The Problem With Healthcare ‘Shopping’

There’s a sucker born every minute.

Last week, there was a lot of chortling over Republican presidential candidate Sen. Ted Cruz signing up for Obamacare since he has been and still is opposed to it (Cruz receives his health insurance through his wife who is leaving her job at Goldman Sachs*). One example is this sort of tongue-in-cheek article by Sarah Kliff describing what Cruz’ health exchange shopping experience might be like. Amidst all the mockery is a very important point I’ve made before–there are so many options, it’s nearly impossible to choose the best one. Kliff (boldface mine):

If the Cruzes generally plan to stay healthy, and don’t have chronic medical conditions, it’s possible this could be the best deal for them: they’d have a low monthly spending commitment. But if they have any sort of medical emergency — if one of the kids ends up in the ER, for example — this plan could quickly become more expensive than the other options….

The premiums are high on this UnitedHealth plan — and what you’re paying for is a plan that leaves you less financially exposed to various medical costs. There is no deductible on the United plan, meaning that the coverage kicks in as soon as you start using medical care. The copays aren’t particularly high, either: $25 for primary care and $35 for a specialist.

But there is one red flag in this plan: it charges a 20 percent co-insurance for any visit to the emergency room. I’d worry even more about this than the $400 emergency care copay in the other plan, because 20 percent of an emergency department bill could be a ton of money…

But what you can’t really do on Healthcare.gov right now is get a sense of how big your network is — if you randomly show up at an emergency department, for example, will your coverage work there? This is typically an important factor in deciding what health insurance plan to purchase, and one that’s not easy to research on the current website.

…most of the plans have a premium that hovers around $1,000 to $1,200. And this is arguably the most confusing space to shop in, because there are about 50 options to choose from.

They’re all slightly different; the copays for non-emergency care vary by maybe $10 or $15. Here, there’s really no best option for coverage. It all comes down to a family’s priorities, and what type of care they expect to use in the next year.

Do they want a plan with predictable charges, regardless of where they get care? A plan that relies on a copay structure (a flat fee for each type of doctor visit regardless of the doctor’s charges, as used in this Blue Cross Blue Shield plan) might be their best bet. Or do they want to price-shop for care? In that case, a co-insurance structure (where you pay a set percentage of a doctor’s charge used in this Humana plan) might be their best option.

These questions are always hard to answer because health care is unpredictable; we never know which year we’ll end up with a broken leg or a bout of the flu, and which years we’ll never set foot in a doctor’s office.

While Kliff seems to think knowing many of the details is a good thing, that’s at most a second-best option: this information helps you mitigate risk (‘known unknowns’) but doesn’t do a damn thing to deal with uncertainty (‘unknown unknowns’). I noted about a year ago:

At the new job, I can choose among 23 different healthcare plans.

Yes, twenty-three. Sure, they can be grouped into some broad classes: catastrophic insurance only, fee-for-service/PPO (high-end), and HMO-like plans. But within each of these categories, some of the plans have to be worse than others. Worse, since I can’t determine ahead of time what my medical needs will be (hopefully, minimal), I have no idea which plans’ specialists are the ones I might need. It sort of defeats the concept of pooled insurance.

I watched a room full of smart people, many with advanced degrees, get frustrated as we all realized we would waste a lot of time trying to pick the ‘best’ plan–with no idea if or how we’ll succeed or fail.

Admittedly, this is nothing new (I first blogged about this in 2007). But as one doctor put it, the devil is in the unknown details (boldface mine):

As it turns out, when you purchase a health insurance policy, you only think you know what you’re buying. You know parameters such as the deductible, coinsurance, premium, maximum out of pocket, and so on. You know whether or not you have maternity coverage, psychiatry coverage, a lifetime cap – and all sorts of nonspecific things.

But the devil doesn’t lurk in nonspecific things, does he? Your policy documents don’t specifically say that certain drugs aren’t covered, or that you might have to try one or more other drugs before they will cover it, or they might refuse to cover it because your condition is not listed as an FDA-approved use for the drug.

One of my colleagues relates an amusing story about this hypocritical farce. He prescribed pregabalin for a patient. The insurer denied it. He spoke with a doctor at the insurance company, who said they wouldn’t cover pregabalin because it wasn’t FDA-approved for that condition. He said they would cover a very similar drug called gabapentin. Gabapentin is cheaper than pregabalin. My colleague then observed that gabapentin wasn’t FDA-approved for that condition either. Upon which the insurance company authorized pregabalin. Or was it pre-authorized?

When it comes to hospital services you might know that they will pay for 60% of charges after the deductible is met, but what you don’t know is what rates they have contracted with providers of healthcare services. Suppose your insurer has negotiated a price of $1,000 for your surgery with the XYZ hospital chain. Another company might have negotiated $800….

There is no way you can know any of this when you sign your contract. Even if you could, they can change it whenever they feel like it, just like they did to me. One year they might pay for a certain treatment, the next year they might decide there’s not enough evidence and your coverage is gone.

You have to use your policy if you want to find out what’s in it.

In econspeak, this is a classic market failure. Yes, some health insurance is definitely better than none (though that can simply mean you accumulate an unpayable debt of thousands of dollars instead of tens of thousands of dollars).

Maybe the ACA (‘Obamacare’) was the best we could have done under the political circumstances. Leaving aside what that says about the supposed best political system on earth (hint: it sucks ass), we enshrined and established a market system–a failed market system.

Some of us, anyway, deserve better.

*Which just goes to show how deeply entrenched Wall Street is in our political system.

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7 Responses to The Problem With Healthcare ‘Shopping’

  1. Felicis says:

    One thing I learned in working for a health insurance company (in the contracting department – gotta keep up that network!)… A plan may have a contract with a hospital, so your stay there would be In-Network, but the ER might be run by a different group which the plan is *not* contracted with – and so is out of network. It is nearly impossible to tell – even when you are checking your list of providers, and even if you are an insider with access to the contracts.

    While there are a lot of problems with the plan side of our health care system (I often wish that I would be legislated out of a job with Single Payer); the business structure of health care *providers* is absolutely insane. A given doctor performing the same procedure in three different places will cost three different amounts – even for the same plan.

  2. gunnora says:

    This is a problem. We really need to have everyone on Medicare, true universal health insurance.

    Given my health, the BC/BS plan we have through my wife’s employer is Just Right. We have a mild co-pay for office visits, and emergency, outpatient, and inpatient hospital care have reasonable costs.

    Of course, at our age we both have chronic conditions and take a lot of medicines, and we consider that we’ll have between us at least one emergency room visit and one outpatient procedure annually, so we can pretty accurately guesstimate what sort of insurance plan is best for us.

    However, as a young adult, one may reasonably expect few office visits and at most maybe an emergency room visit, with few medications. That would lead a young adult to go for an inexpensive plan.

    In my case, my gallbladder had to come out before I was 21, it turned out that internal scarring led to lifelong medical problems, and I was in a rollover car accident. If I’d had cheap insurance with sky-high out of pocket costs, I’d have had to declare bankruptcy. If I could even have afforded a bankruptcy lawyer to help me.

    I think the bad choices for healthcare plans are, under the ACA, going to hit the “healthy” young adult and the poor the worst overall.

    Old buzzards like me know what kind of problems we have and therefore can meaningfully choose insurance plans. At least, until we have to start looking for Medicare supplement insurance.

  3. coloncancercommunity says:

    What Felicis say is SO true. I was trying to figure out hospital affiliations and got ALMOST nowhere. I found a few things online which indicated where the insurers probably had contracts. But I could not find out for certain on much of this. Hours of digging revealed that the insurer that I finally chose had a contract with the hospital in my city and with the nearest level 1 trauma center. But how many people have the TIME to do this? For that matter, how many people even know that they need to know this? Also these contracts can change on a moments notice. So where does that leave us even if we were able to do our homework?

  4. daved says:

    The reason Cruz is shopping for health insurance is that his wife is quitting her job at Goldman, meaning she loses her insurance there.

  5. daved says:

    Whoops, sorry for that comment. I misread your text above and thought you’d left out this point.
    None the less, it *is* hilarious that this opponent of Obamacare is using it. (Assuming Cruz is actually opposed to it. I have no idea what his actual position is on any issue, since I figure it probably has nothing to do with his public position.)

  6. Doesn’t Congress have health insurance that’s better than anything available under ACA?

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