That doesn’t make any sense. Why would insurance companies rather pay for the $150 bottle than the $15 if they are going to charge you only $10?
Insurance companies AREN’T paying for it. We are. That’s why.
Higher prices = higher margins.
Um, I would beg to differ, at least in our case. We focus a great deal on making the consumer aware of these types of things in order to keep costs down. We’ve been pioneering Consumer Driven Health plans focused on educating consumers and open market competition to bring health insurance costs down. Of course, we don’t have 15% per year rate increases as a rule either. In fact, we just had a 15% rate cut a month or so ago.
Not quite. More claims at higher prices = low margins. Since the co-pays are the same, the insurance companies want you to get the generic one.
That doesn’t entirely clear it up.
What you wrote, Goddess would be right if you had insurance where they told you, “OK, you’re just going to pay us $1000 a year for insurance, and just increase each year by the price of inflation.” Or, if the insurance company was really interested in keeping prices down – and some are.
But it doesn’t always work that way.
The insurers come back to the company each year and say, “we paid out $3,000,000 to your company last year. We need to raise your rate.”
With nice, low prices and small margins, they have less room for growth.
If you didn’t pay enough for that medicine with your premiums THIS YEAR, you better believe you’ll be making up for it NEXT YEAR.
That’s the type of thing that comes into play with all businesses. My wife makes jewelry, and the price of gold has skyrocketed last couple years.
If she had a piece of jewelry with $50 worth of gold in it two years ago, she might have sold that for $350. (7x material costs is normal retail).
Now, that gold is $100, she’s not selling it for $400 and just eating the markup. That piece might now retail for $700 (other considerations come into play, but that’s the gist of it). She went from a $300 profit on the piece to a $600 profit on the piece.
Same reason Exxon has had record profits. They don’t care if the global price of oil is high. They’re not only NOT eating it, they’re making MORE money off it.
(Dave, can I email you?)
I don’t know how I want to phrase this exactly, but I think they WANT you to buy the cheaper one on a micro-level. That’s going to help them out right now.
But at a macro-level, higher costs for EVERYTHING (doctor visits, machinery, lab tests, x-rays, drugs, etc.) are the things I would equate with the price of a barrel of oil. And higher prices on those things are going to mean higher margins for the insurers.
Sure. It’s in my profile or use weirddave at gmail dot com.
Insurance companies aren’t all evil. They are working to control costs. Someone has to.
Your employer might be paying $9000-$10000 per year for each family’s coverage. That sounds like a lot, but the insurance company has to pay all the associated costs from that amount. All your doctor visits, prescriptions, adminstrative fees, etc. I don’t think that the insurance companies are making out like bandits.
One problem I see is that we now expect so much more from our medical care. Whereas 50 years ago you might have a chronic sore knee, now you go in for $10-20000 worth of orthoscopic surgery and cartilage replacement. Someone has to pay for these additional costs.
I think HSAs could help control the costs. It would make people consider whether it’s worth spending some money on a doctor visit. But the problem is if the employeer does not contribute to the savings fund. Maybe what we need for employer sponsored HSAs would be that the employer needs to fund 50% of the savings account. That way the employer is not just pocketing the premium difference.
Well, they might try, certainly, but if it’s their business model they are stupid.
The next year, they would have to increase their premiums by enough to make up for the shortfall last year as well as covering the cost increases for the coming year, which means greater chances for losing customer, either to another company or simply being priced out of the market.
As for your example, if your wife can get $700 for the jewelry but only charges $350, then her pricing isn’t optimal. But just because her costs double doesn’t mean that the prices she can charge will double. Markets simply don’t work that way.
The point of the whole story was not my wife’s pricing, but that higher prices on raw materials translates into higher margins.
That’s even more the case when you are selling a necessity like gasoline or health insurance.
There is something like this actually, called an HRA (Health Reimbursement Account) where the employer helps set up funded accounts for employees to use (for medical purposes). The problem there is that too much of the insurance program and the savings associated with it is in control of the employer.
With the HSA, the employee portion of the cost is still reduced, premium wise, but the Savings Account portion rests solely in the hands of the employee. Although the employer certainly CAN contribute to the HSA of an employee, it’s the employee’s right to fund it and thus have the benefit of the tax write off associated with it. Thus, the HSA monies contributed will always remain those of the employee, regardless of their job status, whether they change insurance plans, etc etc etc.
Actually an HRA isn’t anything like that, It’s a benefit program that gives additional tax deduction for small business owners in certain situations. If you qualify for an HRA, it will save you more money than an HSA, but the two aren’t similar at all in structure. I have an HRA myself, trust me, it’s extra write offs, not any type of savings account. Are you thinking of a flex spending account?
Ummm… I think a single trip to a psychiatrist would have been more useful than the idiots at that hospital were. Even without insurance, she would have been in and out for under $250 and probably prescribed a non-lethal dosage of pills.
Wow. That seriously sucks. I am sorry to hear this story.
My understanding of the HRA is that an employer group takes a ‘lesser’ benefit plan – say a plan with much higher deductibles – then the employer agrees to reimburse employees for a portion (or all) of the deductible, if/when deductible is used.
Money reimbursed to employees is indeed tax deductible (just as if an employer funded an employee’s HSA). If the group is “healthy” or are low utilizers the employer saves on premium with the lesser benefit plan while not reimbursing as much deductible as they would a less healthy group.
Money not reimbursed is kept/saved by the employer, and the employee, while perhaps having less premium sharing on the health insurance plan, is not actually saving anything else if they don’t use the insurance.
That’s interesting. I didn’t know about that, although it probably won’t give much incentive for the employee to monitor their health care usage if they can’t keep the unused savings. The advantage of the HSA is that the insured can decide whether they want to spend that $100 on healthcare now or save it for retirement.
I heard a little blurb on NPR today criticizing HSA’s saying that people who are interested in them are the young, and well-off, and that the effect of people moving into them will be creating a different “risk pool” for the people who remain. And that’s going to mean $$.
“Criticizing” might be too harsh a word. “Reporting with a noted opinion” might be pre accurate. Could spark an interesting public debate.
Question I have. . . when you use an HSA, and are paying for your doctor bills up front, do you have to pay the cash rate or the insurance rate?
For example, I went to the doc about a month ago. The bill to my insurance company was $300. My insurance company noted on the claim their “discounted rate” was $170, paid their percentage and sent me a bill for mine. I’d have no problem paying the whole $170 to go to the doctor, but I think the $300 is ridiculous. With an HSA, would I be allowed to pay the discount rate, or would I have to pay the cash rate? Having to pay the cash rate would, for me, make it feel like a scam.
I think the whole medical pricing structure needs to be changed. I remember when I was shoping for health insurance for the start up I worked with, we could NOT find a plan that accodomated our desires, which was to pay a larger copay ($50-$100) for a regular doctor visit, and a larger percentange of the other bills (like a 30/70 or 40/60 PPO), only without a huge deductible attatched. There seemed to be only “Good”/expensive plans with low co-pays and low dedictibles, and “Cheap” plans with high-copays, high percentages, AND a high deductible.
Our idea was for it to be less of a gamble. By having a lower deductible, no one feared having an early illness or injury that would present them with a $2000 hospital bill that needed to be paid right now. Instead, we’d spread the risk/savings out across the year, paying more for each medical treatment instead of a fortune for ones in January and nothing for ones in December.
Well the debate in this thread has been HSAs as an individual choice given today’s market. And for some they can be a good idea. They are a good idea in particular if you statistically expect to be healthy for a while. If you develop a chronic illness, even a relatively minor one, like asthma, then they become a bad choice unless you’ve put multiple years of deductables away by then, because those expenses wil be recurring year to year. Now some big corps will offer several options and incentivize (with cost sharing) the choosing of the cheaper options. A currently healthy young person may be wise to choose the HSA; someone with a chronic health problem would be an idiot to do so; someone who develops a chronic health problem would try to switch if they could.
The inevitable result is that traditional plans become overweighted with higher cost individuals and become more expensive until they are unaffordable for all.
Broadening this discussion to the problem of healthcare costs and coverage for our society as a whole, HSAs fail miserably. They increase the costs of coverage for those with chronic health issues, they provide good coverage only for the short term catastrophe that occurs after a few buffer years, but poor coverage for anything major that spans more than one fiscal year. And they do nothing significant to address the drain on the system that results from our massive number of uninsured or from the employer model in the first place.
(btw, Weirddave, are HSAs portable? If so to what degree?)
Obsidian asks
and previously this question was answered along the lines that you get the insurers rate. I doubt that. As a provider I do not know, nor do my receptionists know, the payment schedule that the each payor uses. Some pay well on some codes and crap on others, another will do the exact opposite. They even out to an acceptable level or we’d not continue to take the contract. We find out what they pay though when they pay. Methinks that you’d be stuck being charged full retail, which of course is not what we ever really expect to get from any individual payor on the vast majority of our codes.
HSAs may be a good choice for a healthy individual but they are no solution for our healthcare crisis. Step one is to recognize that our current model of employer based coverage with pre-tax dollars amounts to a huge public subsidy for healthcare coverage but one that benefits those with higher incomes the most. Even with that public subsidy the cost of providing healthcare coverage is coming out of real wages. For those lucky enough to have coverage at all. It is an albatross around the necks of major US companies in the world of international competition. It often adds major costs in administration costs for many reasons including as a direct result of its lack of portability. It leaves a great many with no coverage and more with coverage that would still allow a major illness to bankrupt them. As a model it must be scrapped. There are many good alternatives, we just need the political will and leadership to implement one of them.
I think everyone here is in agreement that HSA’s are not the end-all solution to the healthcare crisis. I’m not sure where that conversation ever even came into the discussion.
What prevents this from being a productive… conversation (I won’t use the word ‘debate’ 
) is that for most part, there is initial confusion as to what an “HSA” actually is. In discussion, whether it’s on the STMB or in person, when people say “HSA” they are generally referring to TWO distinctly different things:
- A health insurance plan that is deemed HSA “qualified” by the government, and
- The actual Health Savings Account.
These are two very separate things. It gets confusing because, like I said, in discussion use of the term HSA typically refers to both #1 and #2 above. Again, they are separate programs that simply “work together”.
However, you can EASILY have #1 above, the Health Insurance Plan, WITHOUT the HSA. If there were no such thing as an HSA, there would still be some people (mostly small employers) who would want this kind of health insurance plan, because it would mean paying less premium for his or her employees.
But you can’t have #2, the HSA, without #1, the qualified Health Insurance Plan, first. The HSA simply SUPPLEMENTS the health insurance plan, by allowing people to have an additional quasi-individual retirement account (IRA) which allows them to dip into that IRA for medical purposes (without early tax withdrawal penalty).
So about the “discounted” rates. YES, especially as a PPO, even IF you have the HSA that supplements your insurance plan, you STILL use your insurance card for services either way, which results in the VERY same discount as if you did NOT have a HSA-qualified insurance plan. It’s still insurance, with an insurance company.
The insurance company wants as much discounts applied as possible so that an insured does NOT hit their deductible. Why would they want anyone to hit the deductible? They wouldn’t.
So, for people that DON’T have heavily subsidized insurance plans through their (probably large) employer, would you rather pay for your health insurance through high premiums, or pay lower premiums (although the HSA-qualified insurance premiums still seem high in relation to ‘regular’ insurance 10/15 years ago) and still have the ability to bank the difference, write off the contributions and either use or save what’s left?
I think the only debate here is whether or not these kinds of plans will improve, overall, certain things that have been driving our health insurance nation backwards, such as over-utilization of drugs and services and/or lifestyle habits. Inevitably, in my opinion, the answer is NO, because there will probably never be a day when enough of our population, as a % is on such a plan. Could it help reduce uninsured levels? Perhaps… but there are just too many people in large organizations, even small companies, that don’t realize their insurance is subsidized to make a real difference… too many people are now “used” to what the more recent perception of what health insurance is(that perception being cheap copays and low total out-of-pocket exposure). All of a sudden everyone felt like they were ENTITLED to these things, all the while there are millions and millions of people WITHOUT insurance all together.
Now, how much fucking sense does THAT make?
But that is not how it works with regular PPOs. Under your deductible you are charged full retail. And it is your responsibility.