With health care costs rising sharply, why are so many short term medical insurance plans lowering rates? The latest rate reduction was announced at MedSave.com by HPA Inc., the administraors for Secure STM, including the "3x12" 36 month short term medical plan and the new "Secure Lite" lower cost short term medical insurance.
In an inflaionary environment, rate decreases are usually triggered by a drop in medical care utilization. Evaluating utilization trends in health plans is a complicated topic even for those who have access to the best data. We don't; we are just speculating. Just for the sake of discussion, let's assume that utilization has declined in short term medical insurance in recent years. Why would that be?
The easiest explanation is the increase in policy deductible. The median policy deductible selected by buyers increased from $500 a few years ago to $1000 today. The largest increase in policy deductibles chosen is in the $2500 deductible option.
A person who is healthy enough to meet underwriting standards is unlikely to incur substantial medical expenses in excess of $1000 within the 3-4 month average lifespan of a short term medical insurance policy. Of course some do, and they are the reason that insurance is important. But a larger number of people simply do not incur a claim on the policy that exceeds a $1000 deductible.
Another explanation is that people are actually waiting for group insurance to kick in after the STM before going to the doctor. That makes sense and is the behavior we would expect. Perhaps we will eventually find that fewer people are using STM as a substitute for regular health insurance. Those people might have gravitated to limited benefit and other types of low cost health insurance.
Wednesday, June 25, 2008
Wednesday, May 7, 2008
CT will offer coverage to high risk small businesses
Connecticut’s latest health insurance bill has now passed the state Senate and is expected to be signed by the Governor. The approval vote came late last night and today’s news is filled with praise for the “outstanding accomplishments” of the legislators. The new bill presents an entirely different approach to health insurance reform.
The law allows local municipal government employees and small businesses to join the state employee’s health insurance pool. Premiums are already about $2,000 per month for family coverage, (vs. a national average of about $1,200 for comparable coverage in large firms). Certainly this is not what we consider “affordable” but this is apparently far less than some CT municipalities are now paying for health insurance! Few small businesses could afford this coverage. Those that could foot the bill will cover only the owners or key employees. There is no economic reason to suggest that small businesses would use the plan to cover rank and file employees. Small businesses tend to pay far less for employee health benefits than larger firms and municipal governments.
The problem is that those who understand insurance principles realize that adverse selection under the new law will now drive the premium rates up in a spiral effect. That is ALWAYS the economic effect of opening up a guaranteed issue health plan to additional applicants on a voluntary basis. The state will now be effectively subsidizing the health care costs of local municipalities and the rlativley few affluent small business owners who have significant medical costs. The first may be commendable – but who would have expected the second result? Eventually the cost of coverage under this Connecticut insurance plan will be HIGHER than any other state's employee cost but LOWER than any other high risk insurance pool. It will be a highly effective method to distribute health care costs of a few among all the state's taxpayers.
Open enrollment health insurance pools are certainly not a new concept. This is the approach used in most states to cover high risk individuals despite the clear indications that those who need the insurance most can not afford it. Most states use open enrollment health insurance pools as a "last resort" coverage under federal HIPAA law for those who cannot find more afordable coverage. Connecticut's plan to combine the open enrollment plan with the taxpayer-funded state employees' health coverage is an interesting new approach.
The law allows local municipal government employees and small businesses to join the state employee’s health insurance pool. Premiums are already about $2,000 per month for family coverage, (vs. a national average of about $1,200 for comparable coverage in large firms). Certainly this is not what we consider “affordable” but this is apparently far less than some CT municipalities are now paying for health insurance! Few small businesses could afford this coverage. Those that could foot the bill will cover only the owners or key employees. There is no economic reason to suggest that small businesses would use the plan to cover rank and file employees. Small businesses tend to pay far less for employee health benefits than larger firms and municipal governments.
The problem is that those who understand insurance principles realize that adverse selection under the new law will now drive the premium rates up in a spiral effect. That is ALWAYS the economic effect of opening up a guaranteed issue health plan to additional applicants on a voluntary basis. The state will now be effectively subsidizing the health care costs of local municipalities and the rlativley few affluent small business owners who have significant medical costs. The first may be commendable – but who would have expected the second result? Eventually the cost of coverage under this Connecticut insurance plan will be HIGHER than any other state's employee cost but LOWER than any other high risk insurance pool. It will be a highly effective method to distribute health care costs of a few among all the state's taxpayers.
Open enrollment health insurance pools are certainly not a new concept. This is the approach used in most states to cover high risk individuals despite the clear indications that those who need the insurance most can not afford it. Most states use open enrollment health insurance pools as a "last resort" coverage under federal HIPAA law for those who cannot find more afordable coverage. Connecticut's plan to combine the open enrollment plan with the taxpayer-funded state employees' health coverage is an interesting new approach.
Tuesday, May 6, 2008
Is the single payer issue dead?
The tide of public opinion about our nation’s health care woes has taken a sharp turn over the past two months. The movement to blame commercial health insurance – as exemplified in Michael Moore’s “Sicko” movie - has lost wind. While the health care problems remain exactly the same as before, fewer people are willing to blame health insurance companies. We still pay way too much for health care for less than ideal care. The prognosis remains that the problem will get worse before it gets better. But apparently we are beginning to realize that commercial health insurance system is more likely to be part of the solution rather than the root cause of the problem.
Support for an open market commercial competition in the health care business has increased. Most of the current legislative proposals for health care reform on a national and state level now incorporate the use of private health insurance companies.
Those who endorse a government controlled single payer health care system are outraged. Socialist-minded reformers have noticed the change and express frustration in many online publications this week. Some Americans hope for a single payer government-controlled health care system. One blogger titled his column “What’s Going On?” and expressed disgust with the sudden trend toward his state politician’s recent endorsement of commercial health insurance solutions. Another lawmaker in Oklahoma defended himself from attacks by health care reformers by taking a hard stance that proposed measures to expand coverage would simply be too expensive to justify the support of his constituents. On a national level, McCain’s health care proposals, previously regarded are tired and boring, are applauded by mainstream media this week.
So why are we seeing this sudden change in direction? Much of the change in attitude is attributable to the explosion of myths surrounding commercial health insurance. Three of the most popular myths about commercial health insurance companies are:
1 - The profits of health insurance companies boost our overall health care costs.
2 - Private insurance is more expensive than public insurance.
3- Commercial insurance practices are not in the public interest.
See http://www.slate.com/id/2190273/ We will likely see much more on this topic.
Support for an open market commercial competition in the health care business has increased. Most of the current legislative proposals for health care reform on a national and state level now incorporate the use of private health insurance companies.
Those who endorse a government controlled single payer health care system are outraged. Socialist-minded reformers have noticed the change and express frustration in many online publications this week. Some Americans hope for a single payer government-controlled health care system. One blogger titled his column “What’s Going On?” and expressed disgust with the sudden trend toward his state politician’s recent endorsement of commercial health insurance solutions. Another lawmaker in Oklahoma defended himself from attacks by health care reformers by taking a hard stance that proposed measures to expand coverage would simply be too expensive to justify the support of his constituents. On a national level, McCain’s health care proposals, previously regarded are tired and boring, are applauded by mainstream media this week.
So why are we seeing this sudden change in direction? Much of the change in attitude is attributable to the explosion of myths surrounding commercial health insurance. Three of the most popular myths about commercial health insurance companies are:
1 - The profits of health insurance companies boost our overall health care costs.
2 - Private insurance is more expensive than public insurance.
3- Commercial insurance practices are not in the public interest.
See http://www.slate.com/id/2190273/ We will likely see much more on this topic.
Friday, April 25, 2008
Insurance for college graduates
New data gathered by insurers shows that parents continue to be the driving force in a college graduate’s decision to buy short term medical insurance following graduation. Parents pay the premium in more than half of the short term medical insurance policies issues to those in the 21-24 age group. Without this parental financial support, a college graduate is four times more likely to go without medical insurance for a period of two months or more following gradation.
College graduates and their families are often surprised to learn how affordable health plans can be. MedSave.com, a leading provider of low cost medical insurance for college graduates, reports that the average cost of the six most popular health plans to young adults has dropped this year to for the first time in recent history. The price drop is due to the expansion of limited benefit plans rather than a reduction in overall health care costs.
But more health plan choices also means that there is more potential for selecting the wrong coverage. Not surprisingly, the least expensive health plans tend to be the most popular among young adults. This can lead to less than adequate protection. These health plans tend to provide up-front benefits for smaller medical expenses like doctors office visits but offer the least protection for catastrophic risks. It is important that college graduates choose the right plan for their own health situation. It appears that parents may be less likely to be involved in the selection of the insurance than in helping with the cost. Many college graduates are purchasing insurance for the first time and purchase trends indicate that some are making uninformed choices based solely on the cost of coverage or misperceptions of the risk/benefit aspects of insurance choices.
In most cases a high deductible short term medical insurance policy provides a young adult with the best protection at the lowest cost. Most college graduates and other young adults do not benefit financially by purchasing health insurance that covers routine health care like doctors office visits, lab tests and prescription drug costs.
College graduates and their families are often surprised to learn how affordable health plans can be. MedSave.com, a leading provider of low cost medical insurance for college graduates, reports that the average cost of the six most popular health plans to young adults has dropped this year to for the first time in recent history. The price drop is due to the expansion of limited benefit plans rather than a reduction in overall health care costs.
But more health plan choices also means that there is more potential for selecting the wrong coverage. Not surprisingly, the least expensive health plans tend to be the most popular among young adults. This can lead to less than adequate protection. These health plans tend to provide up-front benefits for smaller medical expenses like doctors office visits but offer the least protection for catastrophic risks. It is important that college graduates choose the right plan for their own health situation. It appears that parents may be less likely to be involved in the selection of the insurance than in helping with the cost. Many college graduates are purchasing insurance for the first time and purchase trends indicate that some are making uninformed choices based solely on the cost of coverage or misperceptions of the risk/benefit aspects of insurance choices.
In most cases a high deductible short term medical insurance policy provides a young adult with the best protection at the lowest cost. Most college graduates and other young adults do not benefit financially by purchasing health insurance that covers routine health care like doctors office visits, lab tests and prescription drug costs.
Monday, April 21, 2008
Detriot business owners mirror national trends
A newly released survey of Detroit area businesses showed that while they are highly concerned with the effect of uninsured on their health costs, few support proposed legislation to require health insurance.
The results of this survey mirror those of other groups around the county. We want everyone to have health insurance, but we draw the line at requiring it by law.
The survey was conducted by John Bailey & Associates Inc. in preparation for the Detroit Regional Chamber of Commerce’s Mackinac Policy Conference. Surveyors found that 46% of members would vote “no” on the proposed constitutional amendment to require health insurance; 27% would vote “yes,” and 27% had no opinion or were undecided.
In Michigan, as in most other states, there are more low cost health insurance options available this year than at any time in the past. Yet without a requirement to carry insurance, about 16% of the population is uninsured and those with insurance wind up paying for the cost of health care for the uninsured.
The results of this survey mirror those of other groups around the county. We want everyone to have health insurance, but we draw the line at requiring it by law.
The survey was conducted by John Bailey & Associates Inc. in preparation for the Detroit Regional Chamber of Commerce’s Mackinac Policy Conference. Surveyors found that 46% of members would vote “no” on the proposed constitutional amendment to require health insurance; 27% would vote “yes,” and 27% had no opinion or were undecided.
In Michigan, as in most other states, there are more low cost health insurance options available this year than at any time in the past. Yet without a requirement to carry insurance, about 16% of the population is uninsured and those with insurance wind up paying for the cost of health care for the uninsured.
Friday, April 18, 2008
Short term medical insurance in New York
New York residents face a triple threat when it comes to short term health insurance. First, the insurance products used in most states that are specifically designed for this purpose are not available in New York. Second, the coverage that is available is slow; often taking at least a month just to get through the manual application process. Third, the coverage is expensive. No pricing discount is recognized for the likelihood that this insurance will not be in force long enough to accrue catastrophic claims.
The easiest solution is to buy temporary insurance while staying in another state. Insurance issued in another state is valid in New York and allows treatment with any doctor or hospital in the U.S. There is no requirement that the address on temporary health insurance be your permanent residential address. Some New Yorkers residents purchase health insurance while staying at their out-of-state colleges, while at their second home in another state or while on vacation or visiting relatives. The insurance covers treatment while they are away from home as well as with the doctors and hospitals at home in New York. Almost all short term medical insurance is purchased online and most offer immediate download of the policy and insurance ID cards. Most insurance companies allow you to have the policy mailed back to a New York address if you will be returning from your trip soon.
The only other possible alternatives we can offer are:
1. Core Health Insurance – a limited benefit policy that does a fairly good job at mimicking the benefits of major medical insurance
2. International Medical Insurance - for individuals who are not permanent residents of U.S.
3. Inbound Immigrant Insurance – for individuals who have recently moved to the U.S.
If none of these options will work then it is especially important to explore all options to keep, extend or convert prior health insurance regardless of the higher cost.
The easiest solution is to buy temporary insurance while staying in another state. Insurance issued in another state is valid in New York and allows treatment with any doctor or hospital in the U.S. There is no requirement that the address on temporary health insurance be your permanent residential address. Some New Yorkers residents purchase health insurance while staying at their out-of-state colleges, while at their second home in another state or while on vacation or visiting relatives. The insurance covers treatment while they are away from home as well as with the doctors and hospitals at home in New York. Almost all short term medical insurance is purchased online and most offer immediate download of the policy and insurance ID cards. Most insurance companies allow you to have the policy mailed back to a New York address if you will be returning from your trip soon.
The only other possible alternatives we can offer are:
1. Core Health Insurance – a limited benefit policy that does a fairly good job at mimicking the benefits of major medical insurance
2. International Medical Insurance - for individuals who are not permanent residents of U.S.
3. Inbound Immigrant Insurance – for individuals who have recently moved to the U.S.
If none of these options will work then it is especially important to explore all options to keep, extend or convert prior health insurance regardless of the higher cost.
Tuesday, April 15, 2008
Masschussets learns that "insurance is not health care"
A flood of articles in recent weeks discuss the difficulties triggered by Massachusetts' experiment in mandadted health insurance.
The Kaiser Founation published an excellent summry report at http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=51517 .
Several other states including California have declined similar proposals. Pols show that the majority of Americans do not wnt mandated health insuance, yet this provision remains a key provision in Hillary Clinton's campaign platform.
The Kaiser Founation published an excellent summry report at http://www.kaisernetwork.org/daily_reports/rep_index.cfm?DR_ID=51517 .
Several other states including California have declined similar proposals. Pols show that the majority of Americans do not wnt mandated health insuance, yet this provision remains a key provision in Hillary Clinton's campaign platform.
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