Sunday, October 24, 2010

Health insurance choices


The linkage between having a job and having health insurance is much stronger in the United States than in the Netherlands.  As a result, the process for buying insurance from the free market becomes very distorted.

First, there is the cost distortion. When I worked for a corporation, my family health plan cost $400 per month: the company paid the rest.  I think that the total was $900 per month for a family of three, $300 each.

When I took severance, my existing benefits continued for 18 months under the government’s COBRA rules. However, I paid the full cost, rising to about $1200 per month by the end, $400 per person.

With COBRA benefits ending, I now have to buy insurance as a self-employed person ($500 per person) or pay ex-corporate rates to continue my present plan ( $700 per person).

It’s an amazing escalation, and baffling.  Why is my cost, as same person in the same plan, changing so fast?  Why does ‘being an employee’ vs. ‘being a former employee’ change my rates when the underlying risk pool is the same? Why is the corporate plan now $200 more than a comparable alternative?

In contrast, in the Netherlands, the cost differences among various insurers were less than 5%, and the overall cost for basic insurance was $150 per person per month.  The premium has moved less than 5% year to year.  It feels much more in line with our yearly costs of consuming health care.

The second distortion is in selecting features and services.

In the US, I select among prepackaged plans: HSA (lowest premiums, higher payments for everyday care, bonuses for getting preventative care), EPO (lower premiums in exchange for limiting care to a particular physician network), or PPO (highest premiums, but use any doctor.  It’s not a logical breakdown and hard to compare features vs. costs.

In contrast, the Dutch insurance is a la carte:  I buy the services I need beyond basic costs: I can choose physical therapy or dental vs. pregnancy and childcare.  It was very easy to ’tick the boxes’ for my needs and risks.

Finally, I always have an eye over my shoulder watching for the effect of preexisting conditions.  In the US, it can lead to a disastrous cancellation of coverage when I need it most, it’s not a concern in the Netherlands.

In the end, I make conservative choices in the US, staying with a known policy and paying higher premiums because it’s safe, not because it’s right or the most cost-effective alternative.  In the Netherlands, I assembled a plan, priced it across alternative companies, and selected the best choice from a free market.

As the silly season rolls across the US political landscape, television ads railing against ‘Obamacare’ and threatening seniors, I wonder how this happened.  We have a bad system, but people fight hard against reasonable alternatives.  The market in information is as distorted as the market for plans.

Maybe it’s transitional, but it looks insane.


Jules said...

Health insurance: the second reason why I'm never leaving the country, tied with my boyfriend. The cats, of course, are first ;-)

But in all seriousness, I think my brain just exploded trying to understand the juggling of COBRA, benefits, deductibles, etc. And people don't want to make it easier?

Dave Hampton said...

Thanks, Jules: it's a mystery.

I wish that there was a simple way to take basic and catastrophic care, then agree to pay anything else myself. I should get credit for healthy practices, avoid paying for services I won't use (baby-care is not in my future), and be able to specify a single primary provider who will partner with me on care. But instead we argue about death panels and repealing legislation that curbs tthe worst abuses.