Thursday, March 20, 2014

When a 30 year-old's health insurance decision was a matter of life or death

Yesterday the Atlantic ran an article of mine about the ACA's satisfied unsubsidized -- those who earn too much to qualify for ACA subsidies but were happy with the insurance they found for 2014 under ACA rules because they or a family member have a pre-existing condition.

The original draft was cut down quite a bit, necessarily and appropriately for a general interest publication. Personally, though, I find the full stories of how these "health insurance veterans" navigated the individual market over the course of a decade or two fascinating. One outtake is below; I'll put up another tomorrow.

An individual market vet prefers PPOs

Frank, 40, a film producer, and his wife Sharon, also 40, a film editor, live and work in Los Angeles, among the legions of independent contractors in the film industry. The couple has a 5 year-old son. Sharon has a preexisting condition -- she was diagnosed with thyroid cancer in 2003, which was fortunately caught early and treated successfully.  Intuition and prudence probably saved Sharon's life, as well as the couple's finances. Frank's recollection of the way two young professionals navigated a world in which health insurance was not a given provides a window into the problems the ACA is designed to address.

"At that time, we usually didn't get health insurance," Frank recalls, "but Sharon was working on a program that did provide insurance.  The job ended, and she was going to move on to another thing, and was like, you know, 'I am going to pay for the COBRA and continue my health insurance.' She felt there was something wrong with her neck.  I remember thinking, you don't really have to do that. I didn't have health insurance. I had left where I was and was trying to do some writing, and my attitude was, 'we don't have the money.' She said, 'I really think it's important.'  And she was dead on the money, because she had thyroid cancer.  She was lucky, it wasn't terribly severe, she caught it pretty early, but it took some time -- she had to have three separate surgeries."

To get her problem diagnosed, Sharon "had to go to two different doctors. And the first doctor didn't find anything. I look back, and I think, if we didn't have the health insurance, there's probably no way she would have kept going back until she got the answer she needed."

Thanks to Sharon's foresight, the couple --and later family -- remained insured continuously, though it took some complex maneuvering. California law provided continuous coverage protection that enabled Sharon to transition from COBRA into paying for the same Blue Cross coverage as an individual without medical underwriting. Frank bought his own plan, and when their son was born the couple added him to Sharon's plan.  By 2011, Frank recalls, "the monthly cost of Sharon's plan and mine was $1300 per month. We make a good living but that's a pretty huge sum."

At that point, they did what many film industry professionals do, and with the help of a broker set up a corporation and bought a small business plan. At first that plan provided "huge savings" -- their monthly premiums dropped to $860 per month. But the next year Blue Cross bumped the premium up to $1060, and in 2013, to over $1100.

Given those hikes, Frank's attitude as the ACA exchanges went live was "let me dive in."  When news of the website glitches poured in, though, he decided to wait and let things settle a bit. Then he called Joe, the broker who had connected him with the small business plan in 2011. "He found me a preferred PPO for about $850 with no deducible.  I looked it over with Joe and filled out the application with Blue Shield in about two minutes. It was as easy as any purchase I ever made."

That plan is one of the most expensive gold plans listed on CoveredCa, the California ACA exchange, where gold plans for two 40 year-olds with one dependent start at $689. It's the only PPO (preferred provider organization)  on offer among the gold plans, however (the same plan is also available for a lower premium but with greater cost sharing at the silver level).

The greater physician access afforded by the PPO was a decisive factor for Frank. "The first thing I did was call our pediatrician, our primary care doctor, and my wife's gynecologist and check whether each would accept the Blue Shield plan. I was going to make sure that whatever we signed up for, all three accepted -- and all three were yesses."

Having enrolled in a small business plan in the past, Frank will keep an eye out when the ACA small business exchanges open in 2015. "I know several people who created those plans for the same reason we did." The small business plan took his rates down once before and could do so again.

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A couple of thoughts about this tale. First, while Sharon's decision to keep insurance via COBRA may have been a matter of life or death, and we may shudder at the thought of a 30 year-old having the opportunity to choose wrong -- and young adults still have that opportunity -- it was actually more likely than not at that point in her life that she would be uninsured.  The gig she had just finished was unusual in offering insurance. That was the bad old days, and the ACA represents just an incremental and nascent change.  As fewer and fewer people get health insurance from their employers -- and most health economists think we should transition away from employer-sponsored insurance -- buying insurance is going to have to be inculcated as a necessary rite of passage and as an ongoing necessity. We had best abet that cultural shift, and make the insurance affordable and adequate.

Second: health economists generally like narrow networks, offering access only to doctors and hospitals that meet insurer's pricing (and supposedly, quality) requirements. In our fragmented health market they may be an important means for the payers to gain some pricing power.  But choice of providers is vitally important to many if not most of us as patients.  That's why I think that ultimately, the government has to impose pricing discipline and a degree of uniformity, which it accomplishes by different means in different countries, ranging from paying providers directly (the U.K.) to overseeing collective bargaining by insurers (Switzerland).  And as I've noted before, I think that having at least a catastrophically insured out-of-network option in a narrow network plan is highly desirable. 

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