For my entire life someone else was in charge of my health insurance. First it was my parents, then my graduate school, then my employer. But, now I find myself responsible for my own health insurance. In essence, my family is a test case for the proposition that a portion of the upper middle-class and beyond should enter the market, buy high deductible plans, and through negotiation help bend the health system’s cost.
In July of 2010 we entered the private insurance market. Because of my service with the board I knew that the combined cost of my prior company’s contribution and mine was about $1,350 per month for a low deductible and co-pay plan. Could I obtain coverage at less cost?
My first barrier was who was selling private health insurance in Colorado? It was essentially an exercise in web searches and phone calls that ended only when I went back to the local BlueCross/Blue Shield affiliate. To this day I am not convinced I discovered and understood all the alternatives. The process created the sense of panic I encounter picking a plumber from Angie’s List and the phone book. A central web exchange similar to a travel site would have aided me.
Nevertheless, we were able to buy a high deductible and high co-pay policy at around $400 per month. Meaning that over the course of a year I would pay $4,800 and have $11,400 over my old plan left over for deductibles, co-pays, and the unexpected. This was before the tax impact of any HSA (healthcaresavings account).
Service directly through the agent exceeded any prior employer experience in my career. I was always able to get my agent via email and phone and monitored her Twitter feed for general updates. My sense of control, the quick response time, and the use of up to date technology were a new and welcome development over employer-sponsored health insurance.
None of us were sick or on prescription medication, so from an insurance perspective we had covered our catastrophic risk and assumed the non-catastrophic risk ourselves. We could make money or lose a little in a policy year depending on events.
The healthcare reform bill impact was indirect on us. The exchanges, pre-existing condition, and expanded family coverage were either in the future or irrelevant to us. But we did get hit with a twenty-five percent increase at the advent of the new year. Blue Cross/Blue Shield explained the increase was due to costs related to the new healthcare law.
Having worked in corporate America I know the impossibility of really understanding if the new law was the cause of new rates. I used to negotiate fuel surcharges with major retailers even though we had forward hedged fuel costs. We had no actual bottom line increase, but we did have the perception of our costs rising. The rise in fuel costs was an event to make money. Without the ability to easily comparatively shop, we will never know what was really behind that twenty-five percent premium increase.
Then, one of us did develop a surprise. Not a catastrophic illness, but one of those little hernia like events that requires minor surgery to correct. We were going to find out if we as consumers could drive a better result.
One of the major things even in private insurance that the insured benefits from is the carrier’s ability to negotiate rates. When we went to the doctor we paid, but not at retail rates. We paid the preferred rates of the carrier. This was the most valuable feature of the insurance to us, but also the Achilles’ heel of the experiment.
Once we knew the nature of the problem Val began calling the hospital, the doctor, the anesthetist, and the other providers trying to get an estimate. We were told flat out there was none. Essentially, because we had insurance the rates were set. The fact we were paying them gave us no bargaining power. We simply could not get an estimate and the alternative was to forgo the surgery. This was not buying a used car – I could not walk out of the dealership, play brinksmanship, and wait for a follow-up call to close the deal.
The doctor organized the surgery and care, but not the cost. Which in my career is the single most important cost control mechanism. Someone must be laser focused on individual and overall costs everyday. Could the surgery be done with less people, with more generics, or outside a hospital in a clinic? Someone has to conduct real data driven cost benefit analysis. You cannot just negotiate set rates for procedures and forget about which combination is effective and cost efficient.
After the surgery the bills began to flow into the mailbox. I had the same feeling I have in every turnaround of a business – this place is fouled-up because no one has a clue what is going on. My favorite bill was the hospital bill for $14,000 discounted to $4,400 because of our insurance. When you see any pricing mechanism in a mature industry that varies almost 65%, you are looking at a system where the market is opaque and not working efficiently.
Even with the increase and the unexpected we will make a little money in ourexperiment versus my old employer’s program. We may have played the game effectively for higher income people and made money, but we had no market impact. The price game remained one between the insurance carrier,the doctor, and the rest of the providers.
Whether reform is in the new healthcare law or an alternative, reform must come for the high deductible and co-pay insurance route to be anything other than another dead end of rising premiums.