Monday, November 26, 2012

Shopping Health Insurance - Yet Again

It pays to shop your health insurance now and then.

I have written before about insurance.   It can be hugely expensive, and most folks buy far too much of it.  People are paranoid about having a dent in their car, a broken window, or a broken leg.  They are scared of car repairs, even.   They insure and warranty everything in their lives, and if you see how most people live, you can understand why.

The average "salary slave" gets a paycheck and when he gets home, he has pretty much spent every last penny of it on crap.   They divide up the paycheck into little pie-sliced wedges, with some going to housing (as much as they can afford) and some to car payments, and some to utilities, and some to food, and some to cable TeeVee, and so on.   There is nothing left when they are done, as every bit of the paycheck has been sliced and diced up into little pie wedges.

And some folks think this is financial acumen.   They go on websites like Mint, and see little pie-charts of their spending and assume this is how you manage finances - by figuring out how to spend money.  It ain't so.

And you can see why folks are paranoid about "unexpected expenses" such as a car repair, a broken leg, or a broken window on their house.   Their finances are so stresses - living "paycheck to paycheck" this way, that any tiny disruption in the flow of cash can cause a nightmarish breakdown of the whole system.  Even an unexpected expense of $1000 or so can throw them into bankruptcy, as bills remain unpaid, and credit card balances creep up and climb, until this small event causes a catastrophic meltdown.

In chaos theory, this is called the "butterfly effect".

So, as I noted before, a friend of mine pays $12,000 a year for health insurance with a $250 deductible.  I told him I have a $10,000 a year deductible, and he said "You're crazy!  Suppose you get sick!  Where will you get the $10,000 for the deductible!"

To which I replied, "the same place you get the $10,000 a year that you pay in excess premiums!"

My original Blue Cross plan cost me about $99 a month when I was in my 40's.  Mark had a similar plan for $79 a month.   It was a cheap plan with a high deductible.   We only wanted to cover catastrophic events, not Band-Aids and Asprins.  But even then, the plan covered two doctor's visits a year (with a $40 co-pay) and had some prescription coverage.

And - and this is the big deal - if you do get sick, you are billed at the pre-negotiated Blue Cross rates, not the staggering "retail" rates that Hospitals charge.  So, for example, a Colonscopy which retails for $3000 is billed at $1200.   That's a savings of $1800 over having no insurance, and you can see that even a $99 a month policy is better than none - far better.

But of course, over time, premiums creep up.  $99 morphed to $125, and then to $150.  And it finally broke $200 when I was about 48.  By age 50 it was $250 and this year, I received a notice that the premiums would top $350 a month - just for me.  Ouch.

They helpfully included a note that I could call and look at a different policy that might be more cost-effective.   I was on a "group" policy, and with these policies, the costs are based on how many people are in the group and what the group experience is, in terms of costs.   As any group ages, more people get sick and prices go up.   The healthier people leave the policy and the group gets smaller and sicker - and premiums skyrocket.

It is one of those sick things I just don't get about insurance, and one that I hope the Obamacare plan will address.   If we just make one group out of everyone then the costs won't go up as much, and moreover, it will not incentivize people to leave the group.

Instead, we have this system where the insurance companies chase after healthy people and offer them low rates.  A great system, if you are healthy.  A sucky system, if you are not.  And while you do have a lot of control over your health care costs (yes, you do), there are some folks who get cancer or get hit by a bus and get sick through no fault of their own.

A sucky system, but one we are stuck with, unless Obamacare changes it - and I am skeptical that it will change it much.

So anyway, I call in and the fellow says that they can put me in a new plan with the same deductible, for about $240 a month - for two people.   This represents a cost savings of over 50%.

So needless to say, I signed on to it.

The savings should neatly offset the increase in the payroll tax that kicks in next year.  ;)

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