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An Expert Dilemma

Jun
26
2008

I want to ask your help. I have to make a financial decision regarding my health insurance and given the confusion of the system – one I’m supposedly expert in – I need advice.

Now realistically you’re not likely to be much good to me. Why do I say this? Well, the data says you’re dummies.

Last week Trizetto, a private tech company, put out a survey that said as much. While 80% of consumers surveyed were concerned about health care costs, less than a third knew how much their family spent.

It gets worse. Around 60% of Americans, including the vast majority of those under 65, get their insurance from their employer. How much are employers paying each year? Well according to Joe Public, not that much. Most don’t know or think it’s less than $5,000 per family. In reality it’s around $9,000.

But I’m not one of the blissfully ignorant who gets his insurance at the company trough. Well, not quite. And hence my cry for help.

As a solo consultant I buy my insurance in the gong-show that is the individual insurance market. It’s an convoluted process in which you attempt to persuade an insurance company that you are healthy and worthy of their lowest premium rate. About four years ago I succeeded in this endeavor and Healthnet issued me a high deductible policy at the low price of $99 a month. I’m paying nearly $200 a month now because of premium increases, but that’s still way less than I would have paid if HealthNet had decided that I wasn’t a good risk.

Now California, where I live, doesn’t do much to protect individuals entering the insurance market but once you’ve bought an individual policy, the insurer can only increase the rates with everyone in your age group. But if you let the policy lapse and then try to buy another — usually because you went back into the corporate world and then left again — they’ll re-examine your medical history. If anything has gone wrong – surgery, illness, funny blood work – you might see your rates increase by a factor of 4 or 5. More likely, you won’t get insurance at all.

That’s not currently my problem. This is: I got married.

My wife has a job and health care benefits. She put me on her company plan for an extra $50 a month.

This year my individual premium is heading to $250 a month. Now most of you are saying, why is he continuing to pay $250 a month when his wife is paying $50 to cover him on her plan? The obvious thing is to cancel my HealthNet plan.

But what happens if my wife comes to her senses and stops being my wife? If that happens I’d be better off keeping my plan at $3,000 a year because if I have to buy insurance again in a year or two, and they decide I’m not a good risk, it might cost me $12,000 a year!

It gets more complicated. If my wife stops working, we could buy into her company’s plan under something called COBRA for another three years. But if we decide not to do that we might have to re-apply in in the individual market as a family which means being underwritten again – and running the risk of being a bad risk. So, perhaps we wouldn’t be able to buy insurance, and we’d both be in deep trouble!

And like the rest of the dummies in the survey I don’t know how much my wife’s employer plan actually costs. When you pay for COBRA you pay the whole fee: the employer does not chip in. So I need to find out, and work out the possible future costs. And if you figure into that the relative chance of my not being married and therefore not being able to buy into my wife’s plan my $3,000 in “extra” insurance starts to make a kind of odd sense.

But this all begs a question: Why? The current health insurance system has so many complex wrinkles that an alleged expert (me!) is not sure what to do. There aren’t any good choices, and the decision analysis requires PhD-level economic forecasting. Which makes Republican nominee John McCain’s plan to force these decisions on more people, by giving tax incentives for people to drop their employer’s plan, a mite puzzling.

If this keeps going long enough, the political revolt may create a stable universal insurance plan that will cover me. OK now I’m really kidding.

So can someone tell this dummy what to do?

Share  Posted by Matt Holt at 9:36 AM | Permalink

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