In a report (Individual Health Insurance 2009: A Comprehensive Survey of Premiums,Availability, and Benefits) made public in October 2009, America’s Health Insurance Plans (a trade group representing health insurance companies) presented some interesting information that gives a sense of what health insurance policies cost when purchased by an individual.
Across the country, the annual premium was $2,985 for a single person and $6,328 for a family.
The annual premium was very different from state to state. For example, the premium for a family health plan in New York was $13,296, while a similar plan in Iowa was $5609.
The annual premiums for health plans were also very different depending if the annual deductible was high or low. For example, family plans with no deductible had an average premium of $12686 each year, while plans with an annual deductible of $10,000 had an average premium of $5380 each year.
Many of these plans also differ in the amount of out-of-pocket (OOP) expenses and annual OOP maximums.
So let’s do some assumptions:
Average Co-Pay Cost for a Doctor Visit: $25/Visit
Average Co-Pay Cost for Prescription Drugs: $10/drug for generic and $20/drug for formulary and non-formulary
(Formulary simply means the list of drugs that the Pharmacy has plenty of stock of, due to cost savings and/or effectiveness. If you have a non-formulary drug prescription, they may or may not have it available to you immediately).
Now let’s assume one more thing….You have a slightly unhealthy year but no trips to the hospital or emergency room.
A single person has 5 visits to the doctor and has two drugs they take every month:
5 trips to the doctor at $25 = $125
2 drugs per month at $10 for generic = $240
Total Cost to you = $365 + Premium Cost of $2,985/year = $3,350
Let’s look at directly out of pocket:
5 trips to the doctor at $125 = $625
2 drugs per month at $100/month = $2,400 Total Cost = $3,025
Assume a family of 4 has a slightly unhealthy year:
$365 (Same as single) X 4 Family members = $1,460 + Premium Costs of $6,328/year = $7,788
Out of Pocket: $3,025 X 4 = $12,100 – This is 20 trips to the doctor and 8 Prescription Drugs per month
Now assume a family has a healthy year:
10 total trips to the doctor and 4 prescription drugs per month:
With insurance: $7,058 (Half the out-of-pocket and still all of the premium)
Without Insurance: $6,050
Now think about the Clinics that have popped up inside drug stores and grocery stores. If they charge $80 (by the way, the ones around me charge $65 on average), insurance still pays $25 co-pay. Without insurance, this will reduce your out of pocket by $45 per visit.
Even if you can make trips to these clinics for half of your visits, that is a savings to you without insurance coverage of $225. With insurance, you are still paying the same. Why not go to the specialist for a sinus infection. It only costs $25 with your insurance.
Insurance was designed many many years ago to cover catastrophic healthcare issues, but for decades the average cost for healthcare coverage was cheaper to give to employees than a 3% cost of living adjustment to their salary (I remember doing the calculations). Suddenly, healthcare costs began to increase, and we now have the issues we see today.
My problem is that if we are to have health care reform, mandating insurance coverage is not reform. I am all for disease management, but I want to also see cost containment by hospitals, caps on medical malpractice awards, governance on what hospitals can charge on insurance (why should insurance have to cover a mistake made by the hospital?), removal of pre-existing clauses (something I agree with on the health bill), and if you are going to create mandates – can we look at setting up Coops similar to Rural Electric Coops and Farm Coops? That seems more logical than having government running it. Besides, both are great examples of success in bringing about help to our citizens.
Chuck Gillespie
