I was thinking about my health insurance premiums today and there’s something I just don’t understand.
Health insurance rates for a single employee where I work are $36 a month. For spousal coverage, add an additional $44, for a total of $80 a month. Have kids? Then you’ll need the family plan, available for $163 a month. This plan covers you, your spouse, and any dependants you may have.
Well, I’m a single parent with one child, so have to go with the family plan as that’s the only option which allows coverage for my son. However, it really does seem unfair that I must pay the same premium for the two of us as I would if I were married and had (heaven forbid) 20 kids.
Why do they charge for the family, rather than the number of people receiving coverage? Why should a married person receiving coverage for themselves and their spouse be charged less than half of what I’m charged? In both cases, there are two people being covered by the policy.
I know I have incredibly awesome health insurance…and I know I pay much less for it than lots of other people do…but it still does seem unfair that there isn’t an option to pay per person.
That’s an interesting question. It seems reasonable to conclude that the greater number of dependants would equal greater risk to the insurer. If I had to guess, perhaps it is cheaper for the insurance company to lump everyone into a few categories than to calculate a premium for every possible permutation of dependants and spouses and whatnot.
First, based on the prices you quoted, your employer is paying a lot more money than you are being charged on a per person basis. The fee schedule for you is being heavily supplemented by your employer. The amount that the employer chooses to pass on is a term of employment…if you don’t like it, you can ask to have it changed (and likely be ignored) or leave.
Second, your employer may have negotiated a contract with its insurance company which is based on the prices as they are passed on to you. As parties to a contract, they are free to work out whatever fee schedule they like. In addition, the employer can pass on those fees however the employer sees fit. If you are represented by a union, then the fee schedule would be negotiated by the union during collective bargaining.
Third, employers are not required by law to offer you health insurance. If you don’t like the insurance as it is offered, you can try and get your employer to make some changes. Just be careful not to push too hard. If your insurance is as good as you say it is, it sounds like you are getting a pretty good deal and you don’t want your employer to come to the decision that it is too much of a hassle to offer the insurance.
This is not neccassarily true, and in fact is the opposite in some parts of the country. More and more people are shouldering the bulk of the premium cost, with a lower and lower subsidy from their respective employers. Depending on specifcally what type of medical coverage you are talking about (HMO, PPO, Supplemental Health Insurance such as Dread Disease, heart or cancer policies), they may not offer any subsidy (espicially true for everything outside of major medical, which would be your HMO’s and your PPO’s). You would be hard pressed to find an employer that is willing to subsidize your supplemental health insurance. I get lucky, I get a discount on my supp health becuse I am an employee of the underwriting insurance company. Some health insurance contracts offered to employees are underwriting by the employer, and involves no direct insurance company. These types of policies are almost never subsidized by the company, because the whole idea behind it is that it is so much cheaper (though not always neccasarily true, based on morbidity experience). Though employer underwriting major medical coverage would probably be classified as extremely uncommon, if not rare.
[quote[Second, your employer may have negotiated a contract with its insurance company which is based on the prices as they are passed on to you.[/quote]
emphasis mine
This is not accurate. Premiums are based on a huge number of factors, but the major ones are; 1) Claim experience (also reffered to as morbideity rate). Obviously, the more claims paid, the more the ins is going to cost. 2) The genereal census of the eligible employees (are they too old on average) more females than males? (females experience lower mortality rates than men, but higher morbidity). not enough new eligible employees? (the more new employees you get that are eligible for the plan, the lower the all around claim experience is). Depending on your previous claims experience, premiums are set one of two ways: by past claims experience (say for the last three years), or if there is no claims experience available, then they have actuarial assumption tables that they can use. Saying that the premiums are based on the assumed amount (as a percentage of the whole) that the eligble employee will be paying is inaccurate.
As a friendly piece of advise from someone inside the industry (to the op’er anyway), I would suggest you contact an outside agent of major medical insurance and ask him to give you a quote for a similar policy just for your son, not you. Compare that monthly rate, with the increase you are paying when going from employee, to employee plus dependents. Often times you may find it to be cheaper to not have your son on your work ins. and to carry private outside major medical for your son. Also, is your current plan an HMO (more than likely), or a PPO? PPO’s have cheaper premiums (what you pay out of each paycheck), but conversely have lower benefits (which means if you have to actually use the insurance, you will pay more with a ppo than you would for an hmo for dr.'s visits, er care, surgeries, etc.). If you use your insurance a lot throughout the year, then go with the HMO, it is more expensive month to month, but much less in the long run, if used often.
megadave,
I don’t see how she could be getting health insurance on a ‘family plan’ for only $163 per month, without at least a 50% employee subsidy.
amberlei,
You are right it’s not fair. (life’s not fair generally) You can try to get things changed, but your going to piss off all employees with more than 2 persons in their family. HAve fun.
Sometime back in USA history, likely the 1950s, employees started offering flat rate coverage for the whole family. It dosen’t seem logical in todays world, but not many things are done because they are logical.
I think you are talking about my suggestion to find an outside policy for her son. If so, then I am not suggesting that she find a major medical for her and her son through an outside private agency, only for her son. Depending on her son’s health, among other factors, it may be cheaper.
Lets assume that she found a policy, decent PPO perhaps, that is going to cost her $85/month, just for her son:
In the above scenario, the increase to go from just her, to her and her son results in a net premium $127 more expensive each month. If her agent can find her one @ $85/month (not that hard to do if her son is young, male, healthy) then she is saving $42/month. This is what I was saying.
Also, a question for Amberlei: Usually when given the choices for whom shall be covered under the policiy you are given the following choices: employee; employee + spouse; employee + dependent; employee + spouse + dependent (or a “family” plan). Were these the choices you are given? Essiantially I am asking if it is going to cost the same even if a spouse is not covered.
I am not going to argue with Megadave on this issue, but I did want to make you aware of one thing. Many of the insurance protections that exist with employer health plans (like portability and short pre-existing condition periods) do not exist with private/individual plans. If you get your son an individual policy and he becomes chronically ill, his individual insurance policy carrier may dump his coverage. At that point you will have difficulty getting him covered under your employer’s policy without waiting up to a year.
Please be careful before you make these decisions. If you need to know which laws are relevant, you can call your state insurance commission and you can also read up on the Employee Retirement Income Security Act of 1974 and the Health Insurance Portability and Accountability Act of 1996. Good luck.
all excellent points db4530. Unlike Life insurance, or other insurance contracts, there are no laws preventing health insurers to basically say “We don’t feel like covering you anymore”, and “dump” your coverage. Although, if that were to happen, most companies consider that to be a qualifying event, and then allow you to add him to your coverage, even though it is not enrollment season (October - November). I know that if you get dropped from MediCaid, it is ALWAYS a qualifying event.
Also, if there is an existing problem your son has (such as asthma) then you can find private insurance that has no pre-existing condition clause (although nothing prevents them from writing the contract without a pre-existing condition clause, and then specifically excluding your son’s asthma from claim benefits), although you may pay slightly more for the coverage than you would have for one with say a one year wait on pre-existing conditions.
What all this points out is that if you do decide to go to an outside private source for insurance on your son, you really need to make sure that the agent knows what he is doing, and what he is talking about. It has been my experience that most agents do not know some of the minutia about health and major medical policies.
I could have the exact opposite question about my insurance.
We have 3 choices here - self, self and child(ren), and self and family. Notice that there is no option for self and spouse - if you have a spouse but no children, you get screwed for coverage, because the self and family option costs far more than the self and children ($365 per month for self/family vs. $152 per month for self/children).
When the powers that be here were asked about this, we were told that historically in their experience, two adults incur more medical expenses than one adult and up to 4 children, so this is how they decided to deal with it. This might be all right for older couples whose kids are grown, since they’d be more likely to have higher salaries, but I feel sorry for the young couples who don’t have kids yet and have to make a decision to pay out that kind of money or go with nothing at all for one spouse. The average staff salary here is only around $25,000.
This was a long-winded way of saying that in your particular situation it could be that your company has studied trends in what they pay out for each self/spouse/family configuration they care to study and made decisions on what they were going to offer and what people have to pay for it based on those findings.
Or, although it won’t help you right now, you could ask your employer to see about adding “Employee + 1” coverage to the plan. This is something designed for single parents who have one child - so that you don’t have to get the family plan, which I agree is unfair. It is MUCH cheaper to go Emp + 1 than Family. Are you positive they don’t offer it now? Every plan I’ve been in for the last 10 years has had this provision. In any case, you might ask your employer about adding it - it’s actually cheaper for them, if they are covering a portion of your premium, because they will be paying a lot less for Emp + 1 rather than Family.
romansperson: are you sure your Employee + child isn’t really Employee + 1 (whether that’s a spouse or a child)? Don’t take your HR department’s word for it - they might not understand how the plan really works - call the insurance company itself. Just a thought. You’d be surprised how clueless HR and management can be about what the exact provisions of a policy are.
Example: I have Blue Cross Blue Shield of MA. Our choices are:
Employee only
Employee + 1 (which means one child OR a spouse)
Employee + family (which means a spouse AND one or more children)
I’m telling you, don’t trust what the management says. Check straight with the insurance company.
Employers use the rates charged to employees to encourage certain behavior among their population. Because there is little regulation in this area, there have not been very many legal challenges to these regimes, and none have been successful (as far as I know).
Employers can charge employees whatever they want for the cost of coverage.
Employers might also not be offering an Employee and Spouse option because they want to encourage DINK (Double Income No Kids) couples to obtain individual insurance through each other’s place of employment–thereby covering less people in their own pool.
Unless you are in a union/bargaining situation, employer-provided health insurance is typically a take-it-or-leave-it proposition with very little power available to the employees. If the health insurance situation gets bad enough, however, and someone wants to see about getting union representation, then the issues can be more fully discussed between union and management (in a protected situation). Be careful, however, because you might find out that on average the employer is paying a lot more than you think and the employer might not feel so giving if you are threatening to unionize the workplace.
Thanks for all the advice y’all! I think I need to call the insurance company and see if they do in fact offer an employee +1 option. I don’t really mind the premium so much, as I’ve paid more for less comprehensive coverage in the past, but it’s the principle of the thing. Thanks again for all the input!
We do not have the “Employee +1.” It’s employee + child(ren) - doesn’t matter how many, and employee/family, which is the option that includes the spouse. Adults cost them more, so they charge more. A lot more.
I work for a university in their health policy department and you’d think they’d come up with some better ideas. So far they haven’t. I think we need to, desperately.
JFTR: Health insurance is one of the few insurances left that still has a lot of cross-subsidies between policyholders. Your car insurance will have been calculated based on more factors than you can shake a stick at - age, location etc. etc. but a somewhat different attitude is taken with health insurance.
The classic example is age. Health insurance theoretically should go up a lot with age, but it doesn’t. Similarly medical history should be taken into account a lot more than it is.
I’d say that your “number of children” case is just one more example of this.
Why is this? Well that’s a tough one to answer. If one company started getting really strict with their rating factors then the others would probably have to follow. But I guess the reasons that the market isn’t touched are as follows.
Firstly, it is looked upon as a long term insurance, in which people stick with the same provider for years. As such cross-subsidies between age classes as least tend to even themselves out. Just conjecture, but maybe they price “family” for 1.8 kids and figure that those who have one kid may well go on to have three and cross-subsidise themselves and those who don’t go on to have two or three won’t have enough of an impact to change the system.
Secondly (and more importantly), health insurance is one hell of a political hot potato. The insurance companies daren’t charge “fairly” because then those who really need the coverage won’t be able to afford it and all hell will break loose. The whole system is permanently walking on eggshells and (to switch metaphors) it doesn’t pay to rock the boat.
There are other reasons too, but those are the main ones.
So it’s a shame for those of us who end up paying more than they theoretically should, but when its subsidised by work I guess we’re directly paying less than the theoretical rate anyway. Either way, it is what it is. Sorry.