Healthcare again: overall cost and individual cost as two separate problems

Last updated on: February 24, 2015 at 6:55 pm by Jane the Actuary

Healthcare again: overall cost and individual cost as two separate problems 2015-02-24T18:55:38-06:00 Jane the Actuary

LOGO Patheos Explore the world's faith through different perspectives on religion and spirituality! Patheos has the views of the prevalent religions and spiritualities of the world.

Healthcare in the United States is a complex issue, but there are, ultimately, two categories of problems:

First, the rising cost of healthcare in general, as it affect everyone: those insured by their employers, those with individual insurance policies, and taxpayers, insofar as the rising cost of Medicare, Medicaid, and other government-provided healthcare programs impact us.

As a bit of background, I work as a pension consulting actuary in a firm which also has a practice advising companies on healthcare, so I’m not an expert on healthcare topics, but learn quite a bit from training sessions, informational materials the company produces, etc. And this is what I see: employers, large and small, are looking for, and don’t have, an answer. The current direction is “consumer directed health plans” — that is, high deductible plans. (And we see the trends earlier than most, because the company offers them to its own employees right away. Thirteen years ago, when my fist child was born, we were covered by an HMO, where we paid $10 for everything related to the pregnancy and childbirth — not per visit, but in total. Later, that same child was in speech therapy, and we paid nothing, not even a co-pay. Now we have a $1,500 per person/$3,000 family deductible.) The other approach is “Defined Contribution” or “private exchanges” — where the employer decides on a fixed amount per family type (single/+1/+family) and the employee goes on an “exchange” (administered by a benefits outsourcing firm such as my employer) to purchase healthcare, from what are hoped to be a greater variety of competing providers than if the company had to make individual arrangements with all of these insurers itself. What remains to be seen is whether they take the next two potential steps of (1) moving from a contribution that varies by family size/type to a fixed amount per employee regardless, and (2) increasing the employer subsizy by a fixed amount or by CPI, but not trying to keep pace with medical inflation any longer.

I really don’t believe that insurers are the bogeyman as far as high health insurance costs are concerned. They do compete with each other to offer employers the best price and I’ve never heard any hint that insurers engage in anticompetitive practices. What’s more, large employers are usually “self-insured” meaning that they bear the entire cost of their employees’ health care, with the health insurance company whose name is on the insurance card the employee has in his wallet really providing “administrative services only” (ASO in industry terminology) — processing claims for a fee. It’s the providers — but I’ll save that for another post.

The second issue is cost to individuals. What I mean is that for many people, purchasing an individual insurance policy is genuinely cost-prohibitive, and healthcare without insurance, for any major healthcare need, is inaccessible (hospitals simply won’t provide non-emergency treatment without an insurance card) or unfathomably sky-high — especially because of the quite nefarious practice of charging “sticker price” (double, triple what the negotiated rates are for an insurance company) so that it’s a matter of skill and no small degree of luck whether one can negotiate the price downwards.

And people without insurance behave in ways that are, really, not rational — avoiding visiting a doctor for preventative care or early diagnosis, even if they could swing the private-pay cost, out of a fatalistic “what’s the use, I couldn’t afford the treatment cost anyway, so I’m better off not knowing.”

Decisions not to purchase health insurance are also often not rational — even in cases where people could genuinely afford a premium they go without because of a mindset that health insurance is something one gets through one’s employer. My sense is that if a family has a middle-class life with all the accoutrements (single family home, cable, meals out), and a job change leaves them without insurance, there’s a fairly strong likelihood that that family would deem health insuranc unaffordable if they had to sacrifice one of these markers of middle-classness. And someone leaving Medicaid due to success in a job hunt would never even consider a basic, high deductible policy.

I have a lot of issues with Obamacare, which I hope to write about later, and one of them is the way they’ve made insurance overpriced for the young by requiring cross-subsidies, but I am curious about what the “exchange” enrollment rates will be with respect to these groups that don’t purchase insurance because they deem it to be too expensive.

Uncategorized

Previous Post

July 25, 2013

Catastrophic health care plans?

Next Post

July 26, 2013 Don't do it, Detroit!

Browse Our Archives

Select a Category Actuarial/Retirement Issues Politics Uncategorized

Select a Month September 2026 August 2026 July 2026 June 2026 April 2026 March 2026 February 2026 January 2026 December 2025 November 2025 October 2025 July 2025 June 2025 May 2025 April 2025 March 2025 February 2025 January 2025 December 2024 November 2024 October 2024 September 2024 August 2024 July 2024 June 2024 May 2024 April 2024 March 2024 February 2024 December 2023 November 2023 October 2023 September 2023 August 2023 July 2023 December 2022 September 2022 August 2022 July 2022 June 2022 May 2022 February 2022 January 2022 December 2021 August 2021 June 2021 April 2021 February 2021 January 2021 December 2020 November 2020 October 2020 September 2020 August 2020 July 2020 June 2020 May 2020 April 2020 March 2020 February 2020 January 2020 December 2019 November 2019 October 2019 September 2019 August 2019 July 2019 June 2019 May 2019 April 2019 March 2019 February 2019 January 2019 December 2018 November 2018 October 2018 September 2018 August 2018 July 2018 June 2018 May 2018 April 2018 March 2018 February 2018 January 2018 December 2017 November 2017 October 2017 September 2017 August 2017 July 2017 June 2017 May 2017 April 2017 March 2017 February 2017 January 2017 December 2016 November 2016 October 2016 September 2016 August 2016 July 2016 June 2016 May 2016 April 2016 March 2016 February 2016 January 2016 December 2015 November 2015 October 2015 September 2015 August 2015 July 2015 June 2015 May 2015 April 2015 March 2015 February 2015 January 2015 December 2014 November 2014 October 2014 September 2014 August 2014 July 2014 June 2014 May 2014 April 2014 March 2014 February 2014 January 2014 December 2013 November 2013 October 2013 September 2013 August 2013 July 2013

TAKE THE

Religious Wisdom Quiz

What does Revelation say will wipe away every tear from their eyes?

Select your answer to see how you score.

An angel God himself The river of life The tree of life