Friday, January 31, 2014

The Upsides to Obamacare (and there are several)

Obamacare is expensive, but it does have some upsides to it that might make it worthwhile.

Initially, I was disappointed in Obamacare, as it appears it will result in a steep increase in the cost of my health care premiums.  If you are too wealthy to get a subsidy, and too poor not to give a damn, Obamacare might end up being a steep increase in your cost of health care premiums.   The very rich can afford it, and the very poor are subsidized.  Those in the middle class, particularly the upper middle class, get a little screwed.

Take my case.   I was paying $240 a month with Blue Cross, for two people.  Under Obamacare, this would jump to $1000 a month, and it is unclear whether I would get a subsidy, or if so, how much.

At first this seems like an utterly raw deal, but I have to admit, I was not being totally honest with those numbers.

To begin with, as of January 1 of this year, my old plan (which is grandfathered for 12 months) goes to $300 a month ($298 to be exact).   And these sort of increases would continue, over time, if I was allowed to keep that plan.  That's how group plans work.

You see, in 2012, I was under an older Blue Cross group plan, and the premiums were approaching $600 a month - which is a lot closer to the $1000 quoted for Obamacare than the $240 I used in my previous posting on the subject.

Why did my premiums go DOWN from 2012 to 2013?    Well, it all has to do with group plans, and this is where Obamacare blows our old system out of the water.

When you sign up for a group plan, they lump you in with a group of people.  This might be a group where you work (like a law firm I used to work at) or an arbitrary group created by the health insurance company.

Over time, people in the group get sick, file claims, and the claims history of the group forces the insurer to raise premiums.   Each year you are in the group, premiums go up.   My old Blue Cross plan, for example, started out at about $150 a month (for two) and steadily climbed up to $600 a month in 2012.   Why is this?  And why was I able to get a new plan for $240?

Well, over time, the group gets older and sicker.  As premiums go up, the healthier members of the group decide to leave - and get a lower-cost policy from another insurance company (or even the same company, as I did).   The insurance companies are "cherry picking" healthy people, and offering them lower rates.

Meanwhile, the folks in my old group can't leave - if they have "pre-existing conditions" - so they are stuck.   Premiums not only go up because they are sick, but because the group is smaller and smaller every year.  Eventually, the group boils down to a small number of people stuck in the group, who are paying astronomical premiums.   All the healthy folks, like me, left.

So, the old system was great - provided you were healthy.   But the point of health insurance isn't just insuring healthy people.  And that is what the old system did.

For defined groups, like my old law firm, the problem is worse.   At the first firm I worked at, we had a group plan.   One of the partner's secretaries got cancer, and as a result, the rates for health insurance started to climb, much to the partners' dismay.   They shopped around and found that cheaper plans were available.   But if they switched plans, the secretary with cancer would be excluded as having a "pre-existing condition."   She would be utterly screwed.   And to the partnership's credit, they decided to bite the bullet and pay the higher premiums, than to screw one of their employees.

Other employers are not so nice.

So, Obamacare fixes this problem - completely and utterly and forever.    And since we are all now grouped into one mega-group, where our premiums are determined only by age and smoking status, many of us now are realizing just how expensive health care really is.  Under the old system, healthy people paid little and sick people paid a lot - until they could not afford to pay, and then they dropped coverage and died, or went bankrupt with medical bills. 

Under the new system, sick people pay the same amount as healthy people - which is how insurance was supposed to work in the first place.   Cherry-picking clients sounds great and all - when you are healthy.   The problem with that scenario is that if you ever get really, really sick (like with cancer) you are utterly screwed, big time.

(The one positive aspect of the old system was that it discouraged hypochondria.  People who went to doctors for every ache and pain ended up paying more.   It is like getting a dent in your car - do you report it to the insurance company and end up paying higher premiums?  Or do you just bit the bullet and fix it yourself or live with it.   One downside to Obamacare is that since your premiums are NOT determined by claims history or medical condition, there is no disincentive to going to the doctor every day of the week.   It is a hypochondriac's dream!).

So for many of us healthy people, Obamacare was a bit of sticker shock.   But for someone with cancer, it is a Godsend, as they won't have to declare bankruptcy or forgo treatment, just because they can't afford insurance.

And yea, under the old system, that happened.   A friend of mine, on the eve of his surgery and chemotherapy treatment (for tongue cancer) got a phone call from the billing department of the hospital.  "Bring $24,0000 in cash, or don't bother showing up" is the gist of what they said.   You wanna get well?   Well, we ain't doing it for free!   

That was a pretty sick system, no pun intended.

But getting back to sticker shock, it struck me the term was apropos, as what we are comparing here is apples to oranges, just like when buying a car.

For example, I just bought a Nissan truck, because it was cheap ($25,000).  If I bought another BMW X5, it would have run $50,000 or more - twice as much money.

Now, if the only thing you do is compare prices, you might say, "The Nissan is a better deal, as it costs less" - and to some extent that is right.   But with the BMW, do you get more car.  The question is, of course, whether paying twice as much for it makes it a value.  

The BMW has a nicer engine, leather interior, sunroof, a fancier sound system, and a better ride and handling.  It is a very nice car.

The Nissan, on the other hand, is a pretty stripped bare-bones vehicle with a few options on it, but nothing special.   But it costs a lot less.

My existing health care plan (non-Obamacare) is a Nissan.   It has a $10,000 deductible and not a lot of options.   It is bare-bones cheap, and I can get away with that, because I am healthy.   And it was a good policy, so long as I was healthy.   But I was taking a risk that I would never get sick, ever, ever.

The Obamacare plan (which would be a bronze, or cheapest plan) has a $3600 deductible and provides more coverage.   So it is more of a BMW than a Nissan.

But deductibles and trinkets aside, the really important difference is that under an Obamacare plan, I can't be cancelled for getting sick - or get priced out of the plan if I get sick.   And that is like having a rocket engine on that BMW.   It beats the pants off the Nissan, any day.

And what does this mean for our country?   Well, for starters, it might mean that medical bankruptcies become a thing of the past.   Until recently, the number one cause of bankruptcy in the United States has been medical bills.   Under Obamacare, you can sign up for a plan on the way to the hospital, and get covered, since "pre-existing conditions" are not excluded.   

And in fact, I am sure that hospitals will do this, for any patients that are uninsured.   In fact, I'll bet they insist on it.   If you are poor, there is no point in not signing up for coverage, as your tax credit will pay for the whole damn thing anyway.

This also means  that hospitals won't be stuck with deadbeat patient's bills - which then have to be paid for, by the rest of us, in the form of higher hospital bills.   The $100 Aspirin might become a thing of the past.

And these are good things - incredibly good things.   Yes, I might be paying more for Obamacare ($1000 a month versus $600 a month in 2012, and maybe less, if I get a subsidy) but in turn, I am getting something that is very, very valuable - locked-in rates that are not based on my health.   In other words, for the first time in my life, I will have real insurance that really covers me.

Yes, Obamacare is more expensive, at the present time.  But that reflects what real health insurance costs.   My old "cherry picking" policy was cheaper, but it really would have been of no use to me, if I ever got cancer or diabetes or had a heart attack.   And I say this because I have friends who have had all three of these conditions, and when they got sick, their premiums went up to stratospheric levels far and above Obamacare costs (read: thousands of dollars a month, not hundreds).

And it is possible that over time, the premium costs may go down.   As hospitals are no longer stuck with bad debt, they can lower rates, and in turn this will lower rates for insurance.   It is possible, although I won't hold my breath.

So, there are upsides to Obamacare, particularly if you have a major illness, it is a Godsend.   You no longer have to choose between getting well and going broke.   And that, right there, is a pretty valuable thing.

So when looking at the prices for Obamacare, bear in mind that while it costs more, you are getting a lot more.   Not being cancelled or priced out of a policy is a very, very valuable thing, indeed.