Monday, October 4, 2010

How can a family with $50,000 in income pay $18,000 in medical expenses? | Physicians for a National Health Program

How can a family with $50,000 in income pay $18,000 in medical expenses? Physicians for a National Health Program
"The individual insurance market is highly dysfunctional, and was one of the primary motivators for the regulatory changes in the Patient Protection and Affordable Care Act (ACA). About 30 percent of individuals who apply for individual plans are denied coverage. The private insurers will cover only individuals with an unblemished health record. Most health care costs for those individuals are very low and often below the deductible. This is why the insurers can sell an individual family policy for only $6,328 - these are healthy people who rarely file significant claims. In fact, when they do file larger claims, the private insurers routinely look to see if they could find an omission in the application such as a prior yeast infection not reported, and then they would reject all claims and rescind the coverage. Both of these practices are illegal for employer-sponsored group coverage, which is partly why group coverage is more expensive, but they were very effective in limiting claims losses in the individual market. The new law requires guaranteed issue (all applicants accepted) and prohibits rescission (retroactive revocation of insurance). These two changes will wipe out the individual insurance market as we know it, and will result in skyrocketing insurance premiums.

Another reason that individual plans are so cheap (if you call $6,328 cheap) is that they do not provide nearly as good coverage - both in benefits and cost sharing. Individual plans frequently omit pharmaceuticals, mental health services, maternity benefits, etc. Also they tend to have larger deductibles ($1,000 to $25,000) and high coinsurance (a percentage of fees which is usually much higher than co-pays would be). The bankruptcy studies have shown that medical debt contributes to about 60 percent of personal bankruptcies, and three-fourths of those with medical debt had health insurance. Individual plans have deteriorated to a degree that they don't keep people out of bankruptcy when they develop significant medical problems. The new law will establish a standard benefit package which will also drive premiums up, though it will still permit excessive cost sharing (at an actuarial value of 60 to 70 percent)."