People writing about health insurance who don’t understand it

A story appearing in many newspapers (and featured in today’s tucsoncitizen.com) says consumers signing up for health insurance will be hit with high out-of-pocket costs with deductibles and co-pays. The article includes the following quote:

“These plans are not like standard, commercial insurance,” Mendelson said. “They are more like high-deductible plans where you don’t see a penny of insurance money” until health spending reaches a set amount, such as $2,500 or $5,000.”

The problem with journalists writing about health insurance is that they don’t really know much about the topic. So here is my response, as an insurance broker, to the statement above.

The guy quoted above has obviously not looked at Silver plans.  The Silver plans I have seen are a lot like employer insurance in that they have co-pays for most services. One plan to be offered on the Arizona Marketplace has the following co-pays for their Silver plan:

Primary Care Physician visit co-pay: $30
Specialist visit co-pay: $60
Urgent Care visit co-pay: $60
Emergency Room co-pay:  $500

This Silver plan looks a lot like employer health insurance. I have met people with employer plans that have a $2,500 deductible (or $3,000 like this plan).  But the deductible applies only to the most expensive services. So if a person ends up in the hospital, they will pay the deductible – but that will be a fraction of the total bill.

Most people who have health insurance are fairly healthy. They see doctors, like their dermatologist, every six months or once per year.  And if they have an issue, they can see their primary care physician or a specialist and pay the co-pay. There is no financial reason not to see their doctors.

Current individual health insurance policies are generally “catastrophic” plans. In order to get an affordable premium, people choose a $5,000 deductible (or higher). They can choose a plan that gives them 3 doctor visits per year for a co-pay.  If they choose a plan with 6 doctor visits for a co-pay, their premium goes up. Choose the plan with unlimited doctor visits and the premium really jumps up.  Everything but the doctor visits comes under the deductible, so when a person gets sick they pay and pay until they hit their deductible.

After meeting their $5,000 deductible (or $10,000), the plan becomes an 80/20 plan (or 70/30, or 60/40) where the insurance company pays most of the bill and the patient pays 20% (or 30% or 40%).

This co-insurance has a cap that also affects the premium.  That cap might be $5,000.  So if a person ends up in the hospital with a huge bill, their out-of-pocket costs will be their deductible + their co-insurance cap:  $5,000 + $5,000 = $10,000.

The thing that bugs me about articles written by people who do not fully understand health insurance is that they get lots of things wrong.  The thing that bugs me about politicians talking about health insurance is that they use the wrong terms. Even President Obama keeps saying, “People will get health care starting on January 1, 2014″.  That drives me nuts because they are getting health insurance.  Health insurance is not health care.  Of course, having health insurance means people are more likely to get the health care services they need – and that is the purpose of Obamacare.

I suppose I should not get so irritated by journalists and politicians writing and talking incorrectly about health insurance.  Their mistakes tell me these folks have never needed to truly understand their own health insurance. They’ve probably always had good employer health insurance and never needed to know how it worked.  For people with individual health insurance, I say, “You don’t know how good or bad your health insurance is until you get sick.  Then you might be in for a big surprise”.

Under Obamacare, health insurance will be a lot better than it is now, especially plans bought by individuals and families. And most people will get help with their premiums.  I work mostly with Medicare supplements and Medicare Advantage and I love Medicare. It’s not perfect but it is soooo much better than current under-65 plans.  Obamacare is not perfect, but it makes health insurance a whole lot better.