Human health care

Pills coming out of a bottleLast time I talked about health care, it was because I’d gone to the vet and seen how much health care can cost for animals. Today, I went to the doctor and physical therapist with my friend Nathan.

Nathan has been on crutches for three months now, ever since a bad bicycle accident. Initially, the doctor diagnosed a fracture near the knee, but a specialist examined Nathan’s MRI and recognized that he had torn one ligament and ripped another. They used surgery to fix the torn ligament and replace the ripped one. The ripped ligament, the PCL, is much more rarely damaged than its twin, the ACL. Unfortunately, it’s also harder to fix. Maybe that’s why the replaced PCL failed after four weeks and Nathan had to go through a second pass of surgery. So far, the new PCL replacement seems to be working out–the swelling is down and Nathan’s knee is recognizable again.

Nathan has incurred incredible expense getting this far, and there are months of physical therapy ahead. Based on Anthem’s cost estimations, the two MRIs cost $1,500-3,000 each. The first surgery probably cost between $15,000 and $20,000, while the second surgery cost $4,000 to $10,000 (outpatient surgery is significantly cheaper). The initial emergency room visit might have cost as much as $1500. So far, physical therapy has cost $600 and will cost at least that much in the coming year. That means that Nathan’s medical bills for 2008 total over $25,000.

Most people in the US get their health insurance through their employer. It’s a common non-salary benefit because employers are avoid paying taxes on their portion of the health insurance premiums. Maggie tells me that you normally get to pick from between one and five plans (based on the size of your employer) from one provider. Being self-employed, Nathan’s situation–and mine–is a little different.

As owners of the business, we don’t get additional tax breaks, which makes a group policy less attractive. The premiums for a group policy were actually higher too, because once we start paying the premiums, our provider would have to cover anyone who worked for us, regardless of health.

Our first step was to do lots of research. There are lots of plans out there that cover lots of different things in different ways. Do we want an 80/20 copay? An HSA? A high deductible with low premiums? A low deductible with high premiums?

Eventually, we decided to open individual high deductible health plans along with health savings accounts (HSAs). Each year, you can put up to $2,800 (in 2008) into an HSA fund, which can earn interest (currently, mine is earning 4%). This money is tax-free as long as it’s spent on medical expenses. HSAs can only be opened in conjunction with certain health plans, basically those with a deductible over $1500. Given the fluctuating nature of our business at the time, it made sense to us to get the very basic health coverage, which would be cheap, and flesh out our coverage by putting money into our HSAs during better months.

Once we picked the type of account (HSA-compatible), we got quotes for appropriate plans from dozens of providers. In addition to deductibles and premiums, some plans had percentage or fixed-amount co-pays (where you pay a portion of the bridge between your deductible and a larger deductible). Others had co-pays for drugs but covered treatment entirely once you got beyond the deductible. Presumably, there are also service differences between companies, but it proved impossible to figure out which were bad. Nobody likes their health insurance provider, so poor word-of-mouth was the norm.

Although we used an insurance agent, who is a salesman representing multiple providers who gets a cut of every premium you make, we found the best quote through our own search. Many large providers will give you online quotes for multiple types of plans, which makes comparisons a little easier.

In the end, we got catastrophic coverage, a $5,000 deductible. The plan only cost about $50 a month, which was worth it for the peace of mind. Once business picked up, we could get a better plan with a smaller deductible.

Unfortunately for Nathan, his accident happened before business got good enough. Still, of the approximately $25,000 in costs he’s incurred, Nathan will only have to pay about $5,600 between this year and next year. If his second surgery had happened only two weeks later, in 2009, he’d have been on the hook for another $5,000.

Nathan’s accident pushed me and Maggie into reevaluating our own insurance recently. Once again, we did a lot of research, although we did stay with the same provider. Instead of two $5,000 individual policies, we now have a $5,000 family plan (which is the equivalent of a $2,500 individual plan). In addition, our policy includes $1,000 in a “health incentive account” which is basically a pool of money managed by our provider that covers any initial costs each year. If we only have major medical expenses every couple of years, this could cover most or all of our deductible. Of course, this plan–plus a maternity rider–costs $380 a month, much more than the $130 we were spending together before.

Going through this process–twice–has really cemented my desire for a single-payer system. Even if you’re insured, it’s a crapshoot whether or not you picked the right plan when you signed up. You also have to reevaluate regularly to make sure that it’s covering what you need covered as your life changes. I’m also lucky in that I was able to spend quite a bit of time on the Internet and talking with an insurance agent to figure out which plans might work for me. If I were poorer, and without Internet access or the ability to get an agent, it would have been even more random.

Here’s hoping that two thousand and nine ends with some major changes to our health care industry!

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5 Responses so far »

  1. 1

    Andy said,

    January 1, 2009 @ 3:31 am

    Here’s the thing about health insurance… for these companies to make money, they must pay out less than they take in. For that to happen, the “average” person is therefore paying more than what they will spend. Chances are, if you just didn’t have insurance but saved your money instead, you may need to pay out big a few times in your life, but overall you will have saved.

    If everyone paid “their share” to the pool, and it was distributed as needed, than we would all pay less and we wouldn’t have insurance company exec millionaires. But that’s socialism, and Americans are allergic to good ideas like that it seems.

    -Andy

  2. 2

    Angel said,

    January 1, 2009 @ 1:33 pm

    I was actually required by my employer to get the company health plan as a requirement for employment. They only have one plan, and the only choice I can make is whether I want to have Rob covered as well (which I have, because he incurs more health care costs than I at current). It’s a PPO plan that the credit union pays for and BCBS manages. I believe they have an account with BCBS with a fixed amount of money to apply toward coverage of all their employees. So, they encourage all of their employees to use generics and to cut medical costs where possible to prevent them from having to raise our premiums to pay back into their account for services rendered.

    Don’t get me wrong. I’m happy to have coverage, especially after seeing the bills for Rob’s diagnostic tests (over $3,000 for bloodwork and an evaluation for which we were only responsible for the $25 copay), but the situation isn’t exactly pleasant. If premiums go up while I work for them, even if I continue to get the basic raise yearly, there is no practical way for me to make up the cost of my required health coverage.

  3. 3

    Will said,

    January 3, 2009 @ 2:31 pm

    Andy: That’s a good point, but there are some complicating factors. The most direct is that insurance companies negotiate a “bulk discount” for most medical procedures, so they’re paying less than you’d pay. Theoretically, this means that you might be able to pay less to an insurance company than you would (on average) for medical bills and the insurance company could still make money.

    More importantly, it really is insurance. Even if you end up paying more over your life, it’s easier to manage a monthly payment than a one-time bulk cost. If Nathan hadn’t had any health insurance at all, he’d have had to quit our company and try to find a more lucrative job. He might even have had to file for bankruptcy!

    Those quibbles out of the way, I agree with your general point. It makes more sense to me to make health insurance more like taxes.

    Angel: Yeah, it’s a weird situation for companies too. As part of their deal with the insurers that they’ll cover anyone the company hires, the company has to agree that all employees will use the plan. Otherwise, healthy employees could get cheaper insurance elsewhere and the insurance company would be left insuring only those people who can’t get health insurance anywhere else. It’s basically socialism on a company scale.

    I think it makes a lot of sense to have some incentive for people to minimize their costs. Generic drugs, etc. are easy replacements for more expensive drugs. Unfortunately, most people aren’t in a position to evaluate what they really need medically. That’s why we have doctors!

  4. 4

    arduous said,

    January 7, 2009 @ 3:52 am

    The thing that pisses me off the most about American health insurance is the whole “we can opt not to give you coverage if you have a pre-existing condition b.s.” I don’t know how that works for a small business like you and Nathan have, but you really can’t get individual coverage if you have any kind of pre-existing condition, even if it’s a stupid one. Literally, I have a friend who was denied individual health insurance due to the fact that she got cold sores.

    Another friend of mine is also an American living in London for the year. Because she plans to move back to America after the year, she kept her insanely expensive monthly COBRA because she has, wait for it, a pre-existing medical condition and didn’t want to mess around with having no insurance while she looked for a job in the States.

    Basically, American health care is a freaking disaster, and I hope they fix it before I move back to the U.S. Or I might just stay in Europe for the rest of my life. The end.

  5. 5

    Will said,

    January 7, 2009 @ 1:57 pm

    None of us have any major pre-existing conditions. If we did, we’d have had to go with one of those “we’ll cover everyone” business plans. Maggie does have some small medical condition (little like cold sores, but I forget what it is), and we just put that down as an exclusion on her plan. They won’t cover anything related to that, but at least she can be covered for other things.

    It’s also lame that Nathan can’t easily change coverage while he’s recovering without losing the benefits he currently has. And then, if he switches later this year, he’ll miss out on any deductible money under the old plan.

    I have high hopes that things will be changed for the better, because they can’t get much worse.

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