Nope. Nothing of the sort. The question is about how the health care system as currently instituted works. Truth be told, I’m of the opinion that private health insurance sucks, but I’m starting this thread because I don’t have an understanding of how the system works and my opinion is probably not reasoned out accurately.
I’m hoping to get an impression of what the costs actually are for a hypothetical average person, both personally and to his employer, and what the care “costs” beyond dollar and cents. Once I (and we as a consensus) get close to a fair guess at the monetary costs I can begin to explore and understand the other realities of the health care system further.
I simply think that I, and likely others, can understand thing better by applying tangible examples instead of speaking in large generalities and political rhetoric.
I don’t know if I am a good example or a terrible example for you but my nuclear family is an insurance company’s worst nightmare. We have had about $600,000 in claims in the past five years for all five of us but especially for my baby daughter that passed away from a rare illness and for me. We have paid about $20,000 out of pocket for everything else combined. I always make sure I have PPO insurance because it is the best you can get under a group plan. That is what insurance is for or else we would be near bankrupt.
As to costs for the average person, I can give you rough estimates for plans. Group health insurance for an employee is about $150 a month for a one person HMO or maybe even less. Family plans are maybe $250. PPO’s cost more but not a whole lot more. $300 a month is a rough figure for a PPO family plan (I am erring on the slightly high side here). The employer pays roughly half to 2/3’s.
The rest just depends on how much you go to the doctor and how many prescription medications you are on. The copays are for doctor’s visits are about $20 - $40. Prescription drugs cost anywhere from $5 - $50 with prescription insurance. I know actual rates for many large corporations but I can’t list them directly. I just gave averages.
Now, private plans are a different story. If you have pre-existing conditions, you are basically screwed.
They may be obliged to give you a policy, are they obliged to cover a pre existing condition ?
My understanding would be that if Jon moves directly from company A to company B, then his diabetes is a pre-existing condition an there is no guarantee or legal obligation for company B’s insurance company to cover the costs of it (though they probably would for something routine as diabetes, if on the other hand he comes down with some complicated and expensive side affect of diabetes there is no guarantee they would cover the costs, or what kind of out-of-pocket expenses he would encur)
That is not true. Believe me, I know both professionally and personally and I worked on these plans for lots of major corporations for almost 4 years and talked to the insurance companies daily to build the systems that make their plans work at a detailed level. That is the whole point of a group plan. It is a benefit that can attract people with talent but also have pre-existing conditions like diabetes or heart problems. Once you sign up for a group plan, that is the end of it. Someone with a pre-existing condition is treated the same as everyone else. Someone may come along with a weird exception but that is certainly not the rule for group plans.
That’s what portability means. Normally, if you are uninsured and go on a group plan, there is a period of time when your pre-existing conditions are not covered. If you switch from group plan A to group plan B, then that period of time for plan B begins when you started plan A. So for example, if the period of time is 1 year, and you’ve had plan A for three years, plan B will cover your pre-existing conditions from day one.
This is why one of the key to Obama’s current plan is to make everyone part of the same risk pool so that they can change plans, and people buying private insurance can get the same benefits as those buying group insurance. I hope I don’t hijack this thread, I’m trying to say this in the most neutral terms possible.
I understand that there are many extreme cases such as yours and nearly infinite permutations of circumstances. From a learning point of view I think it’s helpful to try and tackle one clearly defined scenario at a time. This is why I started with what I presume to be the most basic and common scenario, a single, employed male under a large group policy.
So far learning how one employees illness can potentially effect the group’s policy and premiums is interesting. And learning how one large group policy can vary greatly from a small group policy in terms of volatility.
I know there are charts that plot the premium costs by age and I’m guessing that your $150/month estimate for a single individual might be a little on the high side. IIRC my last policy was $65/month for a very basic HMO with a high deductible, I think $5,000. To upgrade to a PPO it would have doubled to I think $125/month or so. IIRC there was also some middle plan that was a PPO with a high deductible and a medical saving pre-tax savings account. I’m sure for a 40 or 50 year old male a $150 single policy would probably be pretty close.
So far I think that the $400 monthly estimate is pretty close. I’m eager to hear if any subsequent posters have more insight or dispute any of the numbers proffered.
Right now the most troubling fact revealed is the premise that a employee with a costly pre-existing condition, especially one than can lead to potential future organ failures and such, is essentially trapped into working for one type of company. He essentially cannot ever hope to start his own business or become self-employed. That’s a cost that’s difficult to put a price tag on, but it’s a cost nonetheless.
It certainly is notable, but I do really want to do my best to keep politics out of this thread. Certainly future GD threads I participate in could be better informed as a result of some of these overlooked details.
I wasn’t really talking about high deductible plans but those are certainly an option and attractive to many people who expect few, if any health issues. My numbers were for zero deductible plans and are only a rough estimate on the slightly high side. I still have access for the exact figures for lots of large corporations just because I have the files saved on my home computer but I can’t quote them here. Large companies often offer a menu of options including high deductible plans and Health Savings Accounts (HSA) which are tax free. There are also tax breaks if you suffer a catastrophic health problem and have to pay for it in the tax year. In short, it can get complicated if you have major health issues.
As a side note, it is illegal not to have health insurance in Massachusetts now and some of it is offered on a sliding scale. I am not sure if any other states do that but I don’t think so.
Correct. Your pre-existing conditions will be covered seamlessly between group plans if you maintain continuous creditable coverage. This is one reason to think long and hard before going without insurance between jobs. Because if you have a gap, they can be excluded for a while.
Something we haven’t touched on too much yet is John’s new problems if he should find himself in the private insurance market. As long as he is in a group plan, his employee contribution will be exactly the same as the person sitting next to him without diabetes. Group plans can’t change employee contributions based on health conditions, or anything else at the individual level.
In the private insurance market, though, they know the expected cost of those doctors visits and medications and supplies (not just the copays). To give him coverage that didn’t exclude diabetes, they would charge enough extra to cover those costs. Plus, they know the actuarial cost of everything he’s now at higher risk for that has the potential to be very expensive - heart disease, ER visits for blood sugar reactions, blindness, amputations. They would also factor that risk into his premium. Alternatively, they might refuse to insure him or refuse to cover the diabetes. Which one of these happens varies based on state law and the company’s choice, but none of them is real good for John. Some states are beginning to develop high risk pools to help with this problem.
Another thing about the employer coverage is that it is paid pre-tax. In some cases the self-employed can take a tax deduction for health insurance out of profits from their business, and their are some tax deductions available for some unemployed, but the tax treatment is more consistently favorable for the employer plan.
Agree with Rumor_Watkins that the consequences are greater at a small company. Ultimately it doesn’t matter much if the large company self-insures. The actuarial issues are the same and they are required by law to keep their self-insurance function separate from their employment function. They need to act like a separate insurance company, just using their own money.
While I’m sure some people have been fired for raising their company’s health costs, it is illegal to do so under ERISA and would violate the favorable tax treatment of the employer’s plan. The small company’s legal options would include to go out of business or to discontinue offering health coverage to all employees.
It sure could be. A high school buddy of mine, perfectly healthy, owned a small but fast-growing business (maybe 10 employees). Then his wife had a baby born with non-functioning kidneys. I can’t even fathom what the medical expenses must have been for that poor baby.
When it came time for him to renew the company’s group health plan, the insurance company jacked the premiums so high that he was essentially forced to shut down the entire company, instantly throwing everyone out of work. Luckily for his baby, he at least had the option of going to work for Daddy, who is a top exec at a multi-billion dollar company with group health coverage for employees and dependents. A bunch of his employees ended up starting their own company, which does work for my employer, so I see them now and again - this all must have happened 10 years ago, and they are still pretty bitter about the whole thing. And they were mostly young, single, healthy guys with no dependents - imagine if they’d had kids with preexisting conditions!
To work in round numbers, generally think of the average cost of health insurance for 1 adult to be $5000. Employers vary in the % of premium they cover, and premiums can be reduced by adding deductibles, but that just shifts more cost to employer.
Deductibles may result in some reduction of true costs by discouraging overuse, but the flipside of that is people postponing care until things get worse and more expensive–John went to his primary care and paid a copay. If he had a $1000 deductible, he might have been facing close to that at the full cost of 2 office visits and all the lab tests for a new diabetic. Even at $75-100 for the office visit, he might have put that off. Then we might have been looking at a couple of thou in ER and ambulance costs when he passed out a week later.
It appears that our estimates are in line with these cites.
Interesting information. I framed the initial questions the way I did, to emphasize recurrent and lifetimes costs, to try and diminish the comparatively small differences in up-front one-time costs. Certainly it could be pricey for John to have to take an ambulance at some point and pay a hefty deductible but even if those costs reach into the range of $5000 it’s not terribly significant in the larger scope of things when you talk about lifetime health care costs.
Certainly there’s another debate to be had on the pros and cons of high deductibles/co-pays and where the balance needs to be struck. I think that might overreach the goals of this thread.
In the above cite it fails to make a distinction between an HMO and PPO. It simply cites an average for small businesses. It also fails to note what constitutes a “small” firm. It does state that small businesses pay 18% more for the same services as a large firm. Good numbers. Since John works for a large firm we can be thankful that he’s getting that 18% savings with his $400/month.
To shift the gears of the thread slightly. I ask this:
How would John’s costs differ if he had opted for the companies PPO option instead of the HMO. I presume that the cost to the company is similar between the two choices. How would having the PPO effect his diagnosis and treatment in the short term and long term? How would it effect his costs beyond the premiums?
The major benefit to a PPO is that you just get to pick your doctors and see specialists most anyway you want. An HMO usually means that you are under managed care and have to get some approval to see doctors other than your primary care physician. There is also the chance that your current primary care physician isn’t enrolled in your HMO so you would be forced to switch. Your insurance company also gets involved more. There is also the factor of being out of the immediate area and having a health problem. Most HMO plans don’t pay the same way for being on vacation and having a health crisis for example. PPO’s tend to do better but all of this depends on the plan. They are all over the place. In an ideal world, you could just trust your primary “gateway” physician and insurance company to give you whatever care you need but it doesn’t always work out that way. I, personally, would never enroll in an HMO if I had a choice for a PPO. If everything worked out perfectly, the results and the costs would be roughly the same but there is a risk with an HMO if there is a major problem and that is one reason why they are cheaper. The cost to the company is usually proportional to the employee contribution for HMO’s and PPO’s.
Is the employer cost different? I would assume that the difference in price is passed along to the patient since they offer both. If having people on PPO cost the employer more it seems unlikely that any employer would choose to offer both at all. Or is there some ancillary benefit to the employer which motivates them to offer both types?
From a long term treatment perspective does it matter if John has an HMO or a PPO? Is he just paying the extra $100 a month for the PPO just for the convenience of being able to bypass the PCP and the referral system?
How does the vacation thing differ? If John has a HMO and he breaks his leg skiing what does he have to worry about from a care perspective? What about if he’s on a PPO? Isn’t emergency care the same regardless of where the ER is? I suppose that leads to the question, is there likely to be a difference between the ER care that an employer offers from plan to plan?
I know packages change and insurance plans change, but if a given employer offers 2 options is the ER details likely to be lastly different between the two?
I have a spreadsheet in front of me that tells both employee and employee contributions for lots of corporations. Health insurance is a benefit but there are lots of other types of benefits that you can sign up for that are subsidized and the company certainly won’t hold it against you. That is just what large companies do to attract talent. It is a core part of being competitive.
It matters for some people. I have literally needed the best doctors in the world for a few situations and I see some of them now. I am not sure I could get referrals to Harvard Medical School doctors under an HMO. That doesn’t usually happen to the average person but it could happen to anyone. My PPO paid to have a genetic test developed in France so that we could have our third daughter. Any child of ours has a 25% of death with 100% certainty and they proved that what happened with daughter #2 would not happen with daughter #3 while she was in utero otherwise there had to be an abortion. I am very greatful. I got the insurance statements and the cost was more than most people’s houses. Thank God I don’t want anymore children.
Out of area emergency room costs are usually covered but you can easily get into a situation where you just need milder care and it will cost you. I suppose you can just play the system and use the emergency room anyway but that isn’t ideal.
In theory, an HMO should be the least expensive way to provide care. In practice, based on working in HR for a company that offered several of both, that wasn’t always the case 100% of the time, but it was the general rule. There’s a lot of variation in HMOs. Some you seriously only see doctors who are literally the HMO’s employees (cheapest), others are networks of participating doctors who are in private practice. So in real life the PPO would probably cost the employer more, and the employer would pass some or all of that difference on to the employee. Another common scenario was the plans costing about the same, but the PPO having a deductible and/or higher copays.
IME genuine emergency ER care in the US doesn’t vary much. What does become problematic with HMOs is non-emergency care away from home. If the HMO is a local network of doctors, they resist paying that something fierce. You may not in fact be covered for non-emergency care away from home or (especially) out of the country. Read the fine print of the policy.
Back to the previous thing on deductibles, don’t downplay that issue too much. For example, if his passing out episode because he postponed getting care had happened while he was driving, or led to organ damage, it could have big, long-term consequences. And actuarially for some percentage of people it will. That’s why the incentive thing is important, which my example didn’t really play up.
What are the approximate costs of an HMO versus a PPO, employer and employee contributions combined?
So have we established that John could switch from an HMO to a PPO after his diagnosis so long as he waits for open enrollment? If so, for the test case I’ve created, is there a major motivation for John to opt for the PPO while he’s 100% healthy other than the ability to bypass referrals that might come up?
Also, if you have a PPO how likely/common would it be for extraordinary methods you employed to be approved. I’m guessing that most people who do lay out for the PPOs wouldn’t be getting the treatment you outlined simply because they checked the PPO box and paid the extra $100/month.
So it’s reasonable to assume that such limitations would create minor expenses and wouldn’t end up being a major financial hit?
Unless I’m missing something, the car crash or organ damage scenarios would still only be a burden up until the deductible kicks in. Right? IIRC my coverage had a $5000 annual cumulative deductible. That’s a lot of money, but in the grand scheme of things it’s not going to send anyone with employee coverage into bankruptcy.
When talking about our fictional John Smith, he and his employer are laying out about $4,500 a year plus a few extra hundred a year for co-pays and medications. Adding $5000 is a big increase out of pocket, but it doesn’t really change things much when you are talking about ~$5,000 per year for the next 30+ years of his working life.