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.