Yeah, about those outrageous insurance premiums

If today you worked for the company where I did for nearly fifty years and you wanted health care coverage for you and your spouse, the monthly premium is $2,517,27 for a plan with a $750 deductible plus out-of-pocket limit of $1,000 more per individual.

Outrageous premiums, right? Someone is making lots of money don’t you think?

But the thing is there is no insurance involved. This is a self-insured plan. The insurance company that processes claims does only that and receives a fixed monthly fee per covered person per month to do so. The claims administrator has no financial risk, no incentive to deny claims to make money.

The “premium” reflects the cost of the health care provided to the covered individuals and little else except the claim processing fixed fee.

This is how virtually all large employers operate. Such plans cover about 60 million Americans.

Still think the health care cost problem is an insurance problem?

4 comments

  1. Perhaps a bit disingenuous to say the claims administrator has no financial risk, or incentive to deny claims. If they want to keep their client, it serves them well to minimize costs to their clients by scrutinizing each claim. Less approved claims= more satisfaction and ongoing contracts for the administrator.

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    1. Not if they want to keep the client. Claims will be fairly adjudicated according to plan terms. Otherwise they put the employer at risk. Why would an employer want less approved valid claims? Yes, they want to minimize spending, but few employers are out to commit fraud on their workers. At least I hope we haven’t sunk that low.

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  2. So, are there other, lower value options? If so, the cost of this highlighted option is likely affected by anti-selection. Other factors may also be at work.

    Otherwise, at $30,000+ per year, the employer would be better served with offering only a MEC of minimum value at “affordable” levels with an opt out incentive of perhaps $750/$1,500 per month so workers could enroll in the public exchange, or, if married, a spouse’s employer’s plan, or if older Medicare.

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