You Do Not Have Health Insurance

[Chomsky]

The Baseline Scenario

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You Do Not Have Health Insurance

with 104 comments

Right now, it appears that the biggest barrier to health care reform is people who think that it will hurt them. According to a New York Times poll, “69 percent of respondents in the poll said they were concerned that the quality of their own care would decline if the government created a program that covers everyone.” Since most Americans currently have health insurance, they see reform as a poverty program – something that helps poor people and hurts them. If that’s what you think, then this post is for you.
You do not have health insurance. Let me repeat that. You do not have health insurance. (Unless you are over 65, in which case you do have health insurance. I’ll come back to that later.)

The point of insurance is to protect you against unlikely but damaging events. You are generally happy to pay premiums in all the years that nothing goes wrong (your house doesn’t burn down), because in exchange your insurer promises to be there in the one year that things do go wrong (your house burns down). That’s why, when shopping for insurance, you are supposed to look for a company that is financially sound – so they will be there when you need them.

If, like most people, your health coverage is through your employer or your spouse’s employer, that is not what you have. At some point in the future, you will get sick and need expensive health care. What are some of the things that could happen between now and then?

• Your company could drop its health plan. According to the U.S. Census Bureau (see Table HIA-1), the percentage of the population covered by employer-based health insurance has fallen every year since 2000, from 64.2% to 59.3%.*
• You could lose your job. I don’t think I need to tell anyone what the unemployment rate is these days.**
• You could voluntarily leave your job, for example because you have to move to take care of an elderly relative.
• You could get divorced from the spouse you depend on for health coverage.

For all of these reasons, you can’t count on your health insurer being there when you need it. That’s not insurance; that’s employer-subsidized health care for the duration of your employment.

Once you lose your employer-based coverage, for whatever reason, you’re in the individual market, where, you may be surprised to find, you have no right to affordable health insurance. An insurer can refuse to insure you or can charge you a premium you can’t afford because of your medical history. That’s the way a free market works: an insurer would be crazy to charge you less than the expected cost of your medical care (unless they can make it up on their healthy customers, which they can’t in the individual market).

In honor of the financial crisis, let’s also point out that all of these risks are correlated: being sick increases your chances of losing your job (and, probably, getting divorced); losing your job reduces your ability to afford health insurance, either through COBRA or in the individual market; if your employer drops its health plan, that’s either because health care is getting more expensive (meaning harder for you to afford individually) or the economy is in bad shape (making it harder for you to get a job that does offer health coverage).

In addition, there is the problem that even if you are nominally covered when you do get sick, your insurer could rescind your policy, or you may find out, as Karen Tumulty’s brother did, that your insurance doesn’t cover the treatment you need. But while important, this is a second-order problem. The first-order problem is that as long as your health insurance depends on your job, your health is only insured insofar as your job is insured – and your job isn’t insured.

The basic solution is very simple. In Paul Krugman’s words: “regulation of insurers, so that they can’t cherry-pick only the healthy, and subsidies, so that all Americans can afford insurance.” I know that there are lots of details that consume people who know health care better than I do, and I know those details are important. But as an individual who is worried about his or her own health insurance (and that is the point of this post), that’s what you want. You want to know that if you lose your job, you won’t be shut out because you’re too sick,*** and you won’t be shut out because you’re too poor.

But we won’t get there as long as people remain convinced that health care reform is for poor people. It’s for everyone – everyone, that is, who isn’t independently wealthy or over the age of 65. Because all of us could lose our jobs. (Have I repeated that point enough?)

Now, I admit that if you are over 65, health care reform is not for you, because you are in the one group in our society that enjoys true health insurance – insurance that you cannot lose, that is paid for by taxes, and that is effectively guaranteed by the government. So maybe there’s nothing in it for you, except perhaps an improvement to the prescription drug component of Medicare. But I cannot believe that, as the only people who have reliable health insurance, you would oppose health care reform that would provide reliable insurance for the rest of us.

* This doesn’t necessarily mean that all those people lost employer-based health coverage because their employers dropped their plans; some of it could be that the employee contributions were increased to the point where they couldn’t afford it anymore. 1.1 percentage points of the shift is due to people becoming eligible for Medicare or military health plans.

** If you lose your job, or you get divorced from a spouse through whom you get health coverage, you are eligible for continued coverage under COBRA. However: (a) this only necessarily applies if your employer has 20 or more employees; (b) you have to pay the full, unsubsidized cost of your health plan, which can be particularly difficult after losing your job; and (c) it only lasts for eighteen months.

*** I said earlier that insurers can’t charge premiums that are less than the expected cost of your care unless they can make it up on the healthy customers, and they can’t in the individual market. But if all insurers are prohibited from doing medical underwriting (pricing based on healthiness), then they will all have to overcharge the healthy customers, and the system could work. This is still a tricky issue – and single-payer (like Medicare) would be much simpler – but it can be made to work even in a competitive market.

By James Kwak

[flintlock]

Re: You Do Not Have Health Insurance

Good article.

I find a huge number of people have no idea what medical coverage outside a large group plan would cost, especially if they are over 40. They either think they will always have a job or can easily get another with good benefits. My 48 year old self-employed brother pays $1500 month for his family. And he had to "hire" his wife on in order to get that through a group plan. He has a son with autism so that is why his is so high I think.

The author is spot on about the medicare crowd not wanting change. Why would they, they have a great deal. A lot of the anti-reform crowd comes from either this group or those soon to hit medicare age. I wonder how many give much thought to their children and grandchildren in all this?

[rjwjr]

Re: You Do Not Have Health Insurance

"For all of these reasons, you can’t count on your health insurer being there when you need it. That’s not insurance; that’s employer-subsidized health care for the duration of your employment."
Every US citizen is free to secure health care on their own, directly with an insurance provider. Since they do not, the benefits of securing insurance through the employer must outweigh these negatives, thus this point is not truly an issue.


"Once you lose your employer-based coverage, for whatever reason, you’re in the individual market, where, you may be surprised to find, you have no right to affordable health insurance. An insurer can refuse to insure you or can charge you a premium you can’t afford because of your medical history. That’s the way a free market works: an insurer would be crazy to charge you less than the expected cost of your medical care (unless they can make it up on their healthy customers, which they can’t in the individual market)."
There are two sides to this point. Put another way, if you live a healthy life style, do not smoke, do not drink to excess, and do not engage in dangerous activities (skydiving for example), you can get much lower insurance rates in the individual market than if you had to subsidize your overweight, smoking, heavy drinking co-workers. "That's the way the free market works."


"The basic solution is very simple. In Paul Krugman’s words: “regulation of insurers, so that they can’t cherry-pick only the healthy, and subsidies, so that all Americans can afford insurance.” I know that there are lots of details that consume people who know health care better than I do, and I know those details are important. But as an individual who is worried about his or her own health insurance (and that is the point of this post), that’s what you want. You want to know that if you lose your job, you won’t be shut out because you’re too sick,*** and you won’t be shut out because you’re too poor."
To a large extent this is simply another example of those of us that take personal responsibility for our lives (in this case our health) being forced to subsidize those that don't. As a result, our society gets progressively weaker and less capable and less motivated. Why "work" for anything, why take personal responsibility for your decisions when the Federal government is so quick to provide freebies, subsidies, and undeserved assistance.


"But we won’t get there as long as people remain convinced that health care reform is for poor people. It’s for everyone – everyone, that is, who isn’t independently wealthy or over the age of 65. Because all of us could lose our jobs. (Have I repeated that point enough?)"
The author repeated his point quite enough. In fact this whole article is a fear-based fluff piece. I hope those in charge of arguing for nationalized health care can do better than this feeble effort.

[ASH]

Re: You Do Not Have Health Insurance

I find a huge number of people have no idea what medical coverage outside a large group plan would cost, especially if they are over 40. They either think they will always have a job or can easily get another with good benefits. My 48 year old self-employed brother pays $1500 month for his family. And he had to "hire" his wife on in order to get that through a group plan. He has a son with autism so that is why his is so high I think.

As it happens, I just completed a review of some healthcare options for the small company at which I work. We're facing the possibility of leaving a decent HMO because we opened up a second office in a city where that HMO doesn't have any medical facilities. In order to provide uniform benefits for our employees, we'd likely have to switch coverage to an insurer with a wider network.

For those who are interested, the monthly premium for the HMO is as follows:

single employee = $327
married employee, no kids = $653
married employee with kids = $979

The average monthly premium for the four similar (although slightly inferior) non-HMO plans we priced were as follows:

single employee = $425
married employee, no kids = $938
married employee with kids = $1,241

My company covers $550 in healthcare costs per month per employee, so single employees pay nothing out-of-paycheck for medical insurance premiums under either scenario. However, those with dependents have several hundred dollars deducted from their paycheck (pre-income tax) each month. Because of this, for employees with dependents, it turns out that with the non-HMO option, trading higher deductibles for lower premium is always optimal, and for single employees the opposite is true.

If we have to leave the HMO, even under the best-case scenario for employees with families, the annual out-of-pocket costs before medical coverage kicks in (premium not covered by employer deducted from paycheck, adjusted by marginal income tax rate to find an equivalent out-of-pocket value, plus deductible) will be $4,800. For single employees it is $250 (the minimum deductible offered).

Five years ago, the company was too small to get a group health plan, and I bought insurance for my wife and myself as an individual. My recollection is that to insure myself as a private (young) individual, the premium costs were substantially lower than as part of an employer-funded plan. My understanding is that this spread reflects (a) state law that says insurers can't decline to cover employees with pre-existing medical conditions as part of a group plan, but they can decline to insure individuals, and (b) the risk assumed in a uniform group policy by mixing in younger and older workers. Unfortunately, I don't recall exacty what that differential was.

[WildspitzE]

Re: You Do Not Have Health Insurance

"For all of these reasons, you can’t count on your health insurer being there when you need it. That’s not insurance; that’s employer-subsidized health care for the duration of your employment."
Every US citizen is free to secure health care on their own, directly with an insurance provider. Since they do not, the benefits of securing insurance through the employer must outweigh these negatives, thus this point is not truly an issue.

One thing that I find annoying is that if an individual wants to get coverage outside of the employer plans (whether supplemental or in lieu of) then such individual has to do so with after-tax money (vs. pre-tax money). This certainly affects the decision making process, and is a material burden.

[ASH]

Re: You Do Not Have Health Insurance

Put another way, if you live a healthy life style, do not smoke, do not drink to excess, and do not engage in dangerous activities (skydiving for example), you can get much lower insurance rates in the individual market than if you had to subsidize your overweight, smoking, heavy drinking co-workers.

Hi rjwjr. Thought I'd mention I'm a fellow traveler, with respect to much of your recent analysis posted on insurance costs and also aspects of the wealth distribution and the impact of global labor arbitrage (to use the fancy term). I see considerable tension between the ethical desire to provide medical care for individuals where the need for expensive treatment isn't a risk but rather a certainty, and the concept of "insurance" against a low-probability yet catastrophic event. I think a utilitarian argument can be made for public spending on health maintenance and preventive medicine at the young end of the population distribution, similar to productivity arguments that justify public schooling and other infrastructure; I think providing healthcare for retired individuals is more of an ethical issue. Likewise, with reference to your comments about labor and wages, I think there is tension between raw efficiency and social stability. Trade and immigration barriers, minimum wage laws, and the like will artificially raise the value of labor at the expense of reducing productivity and competetiveness. On the other extreme, free trade and a largely unregulated labor market will increase productivity and competetiveness, but most of those gains will go to the small strata of society who own the capital, and the disparity between labor and capital will threaten the stability of society. If you let labor costs equilibrate around the world -- both by open borders and free trade -- the net result is equilibration of living standards for labor. Equilibrium is much lower for American labor and slightly higher for the developing world. That may be the natural state to which things would trend, but from a purely self-interested American perspective, that's not something we should wish for. On the other hand, a heavily-regulated labor market (actively fighting equilibrium) is the European model, and that probably means higher unemployment and higher prices. One could argue that combining an unregulated labor market with highly progressive taxation and socialist policies of redistribution might both maximize total economic productivity, keep prices low, and stave off social unrest. However, I waffle a lot on this point, because the libertarian inside me hates redistribution with a passion. On the other hand, I hate being the first against the wall when the revolution comes, too. Is it better to artificially inflate the price of labor by erecting trade and immigration barriers, at the cost of higher unemployment and lower productivity, or is it better to run the economy at maximum efficiency, and redistribute by taxation to maintain social stability?

[flintlock]

Re: You Do Not Have Health Insurance

Great post Ash, wish I could be so articulate.

[sunskyfan]

Re: You Do Not Have Health Insurance

I am self-employed single father of two teenage sons. I am in great shape (6'2" and 190) with no health concerns for any of us. I was just DENIED health coverage. Not accepted with a high premium. DENIED. I can continue with my Blue Cross whose premiums have gone up 100% in three years.

The "insurance" model does not work for health care. It is broken. Period. It should be outlawed. It is as dangerous to the free market as a monopoly. Collective bargaining drives up cost and limits options. Trust me, if you outlawed health insurance you would see a dramatic drop in costs to the point where people can afford it.

I am a progressive liberal politically but I am a realist. If you want to make sure the standard of health care is maintained then subsidize research, train more doctors and nurses and build more medical infrastructure via government spending but the idea that the government can subsidize service as a payer is as big a lie that everybody can be "insured".

For all those covered with the illusion of a group identity and think they are safe think again. The next "collapse" is the health care industry and it will collapse just like the Wall Street Model did and you will be where I am now. IT IS COMING. Statistical risk mitigation is a fantasy that has been rendered false. The only true risk mitigation is competence and the availability of resources to solve the problem.

[Jim Nickerson]

Re: You Do Not Have Health Insurance

I am self-employed single father of two teenage sons. I am in great shape (6'2" and 190) with no health concerns for any of us. I was just DENIED health coverage. Not accepted with a high premium. DENIED. I can continue with my Blue Cross whose premiums have gone up 100% in three years.

The "insurance" model does not work for health care. It is broken. Period. It should be outlawed. It is as dangerous to the free market as a monopoly. Collective bargaining drives up cost and limits options. Trust me, if you outlawed health insurance you would see a dramatic drop in costs to the point where people can afford it.

I am a progressive liberal politically but I am a realist. If you want to make sure the standard of health care is maintained then subsidize research, train more doctors and nurses and build more medical infrastructure via government spending but the idea that the government can subsidize service as a payer is as big a lie that everybody can be "insured".

For all those covered with the illusion of a group identity and think they are safe think again. The next "collapse" is the health care industry and it will collapse just like the Wall Street Model did and you will be where I am now. IT IS COMING. Statistical risk mitigation is a fantasy that has been rendered false. The only true risk mitigation is competence and the availability of resources to solve the problem.

Why were you denied coverage through another company, if that is not too personal? The answer, assuming there was one given you, would seem pertinent.

[govtraksam]

Re: You Do Not Have Health Insurance

It's obvious you don't have a clue about what happens in the real world concerning health care and it's costs.

[Jim Nickerson]

Re: You Do Not Have Health Insurance

It's obvious you don't have a clue about what happens in the real world concerning health care and it's costs.

Just who TF is "you," me (singular and immediately above), or everyone above?

Why not put up some insights?

[Finster]

Re: You Do Not Have Health Insurance

We haven't really had medical insurance in the same sense as other kinds of insurance for a long time.

Whatever you call what we do have, I call it a mess. Things started to go very wrong about a half century ago when Congress deemed employer-paid medical insurance to not be taxable income. Naturally it became more tax-efficient for employers to buy the insurance for their employees than to pay them the same amount in cash and let them buy it for themselves. As long as most people for the same employer for an entire career, the flaws in that kind of arrangement were relatively unnoteworthy.

Add in Medicare and Medicaid and you create the perception that whenever you buy medical care, it's someone else that's paying for it. So long as that seems to be the case, there is little to no incentive to look at the price tag; weigh the costs versus the benefits. It's hard to imagine a more effective formula for escalating costs indefinitely.

That there is something amiss in this kind of model is only made more clear when you consider that we don't buy, say, our car insurance or our homeowners insurance like that. And we don't have a car insurance or homeowners insurance "crisis", do we?

This mess probably could have been fixed years ago by simply undoing the income tax treatment mentioned above, or even more recently by taxing employer-paid medical insurance as income and making individually bought medical insurance premiums tax deductible. In my view, that would still be by far the most preferable way to fix this mess. But what we have now would still not be second best. It is so bad that a national single-payer system would probably be an improvement.

[Ghent12]

Re: You Do Not Have Health Insurance

I'm willing to entertain James Kwak's arguments, but his key source is Paul Krugman, a very smart but ultimately incapable man. Everything espoused by Mr. Krugman is a form of social engineering, and is ultimately economically unsustainable in spite of his Nobel Prize in Economics.

However, that being said, we're in a pretty bad situation and there seems to be no will to improve it whatsoever. Our health care system is a rock star for innovation and modern, complicated treatments, but it fails in some basic care categories due primarily to cost concerns. Since the primary concern is costs, and nothing being considered by Congress would even come close to addressing costs, we will continue to have a "Health Care Crisis" for some time to come.

[sunskyfan]

Re: You Do Not Have Health Insurance

They gave no real answer. There was a vague referral to muscular issues. I had knee surgery (ACL because I am physically active staying healthy ) in June 2007 but they did not reference that. I followed up with another letter and asked for clarification but another letter followed with a once sentence decline with no detail.

[jk]

Re: You Do Not Have Health Insurance

I am self-employed single father of two teenage sons. I am in great shape (6'2" and 190) with no health concerns for any of us. I was just DENIED health coverage. Not accepted with a high premium. DENIED. I can continue with my Blue Cross whose premiums have gone up 100% in three years.

The "insurance" model does not work for health care. It is broken. Period. It should be outlawed. It is as dangerous to the free market as a monopoly. Collective bargaining drives up cost and limits options. Trust me, if you outlawed health insurance you would see a dramatic drop in costs to the point where people can afford it.

I am a progressive liberal politically but I am a realist. If you want to make sure the standard of health care is maintained then subsidize research, train more doctors and nurses and build more medical infrastructure via government spending but the idea that the government can subsidize service as a payer is as big a lie that everybody can be "insured".

For all those covered with the illusion of a group identity and think they are safe think again. The next "collapse" is the health care industry and it will collapse just like the Wall Street Model did and you will be where I am now. IT IS COMING. Statistical risk mitigation is a fantasy that has been rendered false. The only true risk mitigation is competence and the availability of resources to solve the problem.

if you abolish health insurance, the cost of an office visit MIGHT come down. the cost of surgery? hard to say. most people just couldn't afford it. so we'd get mortality from things like appendicitis, and lots more perinatal mortality when prospective moms couldn't pony up for the caesarian. really want to go that way, sunskyfan?

as to why you were denied, here are my guesses: if you're the father of teenagers, you are entering your dangerous years [and they just keep getting more dangerous] for getting sick with something or other. and your teenagers might decide they want drivers' licenses.