free-market

Health Insurance for Under $50 per Month?

/ L. M. Walker / 1 Comment

“If it sounds too good to be true, it usually is.” ~ Better Business Bureau

– By: Larry Walker, Jr. –

According to the U.S. Department of Health and Human Services (HHS), there are 7.2 million uninsured Americans ages 18 to 34 years, living in single-person households in 34 states. And, of that total, 2.9 million are eligible to buy health insurance on either federal or state partnership insurance marketplaces. And among those 2.9 million, 1.3 million, or 46%, could pay less than $50 a month for a “Bronze Plan”.

Hmmm. That sounds, well, too good to be true. Let’s see, 1.3 million times $50 equals $65 million per month, or $780 million per year. Sounds like a good deal… for insurers that is, since the balance of the monthly premium, perhaps another $50 or more, will be subsidized by taxpayers, and the risk of actually paying out any benefits, after high deductibles, co-payments and co-insurance levels are met, is next to nothing. What’s a Bronze Plan anyway, a worthless policy that covers nothing?

Generally speaking, the Bronze Plan is intended to have the lowest premium of the 4 new categories of plans (Bronze, Silver, Gold, and Platinum) but charge the highest out-of-pocket costs for healthcare services. For people without employer sponsored insurance, the Bronze plan is the minimum health insurance plan which satisfies the Affordable Care Act’s health insurance mandate.

What HHS doesn’t tell you is that Bronze Plans are designed so that policy owners wind up paying 40% or more of covered healthcare expenses in the form of out-of-pocket fees, and that’s over and above the cost of the plan’s monthly premium. Although out-of-pocket expenses for individuals are expected to be capped at $6,350, keep in mind that this amount is reset each calendar year.

Out-of-pocket expenses include fees like deductibles, copayments, and coinsurance. Different plans will approach the 40% or more that policy owner’s will pay in various ways, so it is important to research the financial details of a specific plan before deciding which one to purchase. For example, a person who has frequent medical expenses may want a Bronze Plan with a lower deductible, because they will be required to pay at least that much of their annual health care expenses – in full.

Look over the following examples of Bronze Plans, and then we’ll define the terms and discuss Example #2 in more detail.

Deductible – A deductible is the amount you pay for health care services before your health insurance begins to pay.

Coinsurance – Coinsurance is your share of the costs of a health care service. It’s usually figured as a percentage of the total charge for the service. You pay coinsurance after reaching your annual deductible.

Co-pay – A co-payment, or doctor’s visit fee, is a fixed amount you pay for a health care service, usually when you receive the service. The amount can vary by the type of service. You may also have a co-payment when you get a prescription filled.

Example #2: Okay, so let’s say the New York Bronze Plan (shown above) costs a young person $50 per month. What will he or she receive in return for this premium?

Well, since the annual deductible is $3,000, that means the insurance company won’t pay out a solitary dime, until after the insured pays the first $3,000 in annual health care costs. Then, once this $3,000 annual deductible has been met, the policy only covers 50% of the cost of doctor’s visits (co-pay), and 50% of the cost of all other medical services (co-insurance). It’s not until the insured reaches the annual out-of-pocket limit of $6,350 that the policy kicks in and pays all remaining expenses in full.

I hate to break it to you, but this alleged, under $50 per month, health insurance policy will actually wind up costing the poor sucker who buys it around $3,600 per year ($3,000 deductible + $600 premiums), or $300 per month, before it pays out a single dime in benefits. It will cost even more for plans with higher deductibles, and may wind up costing as much as $6,950 per year ($6,350 annual limit on out-of-pocket expenses + $600 annual premiums), or $580 per month, if ever actually utilized for a substantial amount of qualifying health care expenses.

Then there’s the question of which expenses such a plan actually covers, if any, once its benefits do kick in. Who in the hell knows the answer to that? Since the government’s official website is lacking in detail, even when it’s working, apparently you have to buy it first, in order to find out. Yeah, just call the toll-free number and blindly sign up. I guess it’s better than nothing, although not by much in my opinion. On this earth you get what you pay for, but the cost of nothing is generally free.

The bottom line: Don’t expect much from a health insurance plan costing less than $50 per month. If it sounds too good to be true, it usually is.

References:

How do deductibles, coinsurance and copays work?

Insurance for the young could be less than $50 a month

Bronze Plan – Affordable Care Act (Obamacare)

Related:

The Social Security Bust Fund – Opt Me Out

#Obamacare

Homeowners Insurance Tops Inflation by 691%

/ L. M. Walker / 1 Comment

Caveat Emptor

– By: Larry Walker, II –

Have you checked your homeowner’s insurance policy lately?

I’ve been with the same insurer for over 10 years through two residences. Even with the previous company my homeowner’s rates stayed about the same from 1998 through 2007. During a recent review, I discovered that my basic coverage amounts (i.e. dwelling, private structures, personal property and loss of use) have been inflated by around 3.0% annually since 2007, or slightly higher than the general inflation rate, and although I sort of get that, albeit the cost to rebuild is now around 150 times current fair market value (ugh, don’t get me started), over the same time-frame, my insurance premiums (bundled with auto and other discounts) have grown by an annual average of 11.4%. What do you call that?

In fact, excluding additional discounts received in 2009 and 2010, which helped dampen the rate of growth, my premiums spiked by 17.5% in 2008, by another 16.8% in 2012, and finally by a backbreaking 20.4% this year. Had it not been for those additional discounts, my homeowner’s premiums would have averaged 18.2% over the period. Yet, even with a generous discount, my premiums have ballooned by 65.3% since 2007. Now compare that to inflation, which rose by just 13.7% during the same period (via Dollar Times).

So in other words, from 2007 to 2013, my homeowner’s premiums grew 377% faster than inflation. But don’t just take my word for it. A May 2013 article by the Associated Press (AP) confirms that homeowner’s insurance rates have spiked, however it fails to mention why? More specifically, why homeowner’s insurance premiums are currently advancing 691% faster than inflation.

Of course, the insurance industry blames increasing replacement costs (the cost of rebuilding a home from the ground up). Okay, great! But that only accounts for a 2% to 3% annual increase. So how does this translate into an average annual premium spike of 18.2%? According to the aforementioned AP article, which I might add is based on antiquated data, “Nationwide, an average homeowner paid $909 for homeowner’s insurance coverage in 2010, up 36 percent from 2003. Inflation rose 19 percent during the same period.” It goes on to provide a list of what homeowner’s in states bordering the Atlantic Ocean or Gulf of Mexico were paying in 2010.

Following are the average costs in five of those states, ranked by the percentage change from 2003 to 2010:

  1. Florida: $1,544, up 90.6 percent.

  2. Alabama: $1,050, up 54.2 percent.

  3. Mississippi: $1,217, up 53.5 percent.

  4. South Carolina: $997, up 48.4 percent.

  5. Georgia: $833, up 46.1 percent.

Now if the AP had continued its research through the current year, it would have discovered that the situation has gotten a lot worse since 2010, as I mentioned above. Here’s an idea for the media – next time, if you don’t know, why not try asking people who are actually affected? My premiums actually went up by 16.8% in 2012 and by another 20.4% this year, for a two-year average of 18.6%, while inflation averaged a mere 2.35%. So over the past two years, premiums have risen 691% faster than the rate of inflation ((18.6 – 2.35) / 2.35). What’s up with that?

It’s not the miniscule annual dollar increase that bothers me, but rather what the cost will be 10 or 20 years from now. At the current pace, by the time I reach what used to be considered retirement age, God willing, which is less than 20 years from now, homeowner’s premiums will be simply outrageous, perhaps more than 4 times the amounts shown above (i.e. doubling about every five years). In other words, if this doesn’t stop soon, I could be paying around $3,500 a year in retirement. I’m sorry, but this is just unacceptable.

So what did I do? I requested quotes from several local insurers. And what did I find? I received some quotes for less than half my current rate, some 30% to 40% lower, and others around the same. So I struck a deal which comes in at just 64% of the proposed renewal rate. That puts my new rate just 5.7% above what it was in 2006. Now that’s more like it. Perhaps I could have done better, but somewhere along the way I’ve learned that if it sounds too good to be true, it usually is.

The bottom line: Why have homeowner’s insurance rates spiked? As one of my Google+ friends put it, “Because they can get away with it.” Do yourself a favor; check your policy and take action while there’s still a free market (caveat emptor).

References:

Time to reassess your Homeowners Policy

How Homeowner Insurance Rates Have Spiked

A Free Market Solution to Universal Health Care, Part III

/ L. M. Walker / Leave a comment

by: Raymond L. Richman

Link: Trade & Taxes

In the preceding blog on this subject (11-27-09), we wrote:

“The average household can afford to be self-insured with regard to health care costs that are not cataclysmic. We can expect falls and fractures, expect to catch cold, expect to need eyeglasses and hearing aids, expect to have children, expect cavities in one’s teeth, and to need dentures, and so on. Setting aside part of their income in a health savings account at regular intervals would enable the vast majority of our citizens to pay for these “normal” expenditures out of past savings and current income.”

“What we need is insurance against catastrophic illnesses not against the easily affordable costs of relatively minor medical episodes. Were the hundreds of millions of health-care consumers to pay the full cost of their own minor health care expenditures, they would have an incentive to economize and seek-out more economical treatments. And providers would soon compete for their patronage. Competition is the force that makes a private market economy innovate and achieve constantly growing productivity.”

Critics of health savings accounts argue that this could possibly work for the rich but not for the poor. What about those in poverty? Their past savings and current income are very likely to be inadequate to pay for all ordinary non-cataclysmic health care expenditures. Some special arrangement needs to be made for them. The current solution is Medicaid which like Medicare pays for all the expenses of getting treatment subject to a small co-payment which varies from state to state. Medicaid is a state administered program and each state sets its own guidelines regarding eligibility and services.

And these costs have been exploding. As we pointed out, expenditures in the United States on health care surpassed $2.2 trillion in 2007 or about $7,400 for every man, woman, and child, and has tripled since 1990. Neither the House or the Senate Bill creates any incentives to prevent or control rising health costs. They continue to insure the consumers of Medicare and Medicaid against all medical services. The problem is how to create incentives among Medicaid participants to economize on health expenditures. How can we create HSAs for those who have little or no income?

Medicaid is administered by the states. Philip Klein, the Washington correspondent of the American Spectator, wrote recently that the Congressional Budget Office (CBO) estimated that the proposed Obama health care bills

“would add 15 million to 20 million more people to the Medicaid rolls. The cost of such an expansion ‘could vary in a broad range around $500 billion over 10 years.’ But the catch is that such an estimate is of the anticipated federal cost of the Medicaid expansion. In actuality, the federal government typically pays around 57 percent of the cost of Medicaid, while the remaining 43 percent is picked up by the states. So what’s the full cost of a Medicaid expansion at both the federal and state level?”

According to these numbers, expenditures would increase $943 billion, not counting any rise in prices resulting from increased demand for medical services and prescriptions.

Currently, many of the poor uninsured use emergency room facilities, which are alleged to be very expensive. The National Institute of Health (NIH) estimated the average cost of such a visit to be $274 compared to $88 at community clinics. It attributed the difference principally to “the higher levels of fixed cost and indirect cost seen in the emergency department.” As we wrote in the first of this series, that it is alleged that the uninsured go to hospital emergency rooms for illnesses that could be attended to by a qualified nurse, paramedic, or intern. It is asserted that this imposes huge costs on the hospitals.

If the alleged illness can be diagnosed and treated without hospitalization and expensive tests, it imposes no greater costs on the hospitals than an ordinary clinic does. The costs of maintaining and staffing emergency facilities — having specialists, and testing and operating facilities on call to diagnose and treat really serious illnesses and injuries — is expensive. But such costs are not applicable to patients who are diagnosed and treated in a fifteen-minute visit and sent home. The allocation of such expensive overhead to such patients is not justified. The marginal cost of treating minor illnesses in emergency facilities is often zero. The personnel are there on a stand-by basis and often have little or nothing to do. Those who use emergency rooms as a clinic create a costly problem only when the staff and facilities are operating at capacity. In that case, the cost of treating patients with minor health problems in the emergency room is not zero but it is not infinity either. Having a general practitioner on call – MD or nurse or paramedic – is not expensive.

And there are many general practitioners and residents on duty in every hospital in the country. Still there is a need to reimburse the hospitals. Is there a way for every user of such facilities to pay for some if not all of the hospital’s reasonable charges, thus creating an incentive to restrain exorbitant cost increases. Many states require a Medicaid co-payment if the enrollee has any regular wage income. But this does not create a sufficient incentive for the consumer of health care or the provider to economize.

What we propose is assigning each enrollee to a primary private physician, clinic, or hospital-sponsored clinic of his choice. We expect there will be competition among providers to be his primary care provider. Some pharmacies have a clinic in their stores and they may qualify as primary providers. If treatment beyond primary provider’s abilities is required, the patient will be referred to an appropriate qualified co-operating provider of such required services.

An HSA account could be created in a local bank in the name of the enrollee and a fixed amount deposited in it by HHS, perhaps, $100 per month per enrollee or by depositing a single lump sum. A family of four would have $4800 paid into the savings account in a year. The account will be charged for each care provider’s services to the household. The bank will be reimbursed by HHS for withdrawals that exceed the balance in the account. Banks can be expected to compete for such accounts. An incentive to economize on the enrollee’s part would be a provision that half of any balance in the account that remains at the end of the fiscal year will be paid to him.

We need to think anew about providing or subsidizing health care. The above is a start.