Health Insurance and You!

An estimated 26 million Americans are currently without insurance, presumably because the price is too high. Yes, health care reform will help this group of people by subsidizing a basic insurance policy. But the promise of a better deal looming on the horizon is actually causing harm. How many of those who are currently uninsured could afford at least some minimal coverage now but are deferring their purchase while waiting for reform?

We heard in President Obama’s address to Congress that federal reform may take 3-5 years to take effect. I urge everyone to not put off this decision. Individual plans aren’t necessarily more expensive than employer-based plans and can be tailored to offer benefits for an individual’s needs and exclude benefits mandated for employer-based plans. For example, there are low-cost plans available that provide catastrophic coverage. Such an inexpensive plan won’t cover preventive and non-urgent care, but it will pay for treatment in the case of an unexpected accident or serious illness while saving the individual from financial ruin.

Another possibility for those seeking minimal coverage while waiting for federal reform is a short term policy. A short term policy typically lasts six months, and the insurer is not obligated to renew it, but can be an affordable interim solution for some.

There are many people who could and should be getting more coverage than they currently have, rather than waiting for health reform legislation to pass before taking action. And, when a health reform law is passed, those who are eligible can supplement their insurance with more complete, subsidized coverage.

The goals of health care reform legislation are universal coverage and cost control. Logic tells us that increasing the demand for medical care while keeping costs in check is a formidable challenge. Now we have data to confirm and quantify just how challenging it is. Over the weekend, The Boston Globe reported the results of a study by a non-profit health care foundation called The Commonwealth Fund that tracked the cost of premiums for a family of four from 2003–2008. Massachusetts is being watched as a case study for health reform because in 2006 it enacted the nation’s first universal coverage law.
Over that five-year period, health insurance premiums offered by employers, rose 40% to $13,788, the highest in the country. For the rest of the nation the increase was lower than Massachusetts, but still unacceptably high at 33%. This can’t go on.

There are many cost-savings ideas being debated. We should consider the options based on the potential benefit and also on their ease of implementation. Those ideas that are high on both dimensions should be at the top of our national to-do list. The ideas that are most hotly debated are actually those that are high-impact but difficult to implement or low-impact and easy to implement. They include pay-for-performance, incentives for primary and preventive care and reducing profits and administrative costs for insurers.

High-impact/difficult to implement

• Pay-for-performance: While we are very likely heading toward a pay-for-performance model, the details are controversial and implementation will take many years.
• Incentives for primary and preventive care: Motivating patients to rely more on primary care sounds reasonable, but we have a critical shortage of primary care physicians across the country. Waits to see a primary care physician for an initial examination can be more than a year. Remedying the shortage will take time.

Moderate-impact/some difficulty to implement:

• Reducing profits and administrative costs for insurers: For-profit health insurance companies earn an average of 3-4% of revenues – so there is not too much to gain here. On the other hand, administrative costs average 12-13% of revenue and represent some opportunity for savings. We should be careful here – for-profit companies have a strong built-in incentive to reduce costs, so getting below 12% must be difficult to do.

While these ideas should be pursued, there are some cost savings ideas that are high-impact and easy to implement. They have not received as much attention but are worthy of a closer look.

High impact/easy to implement

• Fraud control: Detecting and combating fraud is an opportunity for savings that is both substantial and uncomplicated. Fraudulent claims cost payers, and consumers, more than a hundred billion dollars each year. Efforts on this front will benefit everyone while more systemic changes get underway.
• Incentive compatibility: Health savings accounts, HSAs, with higher deductibles are an innovation in both employer-sponsored and individual plans that merit close observation. HSAs effectively put consumers in charge of their own health care spending and reward them with tax-deferred medical accounts. Finally, the incentives of the consumers match the incentives of the providers instead of working against each other.

When an individual applies for a mortgage loan, the loan is not extended immediately upon approval. Most states require both parties to wait three days. This time, called a rescission period, is intended to allow the borrower an opportunity to consider his choice in the comfort of his own home. He is encouraged to read the small print, and make sure that he is making the right decision for himself and his family.

Buying health insurance is at least as complicated. That’s why many states have a 10-day “free-look” period for insurance policies. Just like taking out a loan, buying insurance involves a long-term financial agreement. This is an important and personal transaction and should not be made hastily or under duress. Our company, GetInsured.com works hard to design a health insurance plan suited for each customer. Then we go one step further than any other company and the mandated free-look. From the day an application is submitted, customers have 30 days to think about their new policies. If the customer changes his mind for any reason, GetInsured.com will give him or her a full refund. No questions, no pressure. I am proud of this industry-leading practice because, after all, what is insurance for if not to provide peace of mind.