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Health Care Policy

Health Care 3: The Terror of Being Uninsured

By February 26, 2010No Comments

Most of us have health insurance. If we need medical care, we may pay a copayment for office visits (typically $10 to $30), have a deductible amount to pay (such as $500) by ourselves before the insurance plan pays anything, or perhaps a 20% copayment on major tests or procedures (such as an MRI) that might amount to $200-$300 until an out-of-pocket maximum is reached, often $1500-$2500 for a family.

If we leave a job, we most likely continue the same health insurance plan we had with our prior employer by invoking COBRA, the federal law that gives us the right to continue that plan for 18 months simply by paying the full cost of the plan (i.e., the employer’s component and the employee’s). Given that most employers pay 50% to 75% of the cost of the plan, our insurance costs go up substantially, but we enjoy the same negotiated medical charges as before through our insurance, with the same copays, deductibles, and out-of-pocket maximums. But just for 18 months. Then COBRA protection vanishes.

Now imagine yourself a 55-year-old man with high blood pressure and a bit of a cholesterol problem (hardly rare), or a woman who is a breast cancer survivor at age 55, and your COBRA has run out and you are now self-employed. You are in deep trouble.

No COBRA: Option 1, Buy Individual Insurance

As an individual (or couple or family, but anything other than a group) if you want to buy health insurance in most states you will need to be evaluated (underwritten) for a policy by a health insurance company. Any known chronic conditions will be held against you. For the adults mentioned above, with common issues such as high blood pressure or cholesterol issues, you most likely could get an insurance policy. However, the premium will be much much higher than your COBRA premium. Certainly 50% more, more likely double. If you are the woman with treated breast cancer, the answer may be well more than twice the premium if you are even offered a policy.

Remember that your health insurance premium cost as an employee was  perhaps $3000 annually. Under COBRA you paid the full cost of perhaps $12,000 annually. But when you are underwritten with a “preexisting condition” you likely will be asked for $18 to $24,000 or even more. And if you can afford that, the policy may specifically exclude any payments for any expenses for that “preexisting condition” for at least 2 years.

No COBRA: Option 2, Don’t Buy Individual Insurance

Without health insurance, the world is a different place. Every medical interaction is likely to be extraordinarily expensive. You now pay “charges.” Full  rate. No discount. No one else pays charges except the uninsured. Even foreign nationals such as Saudi Arabian visitors usually have reduced negotiated rates. The sheik will pay less than you, as an uninsured.

And health care providers expect to be paid their charges by the uninsured, partly because the federal government mandates just that. Why? To validate the price level from which every insurer and Medicare take their discounts. If the providers don’t seek to get paid their official charges, Medicare and the insurers will take that as validation to further reduce their own payments to the providers. And Medicare may charge the provider with fraud and reduce their future payments. Seriously.

So now you have a medical service for which you paid $25 as a copay when you were insured, for which the insurer paid $140, but for which the provider nominally charges $350. Which charge do you think you get? Try this same scenario with an emergency room visit for a bad asthma attack with chest pain. Your ER visit charge might have been $50 (or nothing), and the insurer will pay a real $1800 let’s say for the tests and professional work. But the “charges” for that hospital ER visit may well be $5,500. That will be your bill as an uninsured person. Two to three times what the insurer pays. And the bill collector will come after you.

Summary: Our System’s Triple Whammy for the Uninsured

 You never want to be uninsured in America unless you have truly unlimited financial resources or you don’t care about your health.

The first blow is when you find out that COBRA, good for only 18 months (why? shouldn’t indefinite COBRA be a simple improvement to implement?), costs you about 3 times what you were spending on health insurance as an employee.

The second blow is when you are underwritten when COBRA runs out and find out that your insurance costs will be double or triple the cost under COBRA and amount to $25,000 annually not counting the deductibles and copayments.

The final blow is to get your first emergency room bill for $5,000 or so without health insurance. And then the second when your other child gets injured playing ball and needs an arthroscopic repair of a knee.

Where Is Congress? Where Is the War on Health Insurance Terror?

To be individually underwritten for insurance or uninsured in America is to be vulnerable to financial terror beyond the realistic resources of most Americans.

How can Congress have been so ineffective since last fall that we have not locked in any solution to the most basic of health insurance issues, namely how to allow everyone to purchase or to participate in affordable health insurance and not be threatened with bankrupcy for ordinary medical care? Why hasn’t COBRA simply been made an indefinite right? That immediately would help large numbers of people maintain their health insurance at the group rates they had as employees.

Most important, how can we and our Congress allow so many of our citizens to be terrorized by health insurance and its costs? We can and must do better.

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