Currently, health insurance companies charge higher rates for higher risks
One of the biggest complaints about America’s current healthcare system is that health insurance rates are based on risk factors, just as they are on most other types of insurance. Buy a house on the beach in Florida, and you will pay high premiums on home insurance to cover the possibility of hurricane damage. Get a few speeding tickets while driving and your car insurance rates will soar. Higher risk factors equal higher rates.
When buying health insurance, risk factors are also taken into account.
Are you a woman? Ka-ching!
Want to have children? Ka-ching! Ka-ching! Good luck even finding insurance to cover maternity expenses.
Family history of diabetes? Ka-ching!
Over 60 years old? Ka-ching! Ka-ching!
Had cancer when you were in your thirties? So sorry! You’re denied.
Healthy equals higher profits
An American who is labeled as high risk and cannot afford their higher than average health insurance rates will opt to not buy insurance at all. That’s perfectly fine with the insurance companies. They don’t want these potential “losses” on their books, anyway. They want healthy, “low risk” folks as customers. Healthy equals higher profits.
Even Healthy People are Penalized by Sex and Age
If you already have healthcare through your employer, you probably have no idea how people are charged for insurance. Even if you are extremely healthy and have low risk factors, you are still charged different rates based on your sex and age.
Aetna’s POS Open Access 1000 Plan
Aetna Insurance offers 30 healthcare plans and 2 dental plans in the state of Florida and will cover pre-existing conditions if the patient had “credible” prior healthcare insurance; or after 12 months of paying for the plan.
Aetna’s website includes a downloadable pdf of a brochure featuring plan descriptions and a brochure of current rates. A potential customer can easily compare each plan by perusing easy to read charts, and examining co-pays, items covered, and deductibles.
My favorite plan which Aetna offers in Florida, POS Open Access 1000, would allow me to go to a network doctor and only pay a 20% copay. If I had to go to the hospital or have outpatient surgery, this plan also pays 20% after an affordable $2000 deductible. Generic prescription drugs are $15, and brand name drugs would cost me $35 to $50 after a $250 deductible. With this plan, I can rack up to $5 million in hospital bills before I have to sell my car, mortgage the house, and file for bankruptcy to pay for the rest.
As a recent 22-year old college graduate living in Orlando, the POS Open Access 1000 plan would cost me $142 per month if I were a man. However, it would cost me $187 per month as a woman, even though the plan will not cover basic pregnancy costs.
(Keep in mind that a person earning minimum wage and living in Florida would not be able to afford even these wonderfully low rates, because they only bring home $1138.21 per month after Social Security and Medicare taxes are deducted, barely enough to cover food, clothing, transportation, and housing.)
Rates increase significantly from age 40 and upward, when a plan for a man would cost only $275 per month, but a higher $361 per month for a woman.
Women pay more for this plan than men until age 55, when prices are $563 per month for a man and $550 per month for a woman.
By age 64, before qualifying for Medicare, rates for this same plan are $819 per month for a man and $720 per month for a woman.
Who would have thought that your age and sex may make you “high risk?”
Poor health, age, and sex is not a matter of choice
Charging higher rates for higher risks makes perfect sense when determining prices for home or car insurance. As an American, I can choose to buy a house on the beach and pay higher home insurance than I would if I were to buy a house inland on higher and dryer ground. As an American, I can choose to drive like an impatient maniac, get tickets for speeding, possibly cause accidents, and see my car insurance rates raised through the roof.
Applying the same principals to health insurance rates is simply inhumane.
As an American, I did not choose to be born a man or a woman. As an American, I did not choose to inherit a gene which predisposes me to cancer, sickle cell disease, heart disease, osteoporosis, or diabetes. As an American, I did not choose to be in an accident and become disabled. As an American, I did not choose to catch hepatitis, pneumonia, or meningitis. I did not choose to suffer food poisoning, nor breathe in air pollution.
What is not a matter of choice, but is simply a matter of genetics or bad luck, should not be a factor in determining health insurance rates.
Insurance Companies Can’t Have it Both Ways
As long as health insurance companies practice the policy of charging substantially higher rates for those who are considered “high risk,” or denying coverage completely to those who are “too high risk,” there will always be multitudes of seriously ill Americans living within our communities who are without health insurance coverage. We as a country have no choice but to find some sort of solution to this dilemma.
President Barack Obama has suggested we solve this problem by having the federal government form a government run “public option” insurance to compete with private insurance. However, private insurance companies feel that this is unfair because the government will be able to charge lower rates and undercut them, driving them out of business.
Insurance companies have a choice: either change the way they evaluate customer risks or the federal government will have to step in.
Perhaps it’s time that healthcare insurance rates were based on services, not on pre-existing conditions, age, sex, or family histories.
Step 5B: Regulate Insurance Rates with Blind Menu Pricing
Rather than charge higher rates for people who are considered to be “high risk,” insurance companies should charge a flat rate. I call this “blind menu pricing” because the insurance company is “blind” to your pre-existing conditions, age, and sex.
Standardized Plan Menu
So that consumers can compare apples to apples, a federal government panel of representatives from the private insurance industry, along with available insurance commissioners, would help to create a list of standardized plans which will meet any American’s basic healthcare needs. Plans would range from the most expensive and offer complete coverage with a low deductible; to the least expensive and offer a percentage of coverage with a high deductible.
Every insurance company would list their prices for those standardized plans in an easy to read chart menu, similar to that published by Aetna, which potential customers could pick from.
The cost for adding a spouse and each dependent would also be standardized.
Insurance Companies Set Their Own Prices
Each insurance company would set their own prices based on what they feel they could afford to charge. Companies would compete to offer the best prices for the same plans.
Rather than charge a 23-year old man $142 per month and a 64-year old man $819 per month for Aetna’s POS Open Access 1000 Plan, everyone of any age, sex, or health status would be charged the same rate. This plan could be averaged to cost about $400 per person per month and an extra $200 per month for each dependent.
Pay a much higher deductible, and rates are much lower. For instance the Aetna POS Open Access 10,000 Plan has a $10,000 deductible and a $1 million cap and costs only $29 per month for a 23-year old man and $194 per month for a 64-year old man. This plan could be averaged to cost about $100 per person per month and an extra $50 for each dependent.
Standardized Plans Cannot Discriminate
None of the standardized plans should be written in such a way that they would discriminate by age, sex, or condition. For instance, a standardized plan must include ob-gyn and maternity care, or it would exclude women. Similarly, a dental plan must include dentures, or it would exclude older Americans. A plan must include access to standard treatments, or it would exclude sufferers of specific diseases, such as dialysis for kidney patients, and chemotherapy for cancer patients.
Add-On for Optional Insurance
Each insurance company would then be able to offer special add-ons or special options available through their particular company. For instance, optional insurance could offer free name-brand prescription drugs instead of requiring a co-pay; much lower cost healthcare insurance with no deductibles through a specific clinic, hospital, or medical facility run by that insurance company (such as in the case of an HMO); experimental treatments; healthcare coverage while traveling to other countries; and special sports packages including massages and physical therapy.
Penalties for Irresponsible Behavior
True, it does make sense that people who smoke, don’t go to the doctor for preventative care, and don’t follow doctor’s orders (such as not filling prescriptions) should indeed be charged a higher rate for health insurance. Likewise, a person who practices risky behavior, such as getting a traffic ticket for a DUI, being arrested for soliciting a prostitute, or having a hobby like ski jumping could be required to pay a higher rate for healthcare insurance. However, these are all behaviors which would be easy to quantify and evaluate subjectively.
What should not be considered as irresponsible behavior are conditions such as high blood pressure, high cholesterol, high blood sugar, or obesity, because these conditions can be the symptoms of disease, and not a matter of choice.
An example of “Blind Menu Pricing:” AAA roadside assistance insurance
Currently in America, we have an excellent example of insurance based not on risk factors, but on services.
The American Automobile Association, commonly known as AAA (Triple A), offers three types of memberships based on the services you would like to receive. Plans are listed here and costs are listed here. AAA Classic starts at $64 per person per year and includes emergency assistance (think of this as catastrophic health insurance for your car) in the form of towing up to 5 miles, battery service, flat tire service, and fuel delivery for when you run out of gas. The deluxe membership, AAA Premier, costs $122 per person per year and includes a rental car for one day (think of this as a hospital stay for your car). Motorcycle and RV drivers (think of them as people who are “high risk” by choice) can pay an extra $30 to $80 per year for this coverage. Additional drivers (your spouse and dependents) each cost an extra $30 per year for the classic membership and an extra $63 per year for the premier membership.
In addition, AAA offers trip planning and free map books (think of this as preventative healthcare maintenance) for all of their plans.
AAA also offers additional add on packages for specific services. You can buy additional travel insurance to cover everything from lost luggage to cancelled trip reimbursements.
The reason AAA can afford to provide road service assistance for such an affordable price is because they have enough members paying into a large pool which is used to pay for assistance when it is needed. Rates are set at a reasonable enough level that consumers are willing to pay for the “peace of mind,” even if they never need the insurance.
How I Would Fix Healthcare
Step 1 – Employers must provide a minimum $300 health insurance policy allowance for each and every worker.
Step 2 – Insurance agencies may not take more than $40 per policy for profit and administrative costs.
Step 3 – Protect Health Insurance Surplus Coffers
Step 4 – Preventative Healthcare Maintenance Schedule
Step 5 – Improve Healthcare Access
Step 1 – Employers must provide a minimum $300 health insurance policy allowance for each and every worker.
Step 2 – Insurance agencies may not take more than $40 per policy for profit and administrative costs.
Step 3 – Protect Health Insurance Surplus Coffers
Step 4 – Preventative Healthcare Maintenance Schedule
Step 5 – Improve Healthcare Access
A. Institute a “public option”;
B. Regulate rates with blind menu pricing; and/or
C. Provide free clinics and access to community health centers
Stay tuned for steps 6 and 7
