Shopping at grocery store, Lakeland, Florida Marion Post Wolcott - Photographer 1910
As the health care reform debate rages on, I’ve been trying to figure out how to save money on monthly health insurance premiums. As a sole proprietor, I don’t have an employer contributing to premiums, so I was interested in a high-deductible plan.
Kaiser Permanente, my previous insurer and a well-known and respected HMO (Health Maintenance Organization) in the San Francisco Bay Area, denied my application for an individual high-deductible plan, not an uncommon outcome in applying for individual plans according to this July 21, 2009 publication of The Commonwealth Fund.
So I went shopping.
Anthem Blue Cross accepted my application for a $3500 deductible HSA-compatible PPO plan. My premiums went from $590 per month with Kaiser, major medical only, to $330 per month with Anthem, major medical, prescription drugs and dental all included. I already had my routine annual checkup and mammogram with Kaiser earlier in the year, so if I don’t need to spend money on medical care for the rest of 2009, I’ll save $1300. Sounds great, doesn’t it?
Let’s consider a realistic medical expense, colorectal cancer screening, and compare two different health plans.
My significant other Martin, who is covered by Kaiser through employment with the San Mateo County Community College District, recently underwent a routine sigmoidoscopy that required further investigation: within 45 minutes he was moved to the next diagnostic step, a colonoscopy, underwent the test and was released within one hour. No hassle making a new appointment and redoing the uncomfortable test prep. The test results were normal, not a single out-of pocket dollar was spent, and now Martin doesn’t need to worry about colorectal cancer screening again for several years.
At 51, I am also due for colorectal cancer screening, but didn’t take care of this while still insured with Kaiser. I was curious to see what the deal is with my brand new high-deductible plan. The deal is that I must pay for it. The plan does offer some routine screening that doesn’t get applied to the deductible, but not a sigmoidoscopy or colonoscopy. Those tests get applied to the deductible.
So now I have to decide. I can pay a $75 copay for a Fecal Occult Blood Test (FOBT) at one of the Anthem HealthyCheck centers and avoid a more invasive but informative test, or pay the full out-of-pocket expense for a sigmoidoscopy or colonoscopy. I’d already decided that the FOBT doesn’t adequately screen for colorectal cancer. Based on Martin’s experience, colonoscopy seems like a better choice than sigmoidoscopy, because you need one anyway depending on the outcome of the sigmoidoscopy, and each test involves the same invasive prep to clean the colon. And a sedative is given for the colonoscopy, making the whole experience less unpleasant.
According to High-Deductible Health Insurance Plans: Efforts to Sharpen a Blunt Instrument published in Health Affairs, July/Aug. 2009, 28(4):1145–53, lots of Americans in my position will avoid the test if it must be paid for out-of-pocket.
The prospect of paying for my colonscopy did annoy me at first. Using the MyOptions section of the Anthem web site, I looked up and compared colonoscopy costs of various providers in my area. The costs range from $880 to $2000, and include the physician office visit, prep prescription, test, etc. $880 is definitely not cheap, but I’m already saving $1300 on premiums for the remainder of 2009! Not only that, but since I can pay for the $880 via a distribution from my tax-deductible HSA account, the cost is really $720. Why am I complaining if I can purchase a life-saving colorectal cancer screening test for $720 and still have $580 savings leftover from my $1300?
It’s a no-brainer. I’m getting the colonoscopy because it’s worth it and I can afford to buy it.
Here’s a tip regarding the HSA account: choose your own custodian. Anthem provided paperwork to set up J.P. Morgan Chase as the custodian, but the account would have been a regular debit bank account, like a checking account. I wanted to be able to invest the funds in Vanguard mutual funds, so I checked this Vanguard HSA accounts page and linked through to Health Savings Administors, a provider offering HSA individual accounts with Vanguard funds, and set up my HSA account with the entire $3000 2009 contribution invested in Wellington™ Fund Admiral Shares(VWENX), a balanced fund. If I get the colonoscopy in 2009, I can reimburse the cost from my HSA immediately or at any point in the future.
High-deductible HSA-compatible plans may not be the right choice for everyone, but to me these plans seem like smart shopping.
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I agree with your assessment and I too have signed up for a high-deductible HSA health plan.
To me, these plans represent the true nature of “insurance.” I never understood why health insurance was considered by many (if not most) so differently from other forms of insurance, expecting coverage for planned health care at a lower cost than the care itself.
For example, your home owner’s insurance doesn’t cover a new roof for your home when the time comes for replacement. And your car insurance doesn’t cover oil changes. Why would it? If it did, then the insurance company would have to build in the price of all scheduled maintenance into the premiums in *addition* to covering risk of unforeseen loss or harm. Because of the inefficiency of offering 3rd party payments for known and scheduled costs, the non-risk portion of the premiums would cost *more* than the maintenance itself.
The only way to build a system of health care coverage to moderates the *actual* cost of care for those who need it is to spread the premiums so the young pay for the old. This is represented best by the single-payer systems utilized in other countries and our own Medicare system here in the US. These systems bear little resemblance to the notion of insurance, however, where companies collect premiums to hedge against risk and profit from investment of “float-capital” available between payouts against claims. The profitability of these companies isn’t based on spreading known costs, but rather spreading risk.
What we know both intuitively and from available statistical analysis is that keeping people healthy through regular doctor visits and age-appropriate standard tests/procedures (or preventative care) is a critical component to lowering the overall spending on health care. It is most unfortunate that – under our current system – the broad populace has demonstrated an unwillingness to pay out-of-pocket to maintain their health and therefore, the insurance against risk concept appears inappropriate for a broader solution.
It’s a shame that the prospect of health care reform in this country has been beaten back to nothing more than health insurance reform/regulation. It seems now that to ensure passage they are prepared to eliminate the public option, as well, which will take away the only hope of a provider that is chartered with providing affordable care before maximizing profits. Further, the proposals for regulating the system in such a way that insurance companies *must* underwrite anyone regardless of the known risks (pre-existing conditions, etc.) without broadening the premium base through mandates, etc. this means the cost can only go up.
The debate for how to pay for health care will rage on and on. On the one hand, in a free market society, every individual should be responsible for making their own health care choices. Market forces would then deliver health care at competitive prices. In our society we generally recognize that the free market does not always provide the best results. For example we have the concept of Public Utilities, Public Transportation Districts and the Military all of which function outside the free market system. The purpose of these systems is to pay for goods and services that are of benefit to the entire society. The funds to pay for these goods and services generally come from some form of tax.
If health care is viewed as a benefit to the entire society, then it should be paid for a out of tax dollars just like roads, water lines, sewers and the military. At the same time it becomes a responsibility of all members of the society to live healthy life styles. The benefit and the responsibility go together. I am not particularly in favor of a system where tax payers assume the cost and the individuals do not accept the responsibility to live health life styles. Why should taxpayers pay for smokers, over-eaters and anorexics?
Since most people do not like to be told what to do or how to live, the best approach to health care is probably the high deductible health insurance policies, The individual is motivated to look out for their own interests and are also insured against catastrophic costs. However, there needs to be some way to provide health care to those that can’t afford it. In the long run society benefits as a whole if all have access to health care.
My colonoscopy – which, from what I’ve read, you really should have – and related expenses cost $3781 in 2006. The amount “allowed” was $1409. It seems atrocious to me that while the insurance company paid $1409 for this procedure, I might have been billed $3781 if I didn’t have insurance.
Jason, I see your point about “planned maintenance” – and I’m surprised I never thought of it in those terms before. However, it might well be that many people cannot afford $3781 for a colonoscopy.
I like Jason’s analysis of insurance against risk, agree that it’s probably not appropriate for a broader application, and also agree that we need a public option to make it work. I do think the high-deductible HSA-compatible plans are the best option for people who ARE willing to pay out-of-pocket for maintenance.
I agree with Martin that a public option subsidized via tax dollars should have some kind of accountability component but have no idea how to implement one!
Jeri makes a good point that a colonoscopy may cost more than what the Anthem web site shows for various local providers. One thing I can do is obtain the quote from the provider, then call Anthem to find out the negotiated fee. Given that the test is only needed every 10 years if you’re healthy, $3781 still seems like a reasonable maintenance cost to absorb, and I CAN afford it using my $3,120 annual savings in premiums.
If our society was made up of people who demonstrated personal financial responsibility, then HSA-based plans with tax savings for out-of-pocket scheduled care and insurance against the risk of unforeseen costs would be the way to go. Everyone would manage their regular care by maintaining savings to cover the costs and insurance for all would be much cheaper than it is today.
Same for Social Security. We would eliminate it in favor of IRA/401K plans with favorable tax treatment.
Both would provide subsidies for people below a specific level of income, just as Medicaid does providing health care for extremely low-income individuals today.
Unfortuantely our society is not known for its fiscal responsibility and thus we have decided to fund social safety-nets to provide for the “greater good.”
To Martin’s point, it has nothing to do with fairness. It is not fair that our federal tax dollars should be used to fund FEMA in providing for the victims of Katrina, when they chose to live below sea level, protected from the destructive hurricane forces only by the faulty levee walls.
People in this country, on the whole, are not financially responsible nor are they likely to take care of their health needs if the cost of doing so is pitted against the cost of a new flat-screen TV for the rec room.
So if we decide that health-care is something we should absorb for the greater good, as we have done for retirement income, unemployment insurance, medical care for the elderly and the poor, etc. then we do so accepting that some will take more from the system than their fair share and others, unfairly, will shoulder the cost because it is simply the right thing to do.
Kinda off topic, but I love the picture you choose to use for this post! Sorting through potatoes can be a bit like sorting through financial options such as health insurance premiums.
Congratulations on finding a health care option that works for you! I went through a similar shopping experience about a year ago when I was laid off from my job. For me, the hard part was finding a company that would even accept my family due to my son’s preexisting conditions. Luckily, I quickly found a job that provided group coverage. That experience is one reason I favor a Public Option for health care. . .more about that over here: http://www.howtostayafloat.com/2009/08/guest-post-why-we-need-a-public-option-for-health-insurance.html