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The real math behind why your health insurance premiums keep rising, and what the media hasn’t told us about Obamacare yet.
From the wealthy to the not so wealthy, one thing seems to be a common theme of anyone buying health insurance; the cost continues to increase yearly without any relief.
Today, I was speaking to someone who is a major employer and he is looking at other options than Horizon Blue Cross Blue Shield, who has insured his company for years. He told me that his insurance costs for his business and employees are going to rise 19 percent this year, even though we are being told by the major news media outlets and by our president that Obamacare has lowered the acceleration of healthcare costs in this country. The math does not add up. How can our premiums rise much faster than the overall cost of healthcare repeatedly, from year after year? Is this part of the plan for Horizon to roll out their Omnia network; make the current plan unaffordable so we have little other choice?
As you already know, health care deductibles and out of pocket costs continue to rise yearly. High out of pocket costs, with high deductibles keep people out of doctors offices unless a catastrophic event happens has reduced costs, for the insurance carriers. Why, as the general public are we just accepting this? Where is the transparency, or the outrage? You are likely to visit a number of healthcare practitioners before your insurer ever pays a penny.
In my personal policy, I have moved my children to their college healthcare plans, which give them better coverage for less than half the price of my Aetna Plan, even though my daughter has Aetna through her school, with lower out of pocket costs than we do. To insure my children, their insurance plans costs $1500 yearly for each of them in different colleges, while my personal plan would cost us $4000 per year per child. While college is indeed expensive, placing them under student plans at their schools saves us $5000 per year. That’s crazy; why does their school plan cost so much less, and our plan under Obamacare so much more? Is it the group (young, healthy), or something we aren’t being told about?
While that may sound like a rant, the truth is buried in the numbers. The truth is, under Obamacare, the maximum an insurance carrier can charge you for administration is 20%. They must pay out the balance 80% in claims. If they exceed 20%, they must refund it back to the subscribers of the plan.
While that sounds great in theory, in reality, here is what is really happening. In order for an insurer to become more profitable, they must sell a more expensive plan. Five years ago, an average family policy pre Obamacare may have cost you $1400 per month which is expensive. The insurer on average would spend 30% of that money on administration and advertising. Under Obamacare, the maximum they can spend on that administrative costs is 20%. Using simple math, your plan in 2010 may have cost you $16,800 yearly, and your insurer likely spend only $11,760 of that money on claims, giving them $5040 to pay their staff, claims, bonuses, advertising, etc.. With Obamacare, the average plan has risen 8-10% per year, so now the monthly premium is now $23000 per year for similar family coverage (if you have shopped for insurance lately, these are real numbers). If your insurer kept charging you the same amount from 2010 and only could charge you 20% based on the $16,800 premium, they are only allowed to spend $3,360 on administrative costs, having lost $1680 in revenue complying with the new law. While insurers have restructured, sending out fewer checks due to electronic transactions, direct deposit and email, they still spend a lot on image advertising, marketing and such.
The Obamacare era plans typically cost more, have higher deductibles yearly and have us spending more out of pocket than before, even though there are some benefits such as free colonoscopies (only if there was no problem found, otherwise it is reclassified as diagnostic and it hits your deductible) and no lifetime maximums. Some people are subsidized (those making under 90K), but here in NJ, most people make more than 90K because the cost of living is high here.
The insurance industry understands how to make the numbers work, so they raised our premiums a lot to make up for this shortcoming while adding millions of subscribers since you now must have insurance of pay a fine. As before, they use this money to pay their staff well and advertise how wonderful they are. Meanwhile, they are spending a lot of the premium money on asking doctors such as our office to send them files on different patients to see if we are honest. Doctors are now documenting everything they do in detail with electronic records over thousands of patient visits per year which has had some benefits such as better records, which unfortunately take more time from your doctor visit (you have likely noticed the increase time your doctor spends on data entry).
Our office, as many offices do, runs on a tight budget, with little room for error. The real reason your insurer is doing this is to try to find errors in our documentation that allows them to ask us for a refund of the services we provide you, knowing well most offices have limited financial resources. This is apparently their newest business venture; redacting payments from doctors who are just trying to help people like you, while attempting to document everything in great detail. Is it any wonder doctors are leaving private practice and joining large groups or hospital systems that charge you more than before, moving healthcare costs up higher and higher as this is the only way most doctors can get a raise? Hospital mergers only exacerbate this phenomenon.
Getting back to the math, even as insurers have cut some costs, they need to make healthcare more expensive to make the money they did before. If an average family of four, with two aging parents were to buy a plan similar to the one they had pre Obamacare, they would now spend $23,000. They can charge a maximum of 20% for overhead, but with this years premium of $23,000, they can keep a maximum of $4600. While this is not quite the $5040 they got before, they figured that their new business of going after doctors, making smaller networks, and trying to squeeze every nickel and dime out of your doctor, will solve their problem, while Obamacare does little to solve the cost problem.
Lets look at the math again for review
Then
2010 family of four premium $16800 per year Insurer used 30% for overhead $5040
Today
2015 family of four premium $23000 per year Insurer uses 20% for overhead $4600
A Future prediction
2018 family of four premium $25200 per year Insurer uses 20% for overhead $5040
Scary, isn’t it. Is this their long game? If it is, can we just have Medicare for all with a 3% overhead, no advertising, no CEO bonus, just healthcare and then work on the costs? Can this really happen when they have purchased all of our politicians?
If you are wondering if that is a good idea, ask the seniors who have tried the Medicare advantage plans that use private insurers and then switched back to Medicare, once they realized that they had a huge network of doctors, nationally, with a yearly deductible of only $140. Maybe this is why most countries have social systems that cost less than ours and cover all of their citizens, at a much lower cost.
I’m outraged, and you should be too. We need a reboot.
Feel free to pass this on, the general public needs to know.