Pretty much the entirety of the populace has been up in arms in recent months over the Healthcare Reform Bill. I won’t get into my feelings on the actual politics of it all, except to say that no actual reform was accomplished by the bill. There’s really only two ways that healthcare can work, the free-market way or the Government Option way. I happen to prefer the free-market way, because I believe our government is horribly inefficient and mostly incompetent, but that’s neither here nor there. The fact remains that the recent Healthcare Reform Bill still leaves us in that gray middle area we’ve been stuck in for the last twenty years. I.E. it doesn’t make healthcare more affordable or better.
There are many “cost containment” factors in the bill, but price controls rarely work so I’m sure our premiums will still go up. My biggest gripe with the bill is the health insurance mandate that requires every individual to purchase health insurance. Other than the fact that I don’t think the government should be able to require you to purchase anything, I can see the logic behind the decision. However, there’s two things that really put the kibosh on that whole idea. 1.) Insurance companies can no longer reject you based on pre-existing conditions (At least once this thing kicks into gear in 2014). 2.) The penalty for not purchasing insurance is far less than the cost of the health insurance. This invokes a little thing that’s referred to as the law of unintended consequences.
Here’s how this works: requiring that everyone purchase health insurance is supposed to add people to insurance rosters, creating a larger pool to distribute costs across. However, if you’re young and healthy like me, it might behoove you to forgo health insurance and just pay the annual penalty. Then when you leave a goodly portion of your epidermis on the pavement in a freak grocery cart accident you can just call up Blue Cross/Blue Shield and get you some insurance and they gotta pay for it.
There’s always a chance that youngans won’t bail, but if they do, premiums for those with insurance will go up significantly. All that will be left in the insurance pool are high risk people who cost the insurance companies a large amount of money every year. The young bucks who fill out the profit margin aren’t there to subsidize the old-timers’ Crestor and Cialis prescriptions. Thusly, prices go up. I can illustrate this point quite accurately with my current job. Let’s take a jaunt through the wholesale tire industry.
The tire industry is an interesting one. Most independent tire stores are run by grizzled old men who then hire fellow grizzled old men or soon-to-be grizzled young men as employees. When these employees grow tired of busting tires, they either open their own shops or if they’re articulate enough, move up the chain into sales for a tire distributor. That’s the position I find myself in today.
With the exception of a couple of guys that work in the warehouse, I’m at least 15 years younger than anyone in my company. It’s a similar situation at the other branches of our company. Many of the older employees have reached the age where the insurance company has to pay out on a regular basis; for doctors visits, prescriptions, treatments, whatever. I think five of my coworkers have gotten colonoscopies this year alone. That stuff adds up.
In contrast, in the nearly three years I’ve worked here I’ve only been to the doctor once. I got a blood test, a checkup, and a urinalysis. (A lot of work for an ear infection, don’t you think?) I also got a generic Amoxicillin prescription. What’s that, maybe $250 worth of insurance payout, if that much? Bottom line, the insurance company profits off of me, which I have no problems with as long as my premiums remain reasonable. Unfortunately, that’s no longer the case.
My first year here, the amount deducted from my weekly paycheck for healthcare premiums was $27. That’s between $115 and $120 a month, totally doable. That’s not much more than I was paying when I was independent and this is before taxes are taken out, plus the coverage is better and it offered dental insurance, which is a must-have for me and my tremendously British set of teeth.
My second year here, they offered a two-tier health plan. I chose the least expensive option, with lower co-pays for doctor’s visits but higher deductibles for hospitals and specialists than the previous year’s plan. This plan ran roughly $37 a week. That comes to about $160 a month, and that’s no small amount of change. What kept me on this plan was the fact that I was using nearly $1500 worth of dental insurance a year, and since the premiums were paid with pre-tax dollars and the benefits were slightly better than the independent plan I’d previously had, I felt that it still made financial sense.
In 2008, I made just enough money to put me into the 25% tax bracket, but due to the economy and the raising of my commission thresholds, in 2009 I made a lot less, dropping me into a lower bracket. This really cut into the benefits of paying for my healthcare pre-tax. For example, in 2008 I saved $6.75 in taxes on every paycheck ($27 x 25% = $6.75) but in 2009 I only saved $5.55 per paycheck ($37 x 15% = $5.55) despite the fact that my premiums were $10 higher per week. On top of that, any benefit I may have seen from a lower tax bracket was offset by the ridiculous amount of capital gains taxes I had to pay (the benefits of investing in a down economy).
Yesterday, our company had a conference call to discuss this year’s healthcare plan. They’ve done away with the two-tiered system, leaving only the lower benefit plan I was already enrolled in. The only real difference to me is the price jumped once again from $37 a week to $44 plus $5 for dental coverage (This is the first time we’ve been able to just select or decline dental coverage). Grand total: $49 a week. That’s a bit steep considering what I’m getting and the fact that I expect to remain in the same tax bracket this year as last. I decided to explore my other options.
My Current Plan (all the relevant stuff)
- $44 a week plus $5 for dental, $212 monthly, $2548 annually
- $25 co-pay for doctor’s office visits
- $500 deductible on hospital visits, insurance pays 80% after that
- $300 deductible on emergency room visits, insurance pays 80% after that
- $500 deductible on out-patient procedures, insurance pays 80% after that
- $5000 annual out-of-pocket max
- Total maximum cost to me in a year $5500 (deductible plus annual max)
I did some threat assessment and decided that since I haven’t been to the hospital in 15 years, the likelihood of me going in the next year is rather low. I skateboard, which increases my chances for a broken bone, but my mom works for an Orthopedic surgeon, so I’m gonna call it a wash. My eyes are good and I can purchase our company’s quite good dental insurance for $5 a week.
Here’s my alternative plan, the Tonik Part-Time Daredevil Plan
- $85.11 a month plus $5 a week for dental, $1281 annually
- $30 co-pay for doctor’s office visits
- $3000 deductible
- Insurance pays 100% of hospital and out-patient procedures after $3000 deductible is met
- $3000 annual out-of-pocket maximum
- Total maximum cost to me in a year $6000 (deductible plus annual max)
As you can see, my alternative plan costs roughly half as much and doesn’t sacrifice much that I’m likely to use. In a worst case scenario, if I’m in a bad car wreck and I wind up in the hospital for a few days, I’ll only pay a max of $6000. That will by no means bankrupt me. On the other hand, with my current insurance, that same incident can cost me up to $5500. Not a whole lot of difference. The difference in premiums is all the stuff in between. An older person who is going to go for annual checkups and physicals and colonoscopies and the like will greatly benefit from my current plan. Me? Not so much. Even when you factor in the potential tax savings ($2548 x 15% = $382.20) I’ll still save nearly a grand. That’s a third of the deductible for my alternative plan. Additionally, I intend on using all of my allotted $1500 in dental insurance in my continuing quest to not have any real teeth to worry about.
My current plan includes several extra benefits that I’m highly unlikely to use such as a prescription drug plan and some specialist coverage that doesn’t have such a high deductible. These additional benefits are used almost exclusively by the older workers in my company, and every year as the average age of our company creeps upward, more people utilize them and our premiums creep up with it. It’s a fact; old people cost more to insure, and since my company is dominated by older folks, with very few young, healthier adults to even out the mix, we each pay more each year for a little less.
Besides demonstrating how to effectively compare healthcare plans, the point of this tome is twofold. 1. To demonstrate exactly what will happen if young people are able to loophole their way out of a healthcare plan when this reform bill kicks in. (BTW, I’m not advocating that we increase the penalties. If given my druthers, I’d say repeal it and start with something that makes sense.) 2. To demonstrate how a la carte health care plans are far more reasonable than their one-size-fits-all corporate counterparts. As always, choice and competition will lead us to the promised land.
Addendum: It’s important to understand how group insurance rates are calculated. Here’s an excellent article that sums up my point and explains how your health insurance rates are calculated. The Tonik healthcare plan is so cheap comparatively because I’m a low-risk candidate with a high deductible. The insurance company stands to make a lot of money off me and others like me at a rate that’s mutually agreeable.
UPDATE: I applied for the Tonik Healthcare Plan this morning and the total cost of my plan came to $114. A bit more than the $85 that’s advertised, but I’m at the upper end of the age spectrum for the plan, so I still think that’s reasonable. I’m going with it.
