Good coverage; low premiums; choose your best deal … why not?

I just read in the WSJ that Republican efforts to replace Obamacare are based on the notion that Americans want more choice, they want lower premiums and good coverage that is affordable and provides good value. And I want a six bedroom mansion on the water that is affordable. Our chances of reaching our goal are the same … zeeero‼

Let’s be clear; your premiums are not driven by administrative costs or insurance company profits. They are driven by the amount of health care paid for by your insurance … end of story. Competition for your insurance among different companies is virtually irrelevant.

img_0975Let’s say you could eliminate every penny of overhead from premiums (which of course is impossible) and your $750 monthly premium dropped by 15% to $637.50. Then what? Well, it keeps going up at a rate determined by the amount and type of health care services used by the insured population and the cost of each of those services. In large part that is determined by the makeup and health status of the people who are insured.

If you are given a choice of plans and because you are young or healthy, you pick a bare bones plan for lower premiums, you assume the risk of high out-of-pocket costs. If you are not that healthy and you and your family pick a better plan with lower OOP costs, but higher premiums because you expect to use the insurance. Now, if everyone makes such rational decisions guess what happens? The better plan’s premiums continue on an upward path based on the growing number of people who enroll because they will be using health care.

Premiums will always reflect the claims experience, just like auto insurance reflects your accident record and violations record because you present a higher risk.

You can lower the premiums for some people for a fixed period by letting them select a plan to their advantage, but in doing so costs are shifted elsewhere (such as high risk pools or generous insurance coverage), but they do not disappear, somebody will pay.

The only fair approach for spreading risk and costs is to shrink the number of risk pools, not create more. I for one will be very glad to pay my share of premiums for any type of insurance and never collect a penny in claims.

shell_game_lg_clrThe very concept of insurance is based on some people subsidizing others with their premiums. But you see, many people don’t see health insurance that way and that’s why Republicans get it wrong and why there is little hope we can solve the health care affordability problem any time soon.

Americans don’t want insurance, they want coverage for everything but at premiums reflecting minimal coverage and they ent someone else to pay. 


  1. I do not know what the Trump team will do with healthcare, but within 10 years we will have single payer healthcare. Why do I say this. We tried Obamacare, we tried Trumpcare and both did not deliver what was promised. We need a system I will call it Medicare for all. every worker and employee pays a 5% tax and gets access to all medical services in their region. Co-pays are determined as a percentage of income for all. If people know they will have to pay a co-pay every time they run to the doctor because their kid has a runny nose, or they have an upset stomach maybe they will think twice. I know people who do this all the time, because they are not having to pay up front, or someone else is paying the bill.


  2. Medicare sets the prices they will pay for individual services provided by physicians. As I understand it, Medicare does not set prices for what they pay for drugs. I find the hands on approach regarding doctor’s charges and the hands off approach for drug company’s charges inconsistent. I’d appreciate any reasonable explanation.


  3. Actually, buying insurance across state lines could make a big difference. Take states like New York and New Jersey, where the state legislature had so screwed up the individual marketplace, that PPACA was an improvement, that it REDUCED the cost of coverage for many people in the individual marketplace.

    Pre-PPACA, my then < age 25 daughter could buy a HSA-qualifying HDHP in Ohio for < $150 a month ($1,500 deductible, out of pocket expense maximum of about $5,000 or so, 100% preventive coverage). This year, in New York, as a 29 year old in good health (better than almost all who read this blog) she is paying a taxpayer-subsidized (yes, this is not a joke) monthly premium of $345 for a plan with a $3,300 deductible, and a $6,500+ out of pocket expense maximum.

    So, yes, buying across state lines may well make a difference for those who live in states with stupid legislatures – including my daughter – if the individual insurance market is returned to a pre-PPACA basis and she can also buy across state lines. I would also note that her primary care physician is out of network – unwilling to treat those with public exchange coverage.

    She's headed to Washington DC to protest on Saturday (million woman march) – and I took a few minutes yesterday to remind her that repeal of PPACA with a Republican substitute would HELP, not HURT her. She reminded me that such an improvement might only be temporary, 10 or 20 years, until she ages. I responded that PPACA is self-immolating as we speak in terms of the public exchange options – it wasn't going to last 10 years anyway.


    1. Clearly an insurer based in Ohio could not sell a plan to a person living in NY at the Ohio price. Where they reside determines prices (and care practice to some extent). In addition, they would have to use or establish local provider networks.

      The idea that somehow Obamacare is an actual health plan escapes me and why a physician would not accept an exchange plan based on that makes no sense. I can understand if they don’t want to accept a fee schedule, but beyond that why would they even know where a patient obtained his insurance other than the carrier which they are likely accepting in any case.


  4. I totally disagree with your conclusions that Americans don’t want to pay their fair share. They DO, but they want it to be FAIR and reasonable.
    And they don’t want it to cover everything. I’m a 49 year old male and pretty sure I’m covered for obgyn services. Silly.

    I am glad you used the automobile reference. Do you use insurance for routine checkups? Of course not. Remove insurance and let providers compete for my cash based on quality, service, and cost. WIN! And remove the middleman costs in the process.

    Finally, the ACA goes WAY beyond just getting insurance for everyone. It is a HUGE cumbersome ordeal for employers. Remove the burden on employers and let people shop across state lines for the policy that works for them. We don’t get auto and home insurance from our employers…. We need to repeal the burden on employers


    1. If everyone buys only the insurance they need (or perceive they need), then it’s not insurance and it becomes unaffordable for some with health care needs. You would think differently perhaps if you had an expensive chronic condition. Shopping across state lines does nothing at all. Competition among insurers is not and never has been the issue.

      If you add a barebones option then the young, healthy people will select it because it costs less and the rest will concentrate in higher cost plans further driving up premiums. We need fewer not more options.

      I agree that some of the mandates on coverage are too much and drive up premiums, but people do not see paying health care bills as their primary responsibility. Trust me I managed health plans of all types for 50,000 people for nearly fifty years and I understand how people think about health care and paying for it.


      1. I agree that the insurance pools must be kept very large to spread out risk. I thought the purpose of insurance was to prevent financial ruin from known risks which many medical issues are unknown in advance.

        But looking at car insurance you get to buy three types of coverage: Liability, collision, and comprehensive. With health insurance I am guessing at what I am buying the insurance for; do I expect to break an arm this year or find out I have cancer? There is always an upper limit on totaling a car but cancer treatments is there a limit? I am guessing at what coverage I think I am going to get because you can call BC/BS on different days and get different answers. Different insurance policies cover different drugs, and you better hope that you pick the right plan before you get your next prescription. I also guess at how much out of pocket I will spend for the next year so that I can make a budget to determine if I can go on vacation or fix my sewer pipe.

        I would be happy if they went back to simple coverage; one for your doctor, one for major medical, one for drugs. I may pay more in the end, but at least I know who is paying what which is something I cannot do now because it is all combined for me. Makes it very hard to shop for health insurance.

        If the three options were available to me than more than likely it would cause me not go to the doctor (hooray lower cost for everybody from not using health care). For the past 10 years my results were the same year after year with no changes. I question half the visits and tests I took to now until this past Monday. My BP jump 30 points in a month’s time and now we have to figure out why. Between all of the medical opinions, drug company TV ads, and the Internet misinformation, I do not think I would ever be able to make an informed choice on my coverage. It always like a crap shoot. So I, like most people are going to fall back on how much out of my pocket this year is this going to cost me, what is the most comprehensive coverage I can get for the least price.

        Coming back to what people want to pay, I’ll pay but I don’t want to go bankrupt to get insurance coverage that prevents me from going bankrupting. It a circle.


      2. “People do not see paying health care bills as their primary responsibility”. This blows my mind and is a major problem. Where has the notion of personal responsibility gone in our society? This is exactly why HSAs and high deductibles are important. We need a society of educated healthcare consumers that know what they are paying for and making smart decisions. We need people to take responsibility for their health. Put down the junk food and go for a walk…. because if you are not healthy you will be penalized with higher healthcare costs. Young, healthy people SHOULD chose low cost catastrophic plans, and then take care of themselves to stay healthy. You pay higher auto rates if you drive poorly. You should pay more healthcare rates if you live poorly. The current system – pre PPACA and with PPACA – does not work because “people do not see paying health care bills as their primary responsibility”. Let’s change that mindset instead of giving in and making the problem worse.


    2. Dan, yes, many Americans are willing to “pay their fair share” – it is just that for many Americans of limited means, what is “fair”, relative to the actual cost of coverage, is simply too much for the family budget to bear – unless and until the purchase of health coverage receives as high of a priority as food, shelter, clothes – a greater priority than cable, a car, game consoles, eating out, and Dick’s favorite, tattoo’s.

      Like Dick, I used to lead the benefits function for a Fortune 100 employer (35,000+ employees, and 5,000+ retirees). I can confirm, from repeated, personal experience, that workers very much appreciated their employer-sponsored coverage – PARTICULARLY THOSE WHO WERE UNFORTUNATE ENOUGH TO HAVE TO USE IT!!! Those folks often understood the value provided. My employer-sponsored plan already offered coverage to dependents living in the employee’s household, regardless of age and relationship – so expanding coverage to kids up to age 26 had minimal effect. Similarly, the plan met almost all of the new PPACA mandates at the time the legislation became law – other than the fact that the plan had a $2MM per person maximum benefit. In fact, it was often the worker who only had modest expense who complained the most.

      However, that said, when I looked outside my organization (for example, I attended a pre-PPACA focus group in Cincinnati sponsored by the federal government), it was clear what people wanted – they wanted the best coverage YOUR money would buy. They couldn’t care less about “fairness” or “equity”.


      1. As I have said more times than anyone wants to hear, most people do not see spending their money on health care. For some reason spending $100 on an office visit (or $20 for birth control pills) is unaffordable, but spending the same $100 on just about any other non-essential item is ok … yes, including tattoos.


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