Cheapest Health Insurance Found Out West
SmartMoney.com
December 7, 2004
Cheapest Health Insurance Found Out West
By Stacey L. Bradford
On Tuesday, eHealthInsurance.com, an online insurance broker, released its first national survey ranking the most affordable cities for health insurance. The results were striking.
According to eHealthInsurance, families in Kansas City can purchase comprehensive coverage for just $171.86 per month… Despite a general high cost of living, eight California cities ranked among the top 10 most affordable places for health insurance.
The most expensive health care is found on the East Coast. According to the survey, a family shopping for health insurance in Boston would pay $767.30 a month in premiums; in New York City, $712.77 a month.
Premiums are much higher in places like Massachusetts and New York since insurers must comply with a number of state mandates that raise the overall cost of providing health care. These mandates include what the industry calls “guaranteed issue” (a health plan can’t reject an applicant based on health status) and community rating (a health plan can’t arbitrarily raise an individual’s rates).
In conducting this survey, eHealthInsurance considered only those plans that offer comprehensive benefits, including annual preventative exams, lab and x-ray services, emergency-room treatments and hospitalization. Each plan also includes an annual deductible of no more than $2,000 in addition to a 20% coinsurance. The maximum out-of-pocket costs ranged between $4,000 and $10,000 per year.
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Comment: Although this would appear to be merely an interesting article on geographical variations in premium pricing, it is actually a loud alarm, warning of the catastrophe ahead once the health policies of the Bush administration are enacted.
A major component of Bush’s proposal for an ownership society is to place control of health care costs in the hands of the owners of the funds, who are the patient-consumers. Individually owned health savings accounts (HSAs) are a major part of that strategy. But it is recognized that such accounts would not cover major, catastrophic health care costs. The need for high deductible health insurance (HDHI) to cover catastrophic expenses is obvious.
A strategy of the ownership society is to establish policies that would encourage individual purchase of HDHI. The tax deductibility of employer-sponsored plans would be terminated, and premiums for individual HDHI would become deductible on individual tax returns. Thus policies would encourage a system in which routine expenses are paid out of individual accounts and catastrophic expenses are covered by the individual’s own HDHI.
Numerous previous messages have explained why HSAs are totally unsatisfactory for ensuring affordable access to care for individuals with significant health care needs, whether acute or chronic. But what about these HDHI plans that would cover 100% of the catastrophic costs after the deductible is met?
Supporters of HDHI claim that catastrophic coverage is very inexpensive, and they frequently cite the eHealthInsurance.com website as proof. After all, a family of four in Kansas City can purchase a comprehensive plan for only $171.86 per month. This sounds like a very good deal. What is being left unsaid?
One issue is that the depiction of these plans as covering 100% of the expenses after the deductible is dishonest. These plans are managed care PPO plans with restricted provider lists, significantly limiting choice in providers. Both the deductible and the maximum out-of-pocket expenses are misleading because many health care expenses are excluded as qualifying expenses. Individuals who obtain care outside of the restrictive provider lists are heavily penalized financially, and most of the penalties do not apply to the deductible nor to the out-of-pocket maximum. Further, 20% coinsurance is not the same as a co-payment. 20% of tens of thousands of dollars in charges is quite different from a $25 co-payment. For individuals with high health care costs, these HDHI plans leave individuals with much greater financial exposure that the deceptive depictions would suggest.
Another crucial issue is the shift from employer-sponsored plans to individual coverage. In many states, underwriting provisions allow the insurers to exclude from their plans individuals who have significant health care needs. By selling their plans exclusively to healthy individuals, premiums can be kept quite low because of low rates of utilization. Some states even allow insurers to raise premiums selectively for those individuals who do develop problems and increase their utilization.
To avoid this problem of denying coverage for those with needs, some states have improved equity by establishing guaranteed issue and community rating. Guaranteed issue assures that everyone would be covered regardless of
preexisting disorders, and community rating prevents insurers from charging different premiums based on varying health care needs. But once you establish equity, premium levels then reflect the true costs of pooling risk, as the rates in Boston and New York demonstrate. Cheap insurance that truly pools risk does not exist.
If HDHI is to become the national standard, as the Bush team would have it, then it must be recognized that those with significant needs must be included. 90% of the population uses only 28% of health care. We could cover them with very low premiums if we isolated them in a separate risk pool. But once you add the other 10% that utilizes 72% of health care, the premium per beneficiary skyrockets. Placing the 10% with needs in a separate insurance risk pool would require a premium of about $44,000 per beneficiary. But think of the pride that these individuals would have in owning their own high deductible PPO policy.
HDHI that covers those who don’t need it, and leaves out those who do, is not insurance. It’s fraud. It shouldn’t be our national policy.