Reassessing Your Health Insurance and Healthcare Needs
America’s declining insured population is being replaced by a growing UNDER-insured population
Healthcare in America, including health insurance, costs up to twice as much as other developed countries. Here’s why…
We use twice as much medical care as we need – largely due to deceptive medical “bill-padding”;
Our healthcare system is fragmented and poorly coordinated, earning a shoddy 51% efficiency rating;
We have twice as many specialists as primary care doctors & a payment system that encourages them to perform unnecessary tests and procedures;
There’s little, if any, competition among health insurance companies in over 9 out of 10 major U.S. markets;
Health insurance overhead & profits drive up medical costs by 25% or more;
Hospitals & doctors shift costs to the privately insured to make up for government underpayments;
Medical rip-offs by doctors who invest in facilities they refer patients to at 7½ times what other doctors spend;
Defensive medicine: doctors hospitalize patients to protect themselves from lawsuits at record low levels;
American doctors over-rely on medications that often cause hospitalizations that increase spending; &
Continuing cost-shifting to consumers that means your healthcare spending is likely to double over the next ten years.
“More Skin in the Game”
Obamacare will substantially reduce America’s uninsured population, but it will very likely substantially increase its underinsured.
These include those forced into lower-cost, high-deductible health insurance plans that require they pay more of their medical expenses out-of-pocket. This is likely to be far more families than at present due to a recently revealed “glitch” in the Obamacare legislation. This is expected to deprive many families of subsidies for family health insurance plans purchased through insurance exchanges scheduled to take effect in 2014 (see below for more on this).
Some will think this is a good thing – that patients with “more skin in the game” (i.e., more of their own money at risk) will consume fewer medical services. Reducing the insulation that insurance provides between patients and the direct costs of their medical care will cause them to become more prudent medical consumers.
That’s the theory, at least.
The experience to date, however, tells us that many Americans in high-deductible health insurance plans simply choose to forego needed medical services. And it’s often not the least bit prudent.
They do so because they can’t afford to pay what is often the full cost of a test or procedure for which they’re fully responsible. If they haven’t yet met their large deductible requirement before their health insurance kicks in, they’re on the hook for the full cost until they do. And this can cause them to rationalize not getting the care they need.
And it could get much worse.
One survey found up to 30% of employers indicated they “definitely or probably” will stop offering health insurance coverage altogether in 2014.
And when limited to only those employers with a high awareness of the health reform law – a group that will grow as the law nears full implementation in 2014 – the percentage increased to over 50%.
Another survey of Fortune 100 companies found that 71% of them would save money by dropping healthcare coverage for employees and paying the penalty imposed by Obamacare for doing so.
In fairness, this may not materialize, as it failed to materialize in Massachusetts in the wake of its health reform precedent. The Congressional Budget Office nevertheless has predicted 12-20 million Americans will lose employer-based health insurance coverage once Obamacare has fully matured.
Researchers attribute the more extreme potential for a massive 50% reduction in employer-sponsored health insurance with Obamacare to a perception that employees will have more health insurance options once it’s implemented.
Unfortunately, none of them are good options.
Health insurance premiums have already spiked since passage of Obamacare as insurers pad their reserves in anticipation of the uncertainties of reform implementation. According to the human resource consultancy Aon Hewitt, average employee out-of-pocket costs for healthcare have increased by 38% since 2010 vs. 29% in the three years before that.
Their 2012 Healthcare Survey found that employer spending on employee healthcare costs over that six year period increased by 40%, while employees’ out-of-pocket and payroll costs for their healthcare increased by 82%, virtually erasing any income gains during that six-year period.
The Massachusetts precedent with health reform suggests more of the same – and an even faster escalation of health insurance premiums as Obamacare is implemented. That experience may be tempered, however, by the deteriorating economy that’s caused premium increases to grow less aggressively over the past few years – although they still roughly double non-healthcare inflation.
Even under current circumstances, the average employee with health insurance is paying about 40% or more of her or his total medical costs out-of-pocket.
And a glitch in how the Obamacare legislation was drafted means that fewer families will receive subsidies for private health insurance purchased through insurance exchanges. The problem revolves around how “affordable” health insurance is defined.
The law defines it based on the cost of individual insurance, not family coverage that can cost three times as much. This means that many families won’t be eligible for subsidies and will either need their employers to make up the difference or pay it themselves. The differential between individual and family health plans approximates $10,000 a year, so this is a major flaw that will hurt a lot of Americans financially.
All these factors combined put most Americans in the self-insurance business whether they like it or not.
So while overall healthcare spending is expected to double over the next 10 years, your out-of-pocket healthcare costs could actually TRIPLE due to even more aggressive shifting of these costs to employees and self-insured consumers. The trend to co-insurance in which employees are responsible for a percentage of their medical bills rather than a fixed deductible amount – along with the loss of family coverage subsidies that were expected under Obamacare – may prove the biggest factors.
Reassessing the Excesses
This fundamental shift in how our medical care is paid for requires a fundamental rethinking in how we evaluate and purchase health insurance – and in how aggressively, or conservatively, we use the medical system itself.
There’s plenty of excessive spending going on in American healthcare, after all – and these excesses offer plenty of opportunities to reduce your medical spending.
When the dominant dynamic in health insurance is the shifting of medical costs to employees and self-insured consumers, there’s only one intelligent response.
It’s time for those employees and consumers to reconsider whether all their medical costs are truly essential or not.
This is the kind of fundamental adaption to change that Darwin suggested distinguishes the survivors from those who perish – the living from the extinct.
It’s important – critically important – to start paying attention to this threat to your financial and physical survival and that of your family.
But it’s crucial in doing so to distinguish between what’s probably a rip-off – see Our Healthcare Sucks if you doubt the reality and prevalence of financial rip-offs in American medical practice – and what’s prudent medical care for your particular needs.
This is seldom easy.
But can you and your family afford not to learn how to navigate our medical morass to avoid this dire financial future?
 Study Sees Cuts to Health Plans. Wall Street Journal, 6/8/11.