Friday, January 29, 2010

Why So Many People Are Without Health Insurance

I learned more than I ever wanted to know about health insurance last year. This had a lot less to do with the great national debate than it did with my own family situation. In 2009, due to a perfect storm of empty nests, college graduations and job transitions, I suddenly had to find out how it all works.

Before then I had worked for the same company for thirty years. I joined the company, had medical insurance, and didn’t think about it too much except for the annual grumping. Yeah, I complained when we had to start contributing to the coverage, and I complained when we had to figure out which plan to choose, and I complained each year when the cost went up.

I truly didn’t know how good I had it.

In 2009, it became very clear to me why so many people are without medical insurance. Here are my top four reasons:

1. Medical insurance is way too expensive – When I left my job I was offered a transitional plan to continue my current coverage at the same cost (to me) for twelve months. (If you find yourself in a similar situation jump on this deal, it’s the best you will get.) I really thought $300 a month to cover two kids and myself was expensive. It is. But the total cost of the plan (via a straight COBRA option) was closer to $1000 a month. Sure, there are public plans out there if you can qualify (i.e. you have no pre-existing conditions), but they either provide little coverage, or they cost at least twice what I was looking at for the COBRA option. Ouch!

I was very lucky to have access to that transitional plan.

2. Recent graduates are particularly vulnerable to finding themselves uncovered - Fulltime students can be covered until age 23 as a dependent. With my oldest son graduating from college in 2009, I could cover him through the end of the year on my plan, and then he was on his own. In today’s job market, many college graduates will find themselves without access to a medical plan. Those who don’t head off to college are even less likely to have access to a company-sponsored plan. Sure, he’s young, and he’s healthy. But – he drives a car, and he plays sports, and occasionally he crosses the street. Lack of coverage is not worth the risk.

We are very lucky. He landed his own corporate job with his own corporate sponsored medical benefits.

3. Early retirees and older employees who lose their jobs are particularly vulnerable to being priced out - Access to a plan is the first big hurdle, and being able to retire from a big corporation, I do have access to medical benefits – but without the big employee subsidy. As an early retiree, I have a medical account where my company put money aside for me to cover the cost of insurance prior to being able to qualify for Medicare. To cover just myself under the retiree rates (more than double what it cost me to cover myself and two dependents as an employee), this account doesn’t go far. It will last me no more than four years. But (and this is a big but) if I use up every penny in this account I will no longer be eligible to participate in that corporate plan.

Those who have to go outside for coverage, as so many who lost their jobs do, will find outrageously high price tickets (due to the age pool) if (and that’s a big if) they can qualify at all! Short of keeping your job and your medical coverage for as long as possible, the only solution for this group today is to not get sick.

I am very lucky. I could be covered under my spouse’s plan, at a considerably lower cost than my retiree plan.

4. It’s way too complicated – The rules are not designed to help you, or to keep you healthy. I have a stack of medical insurance notifications that I have received in the mail over the past year about four inches high. Some days I received two packages – often contradictory. I logged dozens of hours with my ex-corporation’s benefits department over the past year. I called to select the transition benefits. I called to find out how long my son was covered and then again to take him off my plan. I called when I was trying to decide whether to continue coverage for my second son on my plan or to cover him under his university plan. It turns out his college has a plan at a great price due to the younger/healthier insurance pool. (If you have college-aged children who need coverage this is definitely something to check out!) I called to find out if I can come back to my retiree plan in a later year if I opt out this year. The answer was yes – as long as I can show I had other coverage during that time, and as long as I still have at least $1 in the medical account I mentioned above. Each time I called I learned something new. And each time I called I learn more about ‘qualifying status changes’, and things to watch out for. It’s very murky territory.

What is clear is that there is nothing easy or straightforward about this topic.

Did you notice how many times I used the word ‘lucky’ in this article? I am comfortable with the coverage my family has for the time being. I wish I could say this is due to great planning or hard work or intelligence on my part. It’s not. It really is all about the circumstances.

Share your health insurance stories, and any ideas to navigate this …um… mess… here.

Reminder - today is the last day to enter the WFWF Bad Boss Contest. A big thanks to everyone who entered so far. As I suspected, there are some pretty bad bosses out there! Finalists will be notified by e-mail on Sunday. Check back Monday (yes, I said Monday) to see the first of the finalist stories. There will be guest posts all week next week, and next Friday you'll be able to vote for your favorite!


KarenG said...

My family has been without coverage for many more years than with it, due to my husband's work situation, i.e. self-employment. Ha! Talk about a financial conundrum, paying for coverage with a large family when you're self - employed. Or even a small family. It's just financially the biggest chunk out of your pay check minus the mortgage. It's like two big car payments. So we developed other coping methods. Like paying cash (sometimes a 40% discount, more often 20%) for doctor and dentist visits, getting pharmacy samples from the doctor, staying healthy lol! Many other things too numerous to mention, but the *intelligent uninsured* (that should be a category) knows just what I'm talking about.

Colette said...

Karen, knowing what I know now I can see how the self-employed are in a tough spot. All I kept thinking as I looked into this topic was "How can people afford this?" Your suggestion to ask for a discount is a great one!

Andree said...

I lost my job and fortunately got covered under my husband's work plan- which costs $600 per month more than the one I used to pay for- and covers less, with much higher copayments. We rarely have used either plan, since we prefer alternative medicine when possible, and it's not covered. However, if an emergency arose and hospitalization were required, you can't afford to not be insured if you have assets. Hospitalization can cost thousands a day, and any procedure done can be 10's or even 100's of thousands. A serious illness could fairly quickly bankrupt even a well-off family if uninsured. I'm considering looking into a health savings plan, but not sure how these work or if its wise at our age (50)

Anonymous said...

My husband and I both work for a state university and have free-to-us health insurance. I work in HR and I know a lot of people who stay here because of the health insurance, even though they'd rather do something different.

My husband would love to start his own business, but he has Hep C and is not insurable on the open market at any price. I can't add him to my insurance, unless I were to divorce him and then remarry him, thus creating a "qualifying life event" under HIPPA. Even then, the insurance company could deny him coverage for anything related to his condition for up to 18 months.

My husband and I are both in good health, in spite of his condition and my (managed) asthma, but we don't dare strike out on our own. Luckily we like our jobs. I feel sorry for some of the folks I know, who keep working here because of a chronically ill spouse or child who needs coverage.

How this is supposed to make America more competitive is beyond me. It seems that we're destroying this country's entrepreneurial spirit, encouraging everyone to hunker down in "safe" jobs and be good little drones. I don't necessarily favor socialized medicine, but health insurance as a non-profit would be a step in the right direction. It's worked well for Switzerland and Japan. As long as insurance companies seek to profit off our illnesses, there will be no chance at fairness.

Colette said...

Anonymous, you are so right! It's really sad that we have to waste energy worrying about things like pre-existing conditions and waiting periods.

And, as Andree points out -- the cost even with insurance are ridiculously high!

catdownunder said...

Prowling in via Nicola Morgan's blog. Private health cover is expensive here in Australia but not that expensive - yet!

Colette said...

Catdownunder, in Australia you have a public plan. don't you? Gosh, I sure hope you never get to where we are!

Anonymous said...

Heath care should not be a matter of 'insurance'. Insurance is for something you hope will not happen. We all need heath care to some degree throughout our lives. Some more than others but we all need it.

Anonymous said...

Disclaimer...I am neither a doctor, in the insurance industry nor a lawyer.

It seems to me that we've lost sight of what the purpose of insurance is. Insurance is essentially two things:

1) You are wagering against the insurance company that the eventuality you are insuring against _will_ happen. The odds on the wager are calculated against the likelihood that the eventuality will occur (e.g. in health care, your age, gender, relative health, and habits potentially alter the wager). Your bet is periodic and called a 'premium'. The insurance company payoff is called a 'benefit'.

2) You and others organizing into a pool (e.g. a company) to share risk across that pool. Generally, the larger the pool, the greater the spread on the risk, allowing for a lowered premium.

Every period (generally a month) you (and your company) pay your premium. Every time you need health care, the insurance company pays off. The payoff may be less than the cost, governed by the conditions of the wager (the contract that governs the benefits). Some contracts allow for the improvement of the odds (premium reductions or rebates) based on your participation in activities (smoking cessation, exercise program, preventive medical care).

Anonymous said...

-continued from above-
Given this distinction, one could easily see that a healthy person with good habits is likely to die long before ever coming close to taxing his/her insurance benefits. These are prima facie facts, otherwise nobody would ever operate an insurance company (you would go out of business paying benefits). That being true, competition drives insurance companies to operate in a very lean manner (3-5% profit). Compare that to other industries (like computer software) that can operate with 50-70% profit margins.

Given the previous, you could decide to 'self-insure,' put the money you would have been paying into premiums into an investment vehicle which you save for that rainy day (which is essentially what the insurance company does on a large scale). Any hospital will allow you to pay up front for preventive services -- and no ER will bar you from care.

What's happened is that people who work for companies that cover the cost (all or some) of health insurance do not see it for what it is, income that they are not taxed on. What they see is that they are entitled to pay less (or nothing) for health care.

Given all this, there's precious little that you can change in health insurance that will make a difference. Costs in health insurance rise to cover the increase in cost of the benefits. The absolute worst thing you could do is to nationalize that system. Changing the baseline from one of competition (to keep the razor thin profit margin) to one of a single dominant bureaucracy, with no incentive towards efficiency will only _increase_ the cost per policy.

Anonymous said...

-continued from above-
The only solutions to the so called health care crisis are to increase the competition in the insurance marketplace and to lower the fundamentals on what's driving up the cost of health care itself:
1) Tort reform - need to limit the exposure of doctors to both unjustified _and_ justified lawsuits. The cost of malpractice insurance grows at a rate greater than inflation year to year.
2) Tort reform - the fear of lawsuits drives up the number of unnecessary and often expensive diagnostic tests. This drives up the cost of the diagnostic process.
3) Tort reform - the misperception that medicines are somehow akin to magic bullets to solve your ills drives the number of justified and unjustified lawsuits against pharmaceutical companies. This drives up the cost of the medicines and medical devices.
4) Tort reform - in all of the above (and others) lawyers have discovered that ANY nuisance lawsuit that would survive summary judgement against the plaintiff is worth something. All of the above will capitulate for a price tag that is lower than the actual cost of litigation to defend. There is a cottage industry of lawsuits clogging the legal system that are simply calculated to skim that level of money out of the industry.

Anonymous said...

There were 900,000 medical bankruptcies last year, 60% had health insurance that did not cover their bill. Health Care increased 10% a year. It is $10,000 a day to stay in a hospital and doctors make $1000 an hour along with $20 Billion in drugs presecribed by their patients as kickbacks. The 60,000 drug sales force bribe every doctor in the USA with an average of $6800 in perks. Computers in the health care industry are tied together, fixing prices, making sure costs increase 10% a year, this has been going on for 30 years. $500 million was spent by the health care industry to defeat or derail the Health Reform effort in 2009. If you are over 65, you are protected by a Socialistic Government program called Medicare with no fear of Medical Bankruptcy. If you are under age 65, you are one major medical issue away from bankruptcy, there goes your savings, IRA,s' CD's, and any monetary asset except your DB pension if you happen to have one. Usually you can keep your house but after the bankruptcy, you will sell it, if you have equity to supplement your retirement and move into a mobile home part or rental.
Tort represents $18 Billion a year (point 46 of one percent of the $2.4 Trillion annual health care cost), Medicare fraud is $80 Billion annually.
The health care Industry does not have to worry about Price Fixing anti-trust, they have been doing that for 30 years or more with Congress's blessing.
47 million today, 57 million in 7 years without health care insurance reform. $1000 from every family annually will cover the 47 million, in 7 years, every family will be paying $2000 a year to supplement the un-insured.
We have the best Congress, money can buy.
One man, our President, has our well-being in mind, certainly, not our Money Bribed Congress.

Anonymous said...

The preceding post is as naive as it is full of false and misleading information...

"60% had health insurance that did not cover the bill." -- So what? What kind of insurance policy covers EVERYTHING (e.g. no deductible, no exceptions)?

"It is $10000 a day to stay in a hospital and doctors make $1000 an hour." -- Bullshit. Period. A member of my immediate family stayed in the hospital for 5 days after emergency surgery last year. The TOTAL BILL was under $20K including the surgeon, anasthesia, and our out of pocket (we are on a HMO) was far less than the maximum HCSA deferral (we had to buy glasses, contact lenses and supplies to cover the remainder at the end of the year, AFTER all the co-pays for our doctor, dentist, optometrist and opthalmologist visits.

The tort number is distorted, as the point of my post was that the tort system, as constituted, contributes to defensive medicine and unnecessary prescription of tests and pharmaceuticals.

What the poster seems to want, rather than medical insurance, is FREE MEDICAL CARE. When we get that, it'll be worth every penny we spend for it...just like the Canadians...oh wait, the privileged in Canada come to the EVIL US for their surgeries...

And as for Obama, the only thing he has in mind is to abscond with as many of our freedoms, including the right to the health care of your choice, as he can.

Oh, and while it's true that you won't go bankrupt while on medicare, you may die waiting for care THAT YOU COULD HAVE PAID FOR OUT OF YOUR OWN POCKET, if only that were legal to do so (it's not).

Colette said...

My rule on this blog has always been to allow anonymous posts, as I can see why some may wish to remain unnamed, but I also ask that we keep this to an open and positive dialogue. Everyone sees things differently, so let's share views, but try to stay respectful, please.

That said -- I agree that we need tort reform. Our legal system encourages lawsuits and windfalls for lawyers who win them. I've thought that perhaps there should be a limit on how much lawyers can make on malpractice suits.

I also agree that health care can't be free. Even if it's government sponsored it's not free -- we pay for it one way or another.

Anonymous said...

I'll leave it at this. When your life is on the line, who do you want to help you:
1) Politician
2) Lawyer
3) Doctor

'nuff said.