Comments on: Quest for Insurance Part II: The Coverage

By: Min

Min — Sat, 23 Jan 2010 17:11:26 +0000

“Perhaps some marketing wizards should figure out how to pitch high-deductible plus HSA plans in a way that the average person would find attractive. How about an infomercial that promises to save you thousands of dollars every year with a proven system and throws in a set of handy dandy steak knives if you act now?”

How about, “You get an instant raise.”?

By: kevindick

kevindick — Sat, 23 Jan 2010 03:53:54 +0000

Yes, the Assurant plan is HSA qualified.

I recommend getting insurance as soon as possible. This preserves your option value.

By: Todd White

Todd White — Fri, 22 Jan 2010 20:01:33 +0000

We ran into the same thing when looking at insuring Dominic. Nancy has a high deductible HSA plan through her work. I think the deductible is $2000, but they give her something like that much in the HSA. I have a Cadillac plan at work that costs $750 a month to my employer ($0 to me). I have to have this plan in order to be seen at Nancy’s hospital if I get sick (a huge plus for me in terms of quality of care). It would cost another $750 to insure Dominic (roughly $250 of which my employer would pick up). To add him to her HSA costs about $60/mo to her (I’m not sure how much to her employer). He has his own $2000 deductible and they don’t give her any more money in the HSA. Still under my insurance our premiums alone would be $6000/yr out of pocket. Her premiums total $720, plus the $1500 deductible difference. Like your situation, a total no brainer. Past $2000, her plan is every bit as good as mine. But there is something to math here that just doesn’t pencil out.

By: kevindick

kevindick — Fri, 22 Jan 2010 18:21:52 +0000

Thanks for the deep analysis Todd.

At 10K of (unexpected) medical expenses, I pay 10K + 7,760 = 17,760 under Assurant. I pay 2K (deductible) + 2K (coinsurance) + 17,593 = 21,593 under Aetna. The difference is 3,833. In my detailed scenarios, I took into account the probable copays and admission fees. They pushed it up to about 5K.

As for the difference in risk underwriting, I actually have some answer from my acceptance letter. One family member was in the “preferred” risk class. One was “standard”. Two were “standard” plus extra premiums for pre-existing conditions. In one case, the surcharge was 40%. So I think that the family as a whole was about average.

Baffling, I know. Another possible explanation is that Aetna’s overhead is much higher than Assurant’s. Or perhaps administering employee-sponsored plans is much more expensive.

By: Todd White

Todd White — Fri, 22 Jan 2010 06:06:20 +0000

I’m trying to make sense out of this from the insurance companies’ perspectives. At any level of medical expenses, the high deductible plan is a winner for Kevin as he says. I actually get a lower minimum savings of around $3K at $10K of medical expenses, but the point is still valid. Assuming this is a zero sum game, and the insurance company pays whatever Kevin doesn’t, this means that the HD plan is always a loser for the insurance company at any given equal level of medical expenses. Therefore, as Kevin says, the insurance company must be counting on a change of behavior (which makes sense because Kevin’s marginal cost on the first $10K is 100% on the HD vs. 80% or so on the PPO). The problem I have is that the shift would have to be very significant, and it would have to occur on expenses greater than $13K. Even if Kevin incurred $0 medical expense on the HD plan, he’d have to incur over $13K on the PPO plan before the insurance company would have been better off writing him the HD plan. Of course, if Kevin incurred $10K of medical expenses on the HD and $13K+ on the PPO, it’s the same to the insurance company. So the problem I have is that in order for this to make sense, the insurance company has to expect Kevin to incur over $13K of expenses a year and reduce that by over $3K by switching to the HD plan. However, since the PPO has an out of pocket maximum of $8K, the incentives in the $13K+ range are very similar under both plans. I don’t see the shift happening. (Plus at $13K+, you’re probably out of the range where incentives have much effect on your behavior anyway.) How can this possibly make sense for the insurance companies?

I suspect that the answer must be that Kevin’s family has a lower than average risk. Since the individual policy can price based on risk whereas the company policy cannot, this seems like the only valid explanation. (In which case the comparison is unfortunately no longer valid.) You need a PPO quote from Assurant to compare against.

By: Andy Bloch

Andy Bloch — Thu, 21 Jan 2010 23:40:02 +0000

I had similar problems when my Cobra expired a couple of years ago. I kept getting denied individual coverage for a condition for which I haven’t been treated at all in 5 years (it was less than 5 years the last time I tried applying), and I take no prescription drugs. I couldn’t even get an HSA-qualified high deductible plan. I don’t remember if I tried Assurant. Is your plan HSA-qualified?

Anyone have an opinion on whether one should try to get coverage before or after the possible health insurance changes?