Has health care finally reached the breaking point? Apparently the number of people choosing to go without health insurance is growing. Should that surprise anyone? It’s actually a rational strategy when the cost reaches the point of being unsustainable. If we haven’t already reached that point, we’re dangerously close.
Fortune published a disturbing article on the last day of 2018 that speaks volumes of the current state of American health care. What Americans Taught Us About ‘Risking It’ Without Insurance in 2018 started with this ominous declaration:
“For many Americans, 2018 was the year that health care reached a breaking point. Insurance was still too expensive to buy. It didn’t cover nearly enough.”
I can attest to that last point. In 2017 I had my appendix removed. The total cost was over $25,000. I had to pay over $5,000 of that out of pocket – even with health insurance in place.
Steep out-of-pocket costs are the second threat of the health care/health insurance crisis. Absurdly high premiums are the first. Seeing people go without coverage does become logical at some point. We should suspect many millions more will do the same when the next recession hits, and job losses begin piling up.
“War Stories” from the Article
The writers of this article spent time interviewing people who are forced to go without health insurance. They culled the specific stories from more than 5,000 responses they received to the question.
Here were some of the scenarios:
- A family in Virginia filed for bankruptcy, even though they had health insurance. This can probably be attributed to absurdly high out-of-pocket costs that are now common with policies.
- Another family in Texas was forced to insure some members of the household, while excluding others. This was their strategy to minimize the premiums.
- A nurse who maintains health insurance every other year, scheduling any needed tests or exams for the years when she’s covered.
- A 79-year old retiree continues working to provide health insurance for his 61-year old wife, who is not yet eligible for Medicare.
- Many individuals, couples and families simply went without coverage, in favor of paying other expenses deemed more immediate or important.
Each of these cases paints a picture of an individual, couple, or household who are engaging in self-rationing of health care, a topic I’ve written on in the past. Realizing that it’s become impossible to provide coverage for everyone in the household, 100% of the time, people are making trade-offs so that some members of the household can have coverage at least some of the time.
You don’t have to think too hard to imagine yourself being in any one of these situations. That’s what makes the prospect of going without health insurance so frightening. But it’s precisely because the potential is so catastrophic that we need to consider it. And to come up with some workable strategies in advance.
Most Americans are One Job Loss Away from a Similar Fate
According to the US Census Bureau, 56% of Americans are covered by employer sponsored health plans. The rest are covered by Medicaid, Medicare, direct-purchase coverage (presumably Obamacare) or military coverage. (The same report indicated 28.5 million people, or 8.8% of the population have no coverage at all.)
56% translates to 155 million people. Now the way the current health insurance system is set up, employer sponsored coverage is the best of all worlds, short of a government plan, like Medicare (plus a good supplement) or the VA. That is, as long as the employer sponsored coverage is heavily subsidized by the employer.
But the flip side of that silver lining is that retaining a job has become more important than ever. If you have employer sponsored coverage, it’s not just a matter of the loss of income, but also of health insurance.
Many millions of people understand that dilemma. That’s what keeps them from changing jobs, quitting jobs they hate, or leaving to become self-employed. The prospect of losing a job, and the health insurance that comes with it, keeps people from moving on in life.
It’s one of the major reasons Americans are increasingly turning into trained ponies, rather than the bucking broncos that built this country into the richest nation on earth.
COBRA and ACA Plans are Not Workable Solutions
Let’s start with COBRA, since that’s usually the first consideration after the loss of a job.
When my wife lost her job in the middle of 2017, we went on the COBRA plan for the second half of the year. The premium was a staggering $1,875 per month. That was much higher than our house payment, and would likely be even higher now.
What many don’t understand about COBRA is that it represents the unsubsidized premium on your employer health insurance. That means if the actual cost of the premium is $1,500, but your employer pays 60%, your portion will be a relatively affordable $600 per month.
But lose your job, and the entire premium is on you. And that’s not all. The plan administrator can add up to 15% to the premium as an administrative fee. That means your actual COBRA payment will be $1,725 per month. Imagine trying to afford that payment when you’re unemployed?!?!
What about ACA plans?
I ran a scenario on the ACA plan estimator site to get some premium quotes. The fictitious profile is of a 40-year old couple with two dependent children, and an annual income of $80,000, living in the Atlanta metropolitan area. This is what turned up:
33 plans came up, some with lower premiums. The cheapest had a monthly premium of $245, but it also had a deductible of $13,500. That kind of deductible is unacceptably high, particularly if one of the breadwinners is unemployed. In today’s high cost healthcare universe, reaching $13,500 isn’t even hard.
But even though the plan in the screenshot has a deductible of only $2,000, the monthly premium is $823. That’s nearly $10,000 per year.
But look to the right of the deductible, where it references $12,700 for the out-of-pocket maximum. This number should never be ignored. It reflects a 20% coinsurance provision. That’s the part of a medical bill that will be your responsibility over and above the deductible.
So taking my example earlier of my appendix removal at $25,000, if I had this plan, I’d pay $2,000 for the deductible. I’d then be responsible for 20% of the remaining $23,000. That would add $4,600 to the bill, bringing my total out of pocket for a single surgery to $6,600. And that’s on top of the $10,000 annual premium.
The bottom line is that neither COBRA nor ACA are workable solutions if you lose your job.
Unfortunately, there are no simple solutions to this problem. That’s because it’s a system, and a largely failed system at that.
Choosing to Go Without Health Insurance – Are there Alternatives?
As much as I’d love to say there’s a super-secret solution to this problem, there isn’t. There are strategies, but each requires accepting trade-offs.
Here’s a short list:
- Get a job just for health insurance. Maybe you were making $50,000 and had health insurance. But maybe the best you can do for now is a $25,000 job, with health insurance. It may be worth grabbing in a pinch.
- Get a part-time job with health insurance. Please don’t dismiss this out-of-hand. It was how my family kept coverage for over two years. It may be critical in an extended unemployment situation.
- Christian health sharing ministries. Not true health insurance, but it works much the same way at about half the price. Limitations: 1) you must be a practicing Christian and 2) in good health to qualify. But if you are, it’s worth a shot. Popular providers include Medi-Share, Liberty Healthshare and Samaritan Ministries.
- Take the ACA plan with the cheapest premium. In the previous section, I gave an example of an ACA policy with a monthly premium of $245 and a deductible of $13,500. Take that plan, and pray nothing bad happens. And if it does, at least it will provide coverage for a truly catastrophic medical event.
- Go without coverage. This should be a last resort, but I suspect that’s what most people do. You’ll have to take extra good care of your health, avoid dangerous or unhealthy behaviors, and keep a well-stocked emergency fund to cover at least minor medical events.
Again, none of these strategies are perfect. But with the current state of health insurance, there are no perfect plans.
Do you have a strategy in place in case you lose your coverage?