Reigning in the Cost of Health Insurance, or, Why We Can’t Have Granite Countertops on a Laminate Budget

This blog comes to you courtesy of a nasty exchange on Facebook. It started with a posting about the fact that an insurance plan offered through the state exchange did not include the regional children’s hospital in its network.

This is happening around the country as insurers limit provider networks in order to keep premiums within  prescribed limits, whether those limits are mandated by the Affordable Care Act or by the employer paying for the health insurance. And it’s no secret that specialty hospitals like children’s hospitals and teaching hospitals have far higher costs than community hospitals. Reasons include the cost of training medical residents and fellows, the high percentage of Medicaid patients they see as well as the high percentage of uncompensated care they provide, and their mission to do research as well as provide patient care. They do receive additional federal and state funding to compensate — at least partly — for those expenditures, but in this day of shrinking budgets it doesn’t cover it all.

On the other hand, insurers offering policies on the exchanges must keep premiums within a certain limit based on actuarial data in their region. In addition, employers are looking for ways to keep their own health care costs under control. Small networks, which allow insurers to promise providers more volume in exchange for lower prices (economics 101), is one way to get there.

Neither side is wrong. The situation simply represents one of many effects of our out-of-control healthcare costs. Plus, people with limited network plans will have access to out-of-network care — they’ll just have to pay more for it.

Which brings me to the basic conundrum in how we view health care:

1. We expect access to everything: the best hospitals, the best doctors, the latest technology, the newest drugs — regardless of the cost, quality, or efficacy.

2. We expect our insurance company and/or employer to pay for it.

3. We expect our premiums and out-of-pocket costs to remain low.

We can’t have it all, people. At least, not anymore. We did, for years, as employers picked the majority of the tab for health care and we, the insured, only shelled out a $10 or $20 copayment here and there. But with double-digit premium increases over the past 10 years, employers can no longer afford to cushion us from the reality of healthcare costs. And so out-of-pocket costs for consumers have doubled in the past 10 years. Note the date people — the past 10 years. The ACA wasn’t signed into law until 2010.

So stop blaming Obamacare.

In fact, the rising cost of health care has effectively wiped out any real gain in income over the past decade for middle-class families. (For a great read on this, see the AARP report here).

Limiting networks, charging higher copayments for specialty care and branded drugs (when generics are available), refusing to pay for treatments that have not been shown to be effective, passing more of the cost onto employees through higher premiums– these are all efforts to reign in costs. Your costs. My costs.

Let’s look at it another way. Say you’re renovating your kitchen. You really (really!) want granite counters and a Bosch dishwasher. But your budget won’t allow it. Do you whine and moan and expect your contractor to provide both for the cost of laminate and a Whirlpool? Of course not.

Well then, why do we expect our insurance companies — and employers — to do exactly that?




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