An interesting article came across my email this morning about legislation seeking to amend McCarran-Ferguson (McCarran-Ferguson solidified the regulation of the business of insurance at the state level, limiting Federal regulation of insurance). H.R. 372 seeks to repeal certain anti-trust exemptions as they apply to health insurers. If you’re not familiar with McCarran-Ferguson, here’s a link to Cornell University Law School‘s Legal Information Institute. Take a minute to read up on it. This is legislation that you need to know about if you’re in insurance. Come back when you’re done. We’ll wait for you.
It appears that the authors of H.R. 372 think that McCarran-Ferguson is part of the reason that health insurance costs so much. This gave rise to some thoughts as to why health insurance costs continue to rise. Without making political comment, I must disagree. By the way, if you’re an agent, helping your customers to understand their health insurance is a great way for you to build relationships and grow a long-term customer (that’s a free tip). Let’s get to a few reasons that health insurance costs continue to rise. If you’ll keep reading to the end, I’ll give you a short process that helped me choose the health insurance policy that was right for my family recently and how I looked at the overall costs of health care for my house.
Health insurance works differently than property and casualty insurance does. Consider the number of years you have bought, sold or dealt with a homeowner’s insurance policy. How many times have you filed a claim on your home? How many times have you talked to a customer that got frustrated with the price of their policy and the first thing they say is, “I’ve never even had a claim!” Precisely! According to III (Insurance Information Institute), in 2014, 5.3% of insured homeowners had a claim. In health insurance, it’s not a question of whether someone will have a claim in a specific year, it’s a question of how many claims and how severe they will be. We use our health insurance. Think about it. You don’t ask the same questions about health insurance that you do for other coverages. You ask questions like what’s my deductible? What’s my co-pay? How many times can I go to the chiropractor? In my opinion, health insurance is not what we have. We have health assurance. An assurance policy covers an event that is certain to happen. Insurance covers events that are possible. When many people buy health assurance coverage, they are planning on going to see their doctor at some point during the policy year. When we buy our homeowner’s policy, we aren’t planning to use it this year, we hope. Health insurance works differently than other insurance does.
Health insurance doesn’t let us pick and choose what coverage we need and want. Let’s look back at the homeowner’s policy. Many homeowner’s policies include coverage for other structures so that you can be indemnified if that shed burns down, is blown over or explodes because you bought your sons a book about backyard ballistics. What do you do if you don’t have a shed? You ask the agent to reduce that coverage to $0 or exclude it. What happens next? You guessed it. The coverage is reduced. Depending on the policy and the state, there are several different options that you can add or remove from your policies. It all depends on what you need. Health insurance doesn’t work that way. You get to buy coverage based on Federal mandates. Think about it. You’re a single man and you have to pay for maternity coverage. Here is a partial list of items that you can’t exclude to try and pay less: maternity, prescriptions, mental health, and physical therapy. In most cases, you get to choose between a few plans offered by your employer or plans offered in your state and those plans will include all the coverages mandated by the ACA. Health insurance doesn’t let us pick what coverage we need and want.
Knowing some reasons behind the rising cost of health care is one thing. How to help people to deal with them is another. Here are a few tips to consider when helping someone (including yourself) with their health care costs. This conversation is best held when someone can make changes, like when they have a qualifying life change, or during an annual enrollment period.
- How many times did you visit the doctor last year and the last three years?
- How much did you pay in premiums + deductibles + co-pays + other out of pocket expenses last year and the last three years?
- Compare premiums + deductibles + co-pays + other out of pocket expenses for different plans.
- Be aware of value added options that you will take advantage of. Many health insurance plans come with discounts at gyms, but how many of us take advantage of that add on?
This is a process that my family and I went through recently as we had a qualifying life change event. It is easy to look at the monthly premium and choose based only on that. Here’s the problem with that, you haven’t considered how much you plan to use your health insurance policy. Look at the last three years because one of them might be an outlier and you need to know about that, but can’t make decisions based on it. Look at all the costs related to your health and add them together. That should help you to gauge which policy is best for you or your client.
This may not help the long term outlook for health costs for the whole country, but it might help next year’s costs for one family and we’re here to help one family at a time, aren’t we?