Consumer Guide to HMOs

New York State Department of Insurance

Choices Available for Individual Coverage

Under New York State Insurance Law, New Yorkers purchasing health insurance on their own can choose either an HMO or an HMO/POS plan option at any time during the year. You cannot be denied coverage if you have health problems, but you may be subject to a waiting period of up to one year for certain pre-existing conditions.

HMOs deliver health care to members using provider networks, which are groups of doctors, hospitals and other health care providers that have agreed to serve members of a particular HMO. Health benefits are covered if the member uses providers that are in-network.

All New York HMOs also offer a point of service (POS) option that allows members to seek care from providers that are out-of-network. Services provided by out-of-network providers generally cost members more in out-of-pocket expenses.

http://www.ins.state.ny.us/consumer/cg_hmo2008.pdf

And…

Premium Rates for Standard Individual Health Plans

April 2009

New York County

Monthly family premium rates for Point of Service Plans (POS)

$4450 – Aetna Health. Inc.
$3776 – Atlantis Health Plan, Inc.
$4066 – Empire BlueCross BlueShield HMO
$6824 – GHI HMO Select, Inc.
$4187 – Health Insurance Plan of Greater New York, Inc.
$3816 – Health Net of New York, Inc.
$3500 – Managed Health, Inc.
$4208 – Oxford Health Plans (NY), Inc.

HMO family rates for these same insurers range from $2266 to $5686

http://www.ins.state.ny.us/hmorates/html/hmonewyo.htm

So in New York County, for a premium of about $50,000 per year, you can have a choice of physicians and hospitals for your family, although you will have to pay more in out-of-pocket expenses if you select out-of-network providers. If you don’t mind losing choice by staying within the HMO for all of your care, you can have your family covered for under $40,000 per year.

What is going on here? Why are the premiums so high?

Well, first of all, New York has addressed the problem of underinsurance by requiring, through regulation, that insurers provide adequate benefits. Also, they must accept anyone, regardless of health status (though they can enforce a waiting period to prevent individuals from waiting until they need care to apply for coverage). Innovative insurance products that keep premiums competitive by shifting significant costs to the insured are prohibited in New York. Health care is very expensive in the United States, so premiums that reflect the true costs will be quite high.

Per capita spending for health care is already at $8,100 per year. For a family of four, that would be about $32,000, but these numbers in New York are even higher. What explains that? If you had an income of $80,000 per year, and you and your family are healthy, and you are told that your insurance premium will be $50,000, what would you do? You really don’t have much choice; you’d wing it. If you had ongoing medical expenses of maybe $250,000 per year, what would you do? You would try to stay in the plan and somehow pay that $50,000.

This is the classic “death spiral” of health insurance. A ever increasing number of individuals who are healthy would leave the plan, leaving within the risk pool the very high cost patients. Premiums skyrocket and become unaffordable for most.

The private insurance industry has an answer for this. They are asking Congress to require everyone, through an individual mandate, to purchase insurance so that the risk pools remain diluted with the large numbers of people who are healthy. That might take care of the death spiral, but it glosses over a very important point.

In most states, plans in the individual market are underinsurance products, and true reform must bring an end to their underinsurance innovations, otherwise people who need medical care will continue to face financial hardship. The New York experiment has demonstrated that well regulated individual plans (which Congress promises us) are too expensive. Congress understands this so they say that we should be able to chose our plans through a “connector” so that we don’t have to pay broker fees. Come on! It’s health care costs that are breaking us!

At today’s costs, private plans that are adequate to prevent financial hardship in the face of medical need must have unaffordable premiums, whether or not in a connector. We need to eliminate this obsolete system of premiums tied to a private package of health benefits. We desperately need an equitable, efficient, single payer national health program. Each person pays his or her fair share, and everyone gets health care.

And what is Congress preparing for us behind those closed doors? Look again at the premiums for New York County. At least you will have a choice of plans with perhaps $40,000 premiums, and for another $10,000 plus out-of-pocket cost sharing, you can have your choice of providers as well.

You say that premiums won’t be that high if we eliminate the death spiral? President Obama has already said that you can’t mandate people to buy an insurance plan they can’t pay for. That keeps the death spiral in play.