In a previous blog entry, I asked whatever happened to community rating for insurance. For those of you who don’t know, community rating was the system in place for most medical insurance companies in which most people had similar insurance premiums, because the risk was shared among the entire population of insured people.
Community rating has all but disappeared in the private insurance market, but what is still somewhat surprising to me is that the Commonwealth of Massachusetts also abandoned community rating in setting up the insurance system for Commonwealth Care and Commonwealth Choice insurance plans.
This decision allowed the governor to state last year that it was possible for an individual to get medical insurance for $170 per month. The fine print, however, was that this was the insurance premium for a 38 year old man, and the $170 doesn’t include the cost of deductibles and co-payments.
What it also doesn’t say is that the effort to keep the cost down for 38 year olds results in extremely high rates for those in riskier categories, meaning anyone over 38. Just how expensive, you ask?
A class from UMass Boston Nursing School recently visited me to discuss community health. One of the students happened to have with her a previous assignment, which was to find out what kind of insurance was available for an uninsured person in the new health care system. She used information for a 58 year old single female from Fall River, working as a nurse’s aide and making $32,000 per year, which is above the annual income that would qualify her for subsidized insurance. The options were eye opening.
The cheapest plan is from Neighborhood Health Plan. The premium is $4424.64 per year, or $368.72 a month. But you have to add the additional expenses to get a true picture. Co-payments for office visits are $25/visit, and $100 for an emergency room visit. If you need hospital care, you pay the first $2000 out of pocket, then 20% coinsurance after the deductible is met. Lab charges are subject to the deductible, meaning that you have to pay full charge for lab services until the deductible is met. Pharmaceuticals have a $100 deductible, after which you pay a $15 co-payment for generic drugs, and 50% of the cost of any other drug.
The price goes up from there to the “gold” plan of Blue Cross/Blue Shield. (For the record, all the companies have various plans, generally categorized as bronze, silver and gold.) In this plan, the premium is $11,212.20 per year, or $934.35 per month, but there is no deductible. You still have to pay a $10 co-payment for office visits and $50 for an emergency room visit, but there are no additional costs for hospital stays. And co-payments for pharmaceuticals are $10/$25/$45 depending on whether it’s generic or brand name.
There are 16 other insurances offered between the lowest tier and the highest. But of course they’re all unaffordable for the woman making $32,000 per year. The lowest cost plan is 13.8% of the woman’s gross income, unless she actually needs to use medical care. The “gold” tier is 35% of income. Try it yourself – it’s easy to do. Just go to the Connector website, and put in your information, then try some other ages and incomes.
I’m sure the Connector would point out that there are few Massachusetts residents who would be in this income/age category, and they might be right. But my point is that medical care costs a lot of money, and is unaffordable for lots of people in the non-subsidized category. And this somewhat theoretical example is based on 2007 prices, which are expected to rise, or, more accurately, be held to 5-7%. Jon Kingsdale, executive director of the Connector, has rightly pointed out that health reform is unsustainable with the kind of annual premium increases we have seen for the last few decades. My fear is that the premium increases will be tempered by increasing fees, deductibles, and co-payments, or cutting back on what is actually covered, an effort to further mask the actual cost of medical care by pushing more of it out of the insurance plan, taking more money out of the wallet in addition to the monthly check.
The reality is that medical care is already unaffordable, with few realistic plans to even keep the increase in cost to the rate of inflation, let alone reduce the price of care. The problem is that we celebrate the very reason for the dramatic increase in medical costs at the same time we bemoan its cost. Has any candidate for statewide office ever pointed out that their suggested solution to increasing employment in Massachusetts – expansion of life sciences – will dramatically increase the cost of medical care?
2008 will be the year in which our health reform law will have its sustainability tested. It won’t be sustainable if the cost can’t be made affordable for both the consumer and the taxpayer.
Bill Walczak
CEO, Codman Square Health Center
I fall roughly into the age group/income described. I am 61 years old and retired. The cost of health care forms a very large percentage of my monthly budget. In addition to the items listed above, don’t forget the cost of dental care, which has skyrocketed in the last few years. Routine exams now cost $140 each, and crowns (which apparently need to be replaced every 10 years or so, so I now get hit almost every year) are around $1200 each. And none of the dental costs are covered by any insurance plan available to individuals.
But I want to point out that if the student had done the analysis _before_ the current law went into effect, she would have found the costs were even higher. Under the old system, I could only get a “nongroup” health insurance plan, which was over $1000/month, with very high co-payments. During that time I reluctantly dropped my prescription drug coverage, which represented $350/month of the cost. I was very relieved when the new plans came in, because, contrary to what this article says, they do use community pricing within the age group. I was able to get a full-coverage plan, _with_ drug coverage and lower co-payments for only $618/month. So it may be bad now, but it was much worse before.
In response to Leslie T;
I am glad you have no problem coming up with $618.00 monthly payment for your insurance but to most residents this is impossible and you must be wealthy to afford this.Most residents are not.My husband is retired and between SSI and pension we struggle every month for basic needs.Also to be fines for not being wealthy enough to afford the insurance is beyond my understanding.We cannot afford the insurance how can we afford the fines?What will happen to us in our retirement years to be saddle with such a dire situation?
Since Romney wasn’t Govenor when this plan was instituted, who gets the credit? Does Senator Kennedy get some credit, even though the plan is a State Plan, Senator Kennedy must have had some input for his home state -?
I live in Florida. I wish we had the free health insurance like you all have up there.
(1) Robert – it is NOT free unless the person has an income below $15000+ for an individual. Everyone else has to pay something for the subdisized plans. Those over 300% Federal Poverty Level pay the full shot.
(2) “I’m sure the Connector would point out that there are few Massachusetts residents who would be in this income/age category, and they might be right.”
The Connector, in that case, would be in its usual fantasy land. It hasn’t gotten the numbers right yet on the demographics of the uninsured and is ALWAYS way low on its’ guesses.
That oh-so-acclaimed cost of $170 was based on the median age of MA residents. That is not necessariy the same as the median age of those who are uninsured. But assumning that it is, that means 1/2 are under 37 and 1/2 are older.
In comparison,the premiums rapidly go upwards for:
(a) Those over 45
(b) Those who are couples (getting hit with 2Xs the cost but not having 2Xs the income to beclassed as over 300% FPL.) Interestingly, many couples would be better off divorcing because then one or both might qualify for subsidized coverage.
(c) Families
When you look at the demographics of those who have purchased the full-price plans, there are very very few couples or families who have enrolled. It is not because they are not uninsured- it is because they simply can not afford it.
Basically anyone over 40, any couples or any families who have incomes over 300% FPL but below 600% FPL, can simply not afford the premiums – and forget the copays and deductibles.
My numbers show that probably 50- 70% of the uninsured who have incomes over the limits for subsidies can not afford the coverage.
(3) Leslie
You do NOT fit the profile of those who are uninsured if you could shell out over $1000 a month in premiums for a single person.
93% of the households who are uninsured have incomes less than 400% of Federal Poverty Level. (Ex: $41K for 1 person)
94% of the households who are uninsured have incomes of less than $60,000.
Those kind of incomes do NOT allow for paying $1000 a month in coverage for 1 person.
Even if you were spending 20% of your gross income on premiums, that means you have an income of $60,000 or nearly 600% of Federal Poverty Level.
I forgot to add that Leslie was not lookiing at being hit with fines ($219 this year and over $900 next year) for not being able to afford the premiums just because a person makes $1 more than that silly premium/income schedule which does not take into account:
(1) The acutal cost of living in a high cost state. (FPL is fairly useless since it was developed when housing was only 12% of a household’s costs and has never been adjusted.)
(2) The actual costs of the deductibles and copays. The Connector is quite happy so long as the private insurers get their money and doesn’t care if people can not get care because of the deductibles and copays. Ironically, if the person wasn’t shelling out the premiums, they could use the money to pay for their medical care.
They all want to compare this twisted law with auto insurance.Well I can “afford” auto insurance.I do not have to show the auto insurance company my financial records.They will not FINE me for not having auto insurance.The facts are if your middle income there are no affordable plans.The Commonwealth Connector is not being honest with us or anyone.Do the lawmakers and Governor even care what is happening to the middle class of this State?I can’t beleive that we have no one on Beacon Hill who cares about this issue.
I don’t think it’s a matter of anyone caring. I think the problem is that very few people (including our elected officials) really understand how the health care system operates, let alone the Massachusetts health care law. And so, most people don’t know that having insurance doesn’t necessarily mean that you aren’t going to be bankrupt if you actually use the medical care system, and most people don’t know what it actually costs for medical care services, or what is covered, or how the pharmaceutical industry operates, or whether the drugs approved by the government are actually good for everyone that the pharma companies claim they’re good for, or whether some expensive procedures are going to work better than less costly interventions. And we virtually ignore prevention. Add this to the fact that the Massachusetts health reform bill used numbers that many observers believed were wrong (like how many residents were actually uninsured), and you have our current rock and a hard place situation. The big question is what our elected officials choose to do when it’s clear the state can’t afford the system it created, and neither can the residents.
To Bill Walczak,
If all you say is true then why punish us with fines?The fact is if I could afford the insurance I would.(if it was real insurance)not $4000.00 deductable.Then how by fining me,which I cannot afford either,how does the penalty HELP?I really beleived the State when they said “we will have affordable insurance” well they don’t so how is that my fault?
Good point, Norma. The reality is that health care is NOT affordable by anyone in the bottom three quarters of the population for income. They can craft a health insurance plan that is affordable, but that doesn’t mean that care is affordable, which is the point of my blog. If you want an insurance system like the one that the architects of the system have, it’ll cost you the gold price premium, which in the case I wrote about is over a third of a person’s income. So it’s unaffordable. Under the old system, the person qualified for the free care pool up to 400% of the poverty line, a far more generous system, and much more affordable for the patient. So if we play this out, the patient doesn’t buy health insurance because she can’t afford it, she’s hit with a fine of up to $1000 AND she isn’t covered in the event that she winds up in the hospital. Is the cure for the problem of uninsurance worse than the disease? It certainly is in this case in comparison to what we had before Chapter 58. My fear is that it’ll only get worse. There’s a lot of pressure on the legislature to drop the requirement for a drug benefit, which will add significant cost onto the patient, and we’ll probably see additional cuts in benefits even as the premium goes up.
I could only get a nongroup health insurance plan, which was more than $ 2000/month, with very high co-payments. During that time, I reluctantly dropped prescription drug coverage, which costs $ 250/month.