Wading into too much health insurance is like wading into quicksand. Pretty soon, you’re in over your head.
Why do people pay for the “Cadillac” of insurance when they still end up having to pay out of pocket for medical care?
Insurance companies want to scare consumers into paying for premium plans. Why? Because it’s good for business.
Parsing Out Coverage Costs
The average cost of healthcare coverage is increasing for consumers. Rates are rising, and they’re rising fast. Per month. Per year. Per plan. All while covering less. In April, health insurance hit a five-year peak, spiking 10.7 percent over the previous 12 months and making it hard for consumers to keep up with the added expenses.
These days consumers are also increasingly in the dark as to what healthcare actually costs. Vague and discretionary pricing, especially in emergency rooms, which is where the majority of personal injury victims end up, makes it difficult for consumers to know what they’re being charged. This, coupled with constant health insurance updates, high deductibles, uncovered procedures or facilities that are “out of network,” and government regulations – tax penalties or no tax penalties – and it’s easy to see why it’s difficult for most people to stay up to date on health insurance coverage, let alone to understand what they’re actually getting out if it.
Finding appropriate insurance is a balancing act between deductibles, premiums, and what might happen. Insurance companies are hoping you’re expecting the worst.
Healthcare & Unanticipated Personal Injuries
Personal injuries are unexpected circumstances. No one has a calendar reminder set for an incident that is going to leave them injured, unable to work, and with hundreds of thousands of dollars in expensive medical bills.
Does the 1994 product liability lawsuit between Stella Liebeck and McDonald’s ring a bell (Liebeck v. McDonald’s Restaurants)? This was the highly publicized “hot coffee” case. Liebeck, a 79-year-old woman in New Mexico, had no plans of spilling scalding hot coffee on her lap resulting in severe burns, hospitalization, and multiple skin graft surgeries. She was left with mounting medical bills and a corporation trying to dodge paying for any of it, which is why a court case ensued.
Why would anyone pay a pretty penny for health insurance with nominal coverage? Then again, why would anyone overpay to cover medical expenses they’re not expecting and may never need?
Two forms of coverage that are well worth the cost, in my opinion – and are actually part of your auto coverage, not healthcare coverage – are Medical Payment Coverage (MedPay) and Uninsured/Underinsured Motorist Coverage (UM/UIM). MedPay covers the cost of injuries to you or your family members, no matter who causes the accident, while UM/UIM covers your medical expenses when you are injured by an uninsured or underinsured driver. Both are great options. (For more information on the two, I recommend giving this article a read: How to choose Medical Payments, Personal Injury Protection & Uninsured Motorists coverage.)
The Business of Insurance
Insurance and healthcare coverage are business models – and they’re designed to be profitable. HMO. POS. PPO. EPO. These aren’t ticker symbols on the stock market, they’re healthcare coverage options for consumers – and instead of leaving people with peace of mind and optimal coverage, they’re leaving them broke.
Are these business models working when consumers are unable to afford the care they need? Insurance companies think so, since they’re the ones coming out on top.
Consumers expect health insurance to cover doctor visits, hospital stays, prescription drugs, and preventative care – it’s what they’re paying for after all. The reality is, health insurance is just like any other business model, so insurance must be priced higher than what a company actually ends up paying out. They make their money through underwriting profits (premiums minus payouts and expenses) and the income they collect on premiums. As a business, they have to cover their overhead costs: administrative expenses (the endless paper bills being sent back and forth), executive salaries, advertising (Superbowl ads are expensive) and rent for office space. But the model, for consumers anyways, is simply not working.
How Does Insurance Work for You?
Alternate insurance plans come at different costs. Depending on specific plans, some offer distinct services. Want more services and added flexibility? That will cost you. Is the individual seeking health insurance a smoker or a non-smoker? Family plans cost more than individual plans. Where you live and how old you are can also affect your rates.
It’s frustrating to pay high rates each month for health insurance coverage that doesn’t cover what you need when you actually need it.
Variables, like types of health insurance plans, the tier of the plan, the sub-divided tier of the plan (there are even “metal tiers” like Bronze, Silver, Gold, or Platinum and a lower “catastrophic” tier), and an individual’s medical history, all affect the underlying costs. “Platinum” may sound like the best, but this coverage may not make sense for you or your family. It all just depends.
But it’s not only about being able to afford your monthly insurance payments, it’s also about putting your insurance to work once you’ve been hurt. When you hit your deductible—say, it’s $5,000—you’ll still be on the line to pay coinsurance, another form of cost-sharing, until you reach your out-of-pocket maximum. Once this is met, insurance kicks in covering 100 percent of “covered” services. “Covered” being the optimum word here.
If you did have a $5,000 deductible set aside for one medical emergency, you’re still not in the clear. Until you hit your out-of-pocket maximum, and only if these services are “covered,” you’re still on the line for covering the rest of those funds.
And on and on it goes.
Growing Profits & Cutting Costs
Insurance companies don’t want to break even—they want to make a profit.
In the 90s, after a series of catastrophic storms and expensive payouts to consumers, insurance companies began going out of business. It wasn’t until they implemented computer programs like Colossus to “turn the knobs” that they were able to tip the scales back in their favor, and to the benefit of their shareholders, not their policyholders.
This same trend is alive and well in the healthcare industry today: insurance companies make more money when they avoid paying for care.
With any amount of insurance coverage, consumers are still expected to pay the remaining funds to cover their non-negotiable care. This can be especially frustrating in personal injury accidents where people are injured at no fault of their own. Top-tier insurance coverage in these cases often doesn’t matter because of the insurmountable costs associated with these catastrophic events.
Health insurance, no matter the level of coverage, is often just a drop in the bucket.