The Solution to the High Cost of Individual Health Insurance
If you are someone who must pay for his/her own health insurance than you are aware of just how expensive it is. Over the last twenty year the cost of individual health insurance has increased virtually every single year. But it is not just the monthly premiums that have risen. In addition to the increasing monthly premiums which have made health insurance almost unaffordable most people have also seen their deductibles and coinsurance costs dramatically increase as well. For individuals buying their own health insurance, the average individual deductible is $4358 with another potential $3800 out of pocket in coinsurance costs.
- Deductible: This is the amount that you are required to pay before your policy will pay any benefits. If your policy had a $5000 deductible and you had a medical event with total costs of $10,000, you would be responsible for the first $5000.
- Coinsurance: After you pay the policy deductible costs are shared between you and the insurance company. In the previous example the insured paid the first $5000 leaving the insurance and the insured to share the remaining $5000. In an 80/20 plan the insurance company would pay 80% of the $5000 which is $4000. The insured would have to pay the remaining $1000 in addition to the deductible of $5000.
- Maximum Out of Pocket Liability: This is the maximum amount of medical bills that the insured will have to pay regardless of the total amount of medical bills. If the individual had a maximum out of pocket of $8150, then even if the medical bills totaled $50,000 this individual’s costs would be capped at $8,150.
- Copays: Many major medical policies include a provision that allows the insured to access certain medical services without having to first meet the deductible. The two best known examples are the doctor visit copay and the prescription drug copay. Many people have a plan that allows then to visit their primary care physician by paying a $25 copayment instead of having to meet their deductible.
The Way Health Insurance Used to Be
A long, long time ago in a United States that is barely recognizable health insurance was simple. You purchased a policy that had a deductible and coinsurance with a maximum out of pocket and went to any doctor or hospital. There were no copays for doctor visits and no copays for prescription drugs. Those things were paid for by the individual. And if you wanted an annual physical you paid for it.
The biggest difference was that there was no “healthcare network.” The insurance company did not dictate what doctors or hospitals you could utilize. When you had a medical event the insurance company reimbursed based on “reasonable and customary” so as an insured it was in your best interest to try to ascertain what a procedure would cost and then contact the insurance company and ask if it was reasonable and customary.
While everyone complained about the increasing premiums, most people were extremely happy with their coverage. Not so in today’s world. Everyone that I talk with who is responsible for paying for their own health insurance is unhappy today.
A Better Way – The Alternative to Major Medical
First, we must define the purpose of health insurance. Health Insurance (major medical) is simply one way to finance the purchase of medical care. Because medical care can be so expensive, we need a way to limit our own financial exposure. My colon surgery in 2014 incurred medical bills in excess of $45000 which would bankrupt most people if they had to pay those bills themselves. At the end of the day the goal of health insurance (major medical) is no different from any other insurance; to protect us from financial ruin.
So, the question is this: if health insurance is supposed to protect us from financial ruin as a result of a medical event are there other, better ways to pay for medical care? The answer is a resounding “yes!”.
One alternative to major medical insurance is to simply self-fund for a medical event. Consider the case average North Carolinian paying $490 monthly or $5880 annually. That means that over five years this individual will have spent $29,400 in premiums. If at the end of the fifth year this individual had a major medical event and met their maximum out of pocket costs of $8150 the total amount spent would have been $37,550. We also know that according to a TransUnion Healthcare study 88% of Americans incur medical bills that are less than $1000. Only 12% of medical claims ever exceed $1000. Unfortunately, no one knows whether tomorrow might be the day that we become part of the 5% of American who account of more than 50% of medical bills. Not only do not know whether we will incur large medical bills tomorrow, we also do not know whether we will become one of the many Americans with a chronic, ongoing medical condition. That is why some type of protection is necessary.
An Example of Cost for a 40-year-old male non-smoker – This is only a partial listing of possible charges and cover expenses.
The Medical Cost Sharing Alternative – $250 monthly (a savings of $145 monthly over Major Medical Health Insurance) with No Network. Member can use any provider
Fully Insured Benefits
- Primary Care – The individual Has unlimted access to a Virtual Primary Care Physician
- MRI/CT Scans – Healthcare Concierge will negotiate the lowest possible cost
- Maximum Out of Pocket – $1000 per illness or accident with a maximum of three event then the plan pays 100% of all bills
- No Network – Freedom to use any doctor or hospital, anywhere in the world.
In the Medical Cost Sharing alternative the member saves $174 annually. In addition, this is a permanent solution and can follow the individual anywhere in the country.