When It Comes to Choosing a Health Plan, It’s Not a Matter Of If Your Insurance Company Will Screw You But How Part II

How your insurance company gets you to hand them tons of extra cash – the individual market for private insurance

In a previous blog post we explored the financial aspects of health insurance policies. To recap, there are three dollar-values in any policy that are very straightforward: your premium, your deductible and your maximum out-of-pocket. The wasteland known as “cost-sharing,” on the other hand …

• Bridges the divide between your deductible and your maximum out-of-pocket
• Represents thousands of dollars of healthcare spending
• Is virtually impossible for consumers to navigate

BANKING ON YOUR FEARS

Insurance companies make these numbers nearly impossible to estimate – by design – to incentivize employers and those on the individual market to buy policies with high premiums. This business strategy results in billions of dollars of additional profit for the health insurance companies. This story plays out in two very different ways in the individual market and in the employer-sponsored market. In this post, we will examine the impact on the individual market.

In the individual market, consumers must choose from a wide array of plans with no tools or benchmarks to understand the differences. More confusing still, terms like “Gold”, “Silver”, “Bronze” categorize the plans. In the rest of our lives, these terms indicate greater or lesser quality. In the health insurance marketplace, premiums mark the difference between Gold and Bronze plans.

In this bizarro-world with no way to estimate cost-sharing expenditures, consumers select plans with higher premiums but lower deductibles and cost-share. Given that provisions of the ACA statutorily capped the maximum out-of-pocket figure, a plan with a high premium and low cost-sharing is often a bad choice.

BREAKING IT DOWN

Let’s do the math on cost-sharing using a simple example:

If this individual went to the doctor seven times this year the total cost for the Gold Plan would be $12,140 ($12,000 for the premium, $140 for the doctor visits). If this person had a medical emergency and reached the maximum out-of-pocket, the most this person could spend on covered medical services is a whopping $19,150 ($12,000 for premium, $7,150 for the maximum out-of-pocket).

If this same individual went to the doctor seven times this year while covered by the Bronze Plan, and we estimate that each visit cost $200, the total cost would be $4,400 ($3000 for the premium, $1400 for the doctor visits). If this person had a medical emergency and reached the maximum out-of-pocket, the most this person could spend on covered medical services would be a less whopping – but still very painful – $10,150 ($3,000 for the premium, $7,150 for the maximum out-of-pocket).

THE THREE REASONS TO ASK DAIZY

For different reasons, both employers and those on the individual market need better tools to understand how this complex financial product will operate under unique circumstances:

1. Employees need to know how changes to employer-sponsored plans will affect their healthcare spending in order to pick the best plan or engage in smart financial planning.
2. Employers will benefit by having a workforce that is better educated about the value of their benefits.
3. Those on the individual market need to pick the most efficient plan in order to avoid over-paying on premiums.

So, ask Daizy. The health insurance cost estimator tool we have created at Clear Health Analytics not only helps people understand the likely total cost of a health insurance plan but also allows users to see if preferred doctors or hospitals are in-network, if preferred prescriptions are covered, at what cost before and after deductible, and what restrictions may apply.

Daizy has helped over 200k health insurance buyers make more informed, better-value health plan decisions so far. It isn’t changing the realities of health insurance (yet) but it’s making it a fairer fight for you.