Cursed by Pre-Existing Conditions

I have several pre-existing conditions which are not covered by my insurance. I am signed up with Medi-Share, a health coverage co-op which is allowed to impose such restrictions.
When I applied for the coverage I was told that my knees were not covered due my history of injuries and potential need for surgeries in the future. My anxiety disorder was also excluded. I signed up anyway.

I signed up because my private work-based “cover everything” Blue Shield plan cost $1800 a month for full family coverage. It also had a deductible of $3000 a month, which meant I would spend over $24,000 a year before I had any true health benefit. The Medi-share plan, in part because it restricts pre-existing conditions, cost $480 a month for a $5000 deductible. I decided that the $16,000 of premium savings a year was worth the risk of paying cash for future treatment on my knees.

I confidently made this bet because my pre-existing conditions do not require ongoing care. Unlike diabetics, cancer patients and patients with congenital conditions, I can go years without paying anything for my knees. In the event I do need such care it will not be urgent and I can re-enroll in another plan to get better coverage. If I need a knee replacement I can game the system and enroll in an ObamaCare plan in November, have the surgery in January, and disenroll in February.

I am not the only person who has figured out that delayed enrollment may be the best financial option. Many healthy Americans are choosing to forego insurance completely. Because they know that they can wait until they get sick to buy insurance, or in the case of emergency know that emergency care will be given regardless of their ability to pay, they roll the dice and do not sign up for coverage. They pay cash for the occasional sick visit and save thousands of dollars a year.

While this no-insurance decision is beneficial for these individual families it is devastating to the insurance industry and the health care system. All insurance industry profits come from healthy patients. As more and more of these patients drop out of the insurance pool insurers are increasingly struggling to cover expenses. The only option they have is to further raise their premiums, which causes more healthy patients to opt out. Patients with pre-exiting conditions, especially chronic diseases, do not have such a choice. They have to pay the higher premiums.

(I have heard many people say that the solution is to eliminate insurance company profits. As appealing as this option may seem, it will do nothing to solve the problem. The insurance industry’s profit margin is about 3%. Cutting this to zero would take only $30 a month off of a family’s $1000 premium. This is not the answer.)

The current system is designed to fail. Millions of Americans have health coverage through their employer. This is incentivized by a tax policy that makes this type of coverage a deduction to the employer and tax free to the employee. Individuals purchasing insurance on the individual market get no such benefit. When people with chronic illnesses leave their jobs they take their pre-existing conditions with them. When they try to buy insurance on the individual market they find insurance difficult to get and expensive.

ObamaCare attempted to address this by forcing insurers to cover pre-existing conditions. While this see
med nice, lawmakers ignored the reality that the money has to come from somewhere and that somewhere is from healthy patients. This has caused sky rocketing premiums in the individual market. Faced with such high premiums many healthy patients opt out of the system, resulting in even higher premiums.

 

The reason this failure is predictable is that this system results in the financial burden falling on healthy people regardless of income. Younger people are on average the healthiest people but they are not the wealthiest. The current law limits the ability of insurance companies to charge higher premiums based on age so the young and healthy are effectively subsidizing the health costs of older, sicker and oftentimes wealthier people.

ObamaCare attempted to address this by trying to force all people to buy insurance. Uninsured Americans are faced with penalties if they do not purchase coverage. Since the cost of the penalty is far less than the cost of insurance and is essentially uncollectable, this part of the law has been ineffective. Too many healthy individuals do the math and opt out.

Left out of all of the current laws and proposals is an important reality. All of the proposals I have read expect all healthy people to pay the same, regardless of income. This seems fair on its face, but is no longer feasible. Health care costs have reached the point where many families simply cannot afford the premiums. I am reluctantly left with the conclusion that we need a system in which contributions to health care costs are based more on income than they are on health. As people are not likely to do this on their own, I expect the ultimate solution will come as a result of a government program or tax.

As unpalatable as this is, if the remaining option is to limit insurance to only those who can afford it, it is a pill we will all need to swallow.

Bart

This post is on both my personal and medial blog sites. For my personal blog, go to www.bartbarrett.com

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