Health Insurance, Part 2
I just received my health insurance notice of premium increase, so it’s time for another article lamenting the cost of health insurance and health care. For some additional background, read this blog article that I wrote in February, 2006.
When I left Parsons Technology in 1999 and began to work for Laridian, I realized many new benefits. However, one thing that I lost was group health insurance subsidized by my employer. It was necessary to obtain health insurance for my family from the private marketplace.
In 2003, I switched my health insurance coverage from a traditional plan to a Health Savings Account (HSA) coupled with a high-deductible insurance policy. The premise of this combination is that the monthly premiums are low (or at least lower) because the individual is responsible for 100% of the medical expenses up to the deductible amount. The insurance will kick in only after the deductible has been met, which would usually require hospitalization or several diagnostic tests. Thus, the insurance really is catestrophic insurance, intended to cover castestrophic events (such as hospitalization or major illness) but not the other typical expenses such as routine doctor’s visits, dental visits, and new glasses. The individual is then encouraged (via tax policy) to contribute to a Health Savings Account on a regular basis, and pay for routine medical needs with money previously saved in the HSA. The combination of the monthly contribution to the HSA and the monthly insurance premium was comparable to the premium of a more typical policy.
Another advantage of this approach is that it puts a financial incentive to health care decisions. Too many people are able to use their health insurance coverage (or lack of any coverage) as a blank check. This often results in poor choices, such as running to the doctor for every little thing or using the emergency room as your family doctor. By making consumers bear more of the cost for their health-care decisions, accountability increases.
While I still appreciate the philosophy of this approach, I’m less satisfied with how it is working out in real life. Perhaps my disappointment stems from the fact that few health consumers in the US are using the HSA. While I get to be more responsible with my choices, others are not and continue to use the ER for their routine health needs. Thus, the cost of health care continues to increase, causing my premiums to increase as well.
Year Premium Increase 2003 $225 — 2004 $275 22% 2005 $327 19% 2006 $415 27% 2007 $532 28%
In four years, my health insurance premium has increased by $300 per month. Plus, while the premium has more than doubled after four years, the benefits and service that I receive have not changed. I’m not receiving any new benefit today that I didn’t also receive in 2003. I’m not receiving any better service today than I received in 2003. Instead, I’m merely paying twice as much for insurance that is not likely to be used during the next year. The provider’s expenses are likely to be limited to adminstration.
In a free market economy, as soon as I’m dissatisfied with the cost or service of my provider, I can shop for a new one. And I have. However, what I’ve found is that changing providers doesn’t necessarily result in a better or less expensive plan. Further, it would likely result in less coverage due to additional pre-existing condition exclusions.
As it stands now, the health insurance providers are selling a product that is a virtual necessity, but the individual buyer has little bargaining power. The provider sets the rate, sets the rate increases, sets the coverage exclusions, etc. The only choice given to the consumer is to accept or reject the offer. To borrow a real estate term, it’s a seller’s market. While that’s good for sellers, it’s not so good for buyers. Unlike real estate, however, the situation is unlikely to change until individuals and small businesses are allowed to pool their business to obtain some bargaining clout.
The Iowa Association of Business and Industry plans to lobby the 2007 Iowa Legislature to allow small businesses to pool together when purchasing insurance. While this doesn’t address my situation exactly, I think this is a good idea, as it would allow more of the free market principles to be in effect.
I also continue to favor the HSA and high-deductible plans, as these encourage free market principles as well.
