Life and Health or Mid-West National have an option to cap the coinsurance, called the “Accumulated Covered Expense” (ACE) Rider. Even when the option is selected, it can leave you with an extra $15,000 to $20,000 financial exposure – way too much for what they charge for a policy like that.

4. Make sure the policy covers the doctors you need

Most plans contract with a network of “preferred providers”. These “PPO” plans pay more of the medical cost if you use the services of doctors within this network. If go to doctor or hospital outside the network, the insurance company may cover only part of the bill. A quick search of network providers for an insurance company, or a call to your doctor asking them which companies they bill will be plenty.

5. Consider separate policies for individual family members

If your family has different medical needs, one family member may prefer a more comprehensive plan while another may only need a catastrophic plan like an HSA. Or, if one member of the family has underwriting concerns or is unable to get an individual/family plan, it may be better to have them get a guarantee issue plan like Cover Colorado while the rest of the family gets a much lower priced individual/family plan.

Child only plans
Coverage for children under the age of 18 are relatively inexpensive. Parents who are relatively young and healthy might be able to save money by buying a higher deductible plan for themselves while still providing comprehensive coverage for their children with child only plans..

6. Coverage offered through an employer

Employers providing health care benefits will pay all or part of the premium for the employee but often do not contribute towards the dependents. Adding these dependents to the employers plan may be the responsibility of the employee and can be expensive. If the dependents are relatively healthy, it may save money to purchase an individual or family policy separate from the employers plan.

7. COBRA Alternatives

COBRA is a continuation of an employer sponsored plan for a former employee where the premiums are usually paid entirely by the participant. If the COBRA participant is relatively healthy, they can usually save money by purchasing an individual policy or short term health insurance instead of accepting the COBRA plan. Keep in mind, that the insurance company may refuse to provide coverage based on past health history. Therefore, those with serious health issues or expenses should stay with their COBRA option or enter a high risk pool, like Cover Colorado.

8. Consider a Health Savings Account (HSA)

With an HSA, you can set aside money in a tax-sheltered, interest-earning account that you can draw on to pay most medical expenses. Because it works with a high-deductible health plan, you pay less premiums than you would with a more comprehensive health plan. In addition, the savings you accrue minimize the risk of not being able to cover unexpected medical bills.

9. Minimize your chances of being denied coverage by the insurance company

Colorado offers health insurance for those unable to obtain health insurance from the traditional carriers due to serious health issues such as AIDS, cancer, major heart disease, diabetes, or other chronic conditions. These high risk plans can be expensive and therefore it is beneficial to qualify for the plans offered by the insurance companies if possible. Decline rates can be as high as 60 percent and often individuals without serious issues could have been approved had they provided an adequate explanation of past medical history. For example, be sure to explain clearly when condition has been resolved and requires no further treatment or medication.

10. Government assistance programs

Those at or below the poverty level have access to government assistance, but many people are unaware that some states offer programs for those above the poverty level as well. Usually, this assistance is in the form of a subsidy that will pay part of the premiums for traditional health insurance.

Watch out for too-good-to-be- true offers

A company offering coverage regardless of your health status and at very low rates should be a red flag. Also, make sure the plan offers protection for catastrophic coverage in the event a large claim is filed. Often plans with very low rates are discount programs and not insurance. Read the Colorado Department of Insurance warning on discount health plans.

tags: health insurance colorado hsa colorado

Johnny Knoxville said he was sure they were going to die while filming the Jackass sequel, so they asked studio execs to shell out $7 million in insurance coverage to protect them. According to Starpulse.com, the precautions weren’t unwarrented—Knoxville said he just about died during the soon-to-be-infamous rocket-launching stunt.

“When the rocket exploded in one stunt—there was like a foot-long metal rod that went right out next to my side. It was close!”

So getting insurance was obviously going to be a chore. “I don’t get it man. This is supposed to be routine. What’s with the hang-ups and special treatment? This royally sucks,” complained Knoxville.

Met Life insurance claims adjuster, Anthony Thomas said, “I don’t think that it is Knoxsville’s best interest to be on our premium plan. I saw last week’s episode of Jackass. He almost died! That is why we created the Jackass plan, which reads as follows: In the event of serious injury, Johnny’s deductible will be equal to his Maui home, the proceeds to his last three films, and his Hummer.”

Knoxville wasn’t pleased with this, “I can always get insured by Blue Cross Blue Shield. Their deductible equals the royalties from Season 1 of Jackass plus my first film,” he said.

So before any morons out there see this movie and try to re-create some of the stunts, make sure you have good health insurance first.

Technorati tag: health insurance

Wal-Mart encourages its employees to apply for welfare and Medicaid rather than provide adequate and affordable coverage. CEO Lee Scott said “In some of our states, the public program may actually be a better value.” The vast majority of workers qualify for public assistance, which costs the state of California over $75 million a year – just for Wal-Mart employees who do not receive adequate benefits.

I think that making benefits available to more of their workforce should be a priority, but a $1,000 deductible is not bad coverage for those that qualify, and no one should be complaining about that aspect of Wal-Mart’s policy. People with Wal-Mart’s insurance will be taken care of in the event that they have a serious illness or injury, which is really what health insurance is all about.

Technorati tag: health insurance