Updated: Apr 1
Health Insurance – One Common Story
Husband, father of four and estate planning and business attorney in Colorado Dan McKenzie manages the family and his firm’s finances. For years they have selected a family health insurance policy, paid premiums up to several thousand dollars each month and over time watched as benefits reduced and deductibles rose to the point where they had to spend out-of-pocket premiums plus deductible totaling over $30,000 annually before the insurance company would pay significantly for any incident. Dan reports, “Our traditional insurance plan was extremely expensive and did not seem to provide much protection for anything other than absolutely catastrophic events. We never came close to meeting our individual or family deductibles and still occasionally received bills for thousands of dollars for relatively routine events, such as a short visit to an emergency room or a referral to a specialist. A close review of the “Explanation of Benefits” frequently revealed that our insurance hadn’t actually paid anything. It had merely negotiated a discount.”
Why Is This?
It’s more complicated that this blog might attempt to address. Some factors follow.
Consumers – all of us – want the very best solutions to our health issues. This desire comes at a high cost which many believe is paid by the insurance companies. In the end consumers always pay the bill.
To win clients the hospitals and other medical services and products industries respond to consumer demand and create ever-more refined medical treatments solutions that cost ever-higher amounts to develop, regulate, and operate. Even non-profits must remain financially viable and competitively attractive. They each have clients, employees, budgets as well as profit, survival and growth incentives. Insurance companies charge higher monthly premiums, reduce benefits and raise deductibles in order to remain profitable.
And it is extremely difficult to find competitive cost information for anything – doctor visits, X-rays, medicines, hospitals, surgeries, etc. As Dan experienced it may only be after the fact that an Explanation of Benefits reveals how little the insurance company paid for any very expensive treatment, service or procedure.
However, some of this is changing.
Shopping For Medical Services In January 2021 Hospital Price Transparency went into effect such that “hospitals’ standard charges, including the rates they negotiate with insurance companies and the discounted price a hospital is willing to accept directly from a patient if paid in cash, must be publicly available, free of charge, and presented in a consumer-friendly display.” It is now easier than ever to shop at various hospitals for common medical services such as appendectomy, hernia operation or colorectal cancer screen. While improvements are possible this a helpful and consumer-friendly step forward.
One personal anecdote follows. A necessary though non-urgent 15 minute out-patient surgery in late 2020 provided the author the opportunity to shop for a surgeon, surgical center and anesthesiologist. First, the surgeon. Three were referred leading to two with equally excellent reviews after hundreds of the same surgery each. Each doctor had about the same availability and chose their preferred anesthesiologist and operated at select medical facilities. Either would be acceptable so next was understanding cost. One surgeon practiced in a closed hospital network while the other was independent. The hospital-based surgeon quoted a net inclusive cost for all three required items of about $17,000, after an 87% self-pay discount for the surgical center fee. Who decides these numbers? The independent surgeon quoted about $6,000 for all three items, again after some less mind-blowing self-pay discounts. The decision was a no-brainer. 1/3 the cost for the same quality and timing.
What Alternatives to Insurance Exist?
There are alternatives to buying healthcare insurance.
One is to insure yourself by paying personally only for the services used. Many people do this for dental or vision care paying no monthly premium and paying out-of-pocke when they need help, usually in response to squinting harder to read or getting a tooth ache. However, in general personal and family healthcare a choice to self insure could be financially catastrophic. Accidents, surgeries, illness could each cost tremendous amounts, more than most people could afford to pay. Studies show that as many as 62% of personal bankruptcies in the US are caused by medical expenses. So, this might be an alternative only for the most financially secure and risk-accepting people.
Another option is to join a medical sharing plan in which members commit to paying their pro rata share of the total medical cost of all of the members. It’s sort of like going to dinner with friends and splitting the bill evenly – everyone agrees to cover their share of the total bill regardless of the meal selected or glasses of wine consumed. Medical sharing plan members each contribute monthly to the general fund which pays for operations and claims and then also make, if needed, a one-time true-up contribution at the end of the year to keep the plan financial even. In many cases the monthly contributions are a fraction of monthly insurance premiums. Several key differences exist between a medical sharing plan and healthcare insurance. One is that each member of the plan, and not the organization, is ultimately responsible for medical expenses they incur while counting on all other members to chip in to pay for those shared expenses covered in the plan. It’s a system based on mutual commitment to one another founded on some shared belief system. Another is that the plan might allow members to pick their own doctors and service providers rather than limit those choices to a defined network. And deductibles, the amount a member pays personally before expenses are shared by others, could be in the hundreds rather than thousands... 1/10 as much or even less. Also, some medical sharing plans are religious in nature while others are not, and each operates in a slightly different way. With distinct differences between various medical sharing plans it makes good sense to investigate and compare as carefully as when choosing an insurance plan.
What if you could find an alternative to healthcare insurance that permit you to:
Get the same medical services coverage for when you need it?
Pay less each month?
Have much lower deductibles to pay yourself before receiving financial support?
See the doctors you want at the medical facilities you prefer?
Would you choose that alternative to common healthcare insurance? Or decide to continue to pay more and receive less in systems that often limit your choice of doctors and facilities? Author: Tim Balfe, JRW Advisory Services, March 19, 2021
Disclosure: My family is a member of Christian Healthcare Ministries since 2015. Since 2015 we have received sharing of at least 7 significant medical incidents ranging from accidents (multiple concussions) to unexpected (hernia) and preventative (heart issues post COVID-19 infection). We contribute less than $600 monthly for four family members, gladly contribute also the full amount of the annual “true up” figure - typically about $100 or less - solicited to all members in order to “balance the books” at the close of each year. We estimate a cumulative family savings easily surpassing tens of thousands of dollars during the past 6 years. We continue to seek a superior medical expense solution though so far have found none.