March 25, 2010

No Longer Able to Save on Health Care Insurance

By C. Edmund Wright

The president has promised that his health care plan will save the average American family 2,500 dollars a year in insurance premiums. What an amateur! Without a single Ivy League credential to my name -- let alone any help from government --I did almost three times better this year myself.

But it gets worse. Not only is Obama unable to match our savings, but his plan outlaws what we have done under (Section 1302 (c) (2) (A).

Yep. With some commonsense shifting around of our family's finances that are soon to be felonious, we are saving as much as 7,000 dollars this year on premiums this year. What we did was hardly revolutionary.

(It is important to note here that we may or may not save the 7K on overall medical costs, depending on what happens to us this year. Having said that -- unlike our credentialed president -- we understand that "medical costs" and "insurance prices" are two different things. There will be no improvement in our health care cost structure until more Americans understand this.)

So how did we do this? Simple. We bought a policy that does what insurance was created to do: to protect us from financial disaster. That's what all insurance is designed to do. Life insurance, car insurance, boat insurance -- and yes, health insurance -- were all created as financial risk instruments, period.

Even widely misunderstood auto liability coverage is primarily a financial risk-management tool. In some states, if you can prove that your bank account can foot the bill for any potential damage you do to others, then you can opt out of liability coverage. Very few can prove that, and purchasing liability insurance would be the commonsense thing to do regardless of state law.

The bottom line, nonetheless, is that insurance does nothing to protect lives, cars, or boats. In all of recorded history, there has never been a policy designed to protect any tangible asset other than money. Yes, grubby, evil money. Money is the only asset insurance can protect. Thus the correct, if little-used, description: financial risk-management.

We currently have the option of managing our financial risks by purchasing expensive first-dollar insurance coverage, or by purchasing much lower-cost, high-deductible insurance coverage, or by purchasing no coverage at all. The last is called "self-insuring."

This is true for all of our insurable risks, including our health-related financial risks. For years, our particular insurance company has offered only health plans with deductibles of 2,500 dollars or less. For a 2,500-dollar plan, we were paying about a thousand a month. For Obama voters out there, that comes to about twelve thousand bucks a year for the premium -- and when you add the twenty-five hundred out-of-pocket (deductible) expenses, our total health care expenses were $14,500 per year.

Finally, this year -- and ironically, maybe only this year thanks to ObamaCare -- our carrier offered a ten-thousand-dollar deductible plan. The cost: less than $400 a month. That's right, under 400 bucks a month.

So let's do the math here. Our premiums are about $4,500 per year, and our worst-case scenario for out-of-pocket expenses is ten grand. That equals $14,500. Well, what do you know? Our worst case total health care outlays are almost identical to the outlays from last year. Best case? We'll save ten grand. In all likelihood, we'll end up saving several thousand dollars.

This demonstrates that regardless of how you dicker with the insurance price component, the actual cost of health care for us, and for the universe of families like ours, remains largely the same. All we did was rearrange how we handled the price component to manage the cost component. It also demonstrates that the cost curve in health is more related to all the little items, and not the catastrophic disease or the insurance profit component.

And guess what: We will sacrifice absolutely nothing in terms of the quality of care or in terms of our financial risk management. Like the owner of any high-deductible plan or any health savings account plan (HSA), we are simply keeping "in house" the little transactions like prescriptions and routine visits. Conversely, we are keeping "in house" well over half of our would-be premium dollars, too. In other words, you don't have to have a lot of money to do this, and yet you can be more of a master of your own destiny.

When you buy a low- or zero-deductible plan, you are "outsourcing" your payment for the little items, which means that you are paying ultimately for the item -- and paying for someone else to process the payment. That is adding cost but no value. If you get it from work -- which most Americans do -- it is costing your employer money that he cannot pay you in salary.

Costs are costs, period. Price depends merely on how efficiently -- or inefficiently -- we pay for it. Health insurance is merely the payment conduit for all non-insurance medical costs. You know, like doctors, hospitals, drugs and so on. And oh yeah, we all pay for the lawyers suing all of the above, too!

High deductible-plans or HSAs link the consumer and the expenditure. This is the only way market forces can work. Moreover, a lot of services be purchased less expensively if paid for on the spot, and the provider does not have to file claims.

All that efficiency is going to be outlawed now. But the president solemnly assures us that his scheme will save us money.