New Insurance Premium, Ouch

Every year in late October we get our annual notice from our health insurance provider telling us how much our monthly premium is going to go up. Last year it went up by 20%. This year’s notice came with news of an almost 12% bump.

Maybe I have this wrong but while there may be uncertainty on what will happen with Obamacare not much has actually happened yet (in relation to what was promised, or threatened depending on your perspective) but the newness of the Obamacare concept is no longer with us and so I don’t think they can legitimately blame a policy that is no longer new for the gouging.

It seems pretty obvious that this expense is going to continue to increase at a rate well above the reported rate of inflation.

One aspect in my role on the Fire Department is that I participate in just about all of the medical calls. One normal part of the process is to ask what medications the patient is taking which can be important in treating the patient in the field and for whatever treatment the patient might receive at the hospital.

The reason to bring this up is that based on my casual observation people have a lot of prescriptions that must be refilled on some regular interval. The costs of these prescriptions of course goes up as well and depending on the insurance coverage this could result in more expense for the patient.

As this relates in large part to retired people living on a fixed income it underscores what most people know on some level even if they haven’t tried to map it out which is healthcare expenses will be a nasty variable expense.

A couple with $2000 in social security income and taking 4% from a $200,000-$300,000 portfolio probably can’t easily absorb a 50% increase in medical costs every five years (simple math) or in our case a 30% increase in two years. Sadly portfolios of even $200,000-$300,000 is probably unrealistically high.

There is no answer that will make people happy. I don’t think it is realistic to expect the government to create an effective regulatory framework that creates a competitive industry, doesn’t create resentment by customers or otherwise have hideous unintended consequences.

While I don’t think there is a happy answer there is a simple answer. Save more and spend less.

On a different note the Madoff interviews on 60 Minutes were fascinating although I’m not sure I can pinpoint exactly why. Whether they were guilty or otherwise complicit they have clearly been crushed as a result. Ruth seemed very medicated and I can believe she blocked out as much as she apparently did even if it was along the lines of “it’s not a lie if you believe it.”

I have to admit I don’t watch 60 Minutes very often but it seemed like every commercial was either for pharmaceuticals or financial services which was interesting too.

23 Comments

  1. You have this post every year and it’s always eye opening. It’s amazing in the sense everyone agrees -but no one can roughly or pinpoint why or how to fix it.

    I underestimated how much of an impact this would have on the budget in retirement.

    Perhaps others have found a way to deal, but you pay regardless of your healthy or not so healthy, see the doctor once a year or once a week.

    We can create smartphone apps that trim your toenails and software/hardware that runs so fast that stock purchase orders can be front run and juked for a penny…

    but no one has a clue how to approach health care!

    Reply
  2. Tort reform and a cap on medical malpractice case settlements would be a start; however the Dems are owned by the lawyers lobbyists.

    Reply
  3. This report on health insurance premiums does seem to have become an annual event; so here is the annual report on my 27 year old, single, son’s high deductible health insurance premium (coverage never changed by him since he took the policy out): Up 29% from last year (this on top of an 18% increase the year before, and approximately 14% increase the year before that). This year, he broke his ankle and, so unlike previous years, did file a claim (amazing the difference in what health care providers say a procedure costs versus what the insurance company pays, usually about 1/2 and way less in many cases).

    Thanks Obamacare for the many female-only benefits that have been added to his policy, obviously a big driver in the premium increases.

    I’d be interested in hearing about others’ recent health premium experience.

    JCarr

    Reply
  4. The “PUBLIC OPTION” is the only option for a long term solution.

    The current attempt can hardly be called Obamacare anymore on account of the GOP actions to have watered it down beyond recognition.

    Reply
  5. The health care system we have have today is legal extortion…a way of transferring wealth to the insurance and medical establishments.

    Reply
  6. Putting aside the political posturing as to who is to blame for rapidly rising health insurance premiums, two factors often receive little notice.

    1. The health care industry continues to make great strides in treatments for ailments which may give us a few more years, sometimes only months, to live.
    Those advances come at an increasingly higher cost for that extra time. And most people, when faced with the choice, seem to be more than willing to go to extreme measures to obtain that extra time.

    2. It’s been my experience that I seldom see dramatic increases in premiums when insurance companies, regardless of what type of insurance they sell, realize satisfactory returns on investments. In fact, during times of superior returns, mutual insurance companies like my insurer, often return excess profits to their customers. It’s been at least 10 years since I’ve seen one of those checks.

    Reply
  7. Anon 8:17. I agree that we need a public option. As for your comment about GOP actions to water Obamacare down, please provide some examples. The only recent things detracting from Obamacare to come to mind are the Obama admin’s Health Department canceling CLASS and the many waivers provided (many to Dem supporting unions). You are entitled to your own opinions, but not your own facts.

    As for the future of Obamacare, I predict the Supreme Court will find it unconstitutional and President Romney will spend his first term (2013-16) unraveling the mess, and hopefully working on that public option.

    Reply
  8. Expanding on my first post, what ? wait:

    BREAKING NEWS: now for something REALLY IMPORTANT! Kim Kardashian is going to file for divorce. OMG!

    Actually – I wonder how many tens of millions of dollars in compensation Corzine will get get for blowing up MF Global

    Reply
  9. My wife and I self retired in 2000. I purchase individual BCBS high deductible health insurance. Since 2000 our premiums have tripled to where we now pay almost $1000 a month for the highest deductible plan available to us in Prescott.
    Our insurance premium rises every year in line with what Roger reported if not more. On top of that we also get a second “age related” increase which can be huge on a decade birthday like turning 60. This year my wife and I both needed minor outpatient surgeries which cost us $11,000 out of pocket despite the very high monthly premiums we pay because it mostly all went against the high deductible. This is the bear trap being faced by a lot of retirees. My wife is still 7+ years away from Medicare …

    Reply
  10. My adult son had to have an appendectomy and didn’t have insurance. 1. We tried to find what hospital or doctor charges would be. We could not find anything. Everything is hidden. If all health providers were required to have fees posted on their website or available as a handout in their office, that would allow for some shopping and competition.
    2. The doctor fees were about $10,000. I called them all and fees were reduced 40-60% with a simple request to the bookkeeper. That is probably still more than they receive from Blue Cross.
    3. The hospital was $98,000. There was no way he or I could pay. We called them and they had a program for destitute people, so they ate it. But I know from work that they would have received maybe 20% from Blue Cross. I could have paid that amount. I don’t know what they would receive from Medicaid or Medicare. I’m not aware of any other product or service where a 500% pricing differential exists. There is really no competition in the health field regardless of what the medical profession or politicians say. That is a large part of the problem and one reason we are getting Obamacare.

    Reply
  11. I wonder how many studies have to show that “Tort reform and a cap on medical malpractice case settlements” are not the major driver for health care costs before people actually start to realize that tort and malpractice are actually not the major drivers for health care cost?

    Reply
  12. the thing that’s really frustrating to me is that, unlike Roger, people don’t know what health care costs. I occasionally hear people complain about healthcare or, more commonly “Obamacare” and my first question is “what do you pay per month for health insurance” followed by “how much has it increased from 12 months ago”?

    The sad fact is that I have yet to run into someone who could answer either question, let alone both. As long as insurance is a paycheck deduction and hospital costs are hidden, this isn’t gonna change.

    My wife was talking to a friend of hers last week, and her family has gone the “no insurance route” with his new job. They both have finance backgrounds; they ran the numbers and they believe they are better off paying cash for health care along with purchasing a catastrophic health insurance policy.

    I’ve talked to a few doctors in the last 5 years about cash vs. insurance prices for their services, but I’ve never run a full-on analysis by looking back for 12 months at the services I’ve provided. My kids got some new vaccinations a couple of weeks ago and, for fun, I’m gonna call the doc and ask what those would cost if I’d paid cash. I pay about $340/month IIRC for health insurance via work; I wonder if I could get a catastrophic plan for $100/month? That leaves $240/month or $2880/year for healthcare. That really doesn’t seem like much.

    Reply
  13. I’m not sure why everyone is upset with increasing health care costs. This is how capitalism works.

    Reply
  14. Tort reform and medical malpractice limits are the only way medical costs will begin to decline. What is often overlooked is all of the additional tests physicians order so that they can protect themselves. These extra tests are not ordered for the benefit of the patient, they are ordered to prevent footholds in the event of a malpractice lawsuit.

    To state that medical malpractice expenses are not a driver of ALL of our insurance premiums is to overlook what actually happens in practice. I’m not sure about you, but I do not enjoy having multiple unnecessary tests, all billed to my insurance company, so that the doc can avoid a lawsuit.

    Eliminate or greatly reduce the size of settlements in cases of real mistakes and the annual 30% increases may slow a little.

    Reply
  15. People who think their physicians are performing too many diagnostic tests have a simple solution at hand.

    The next time you get so sick you visit your physician, and the doc starts ordering tests to see what’s wrong, well, you just tell the doc which tests to skip because you are absolutely sure they aren’t needed.

    That’ll fix your problem with tests, real fast.

    BillM

    Reply
  16. I doubt that the hundreds of studies that have been done ignored “over testing.” do you have data that shows tort/malpractice are more than 15% of total healthcare costs?

    Reply
  17. CBO has done a number of analyses of tort reform and concluded the impact of that reform path is decidedly mixed. Although positive in most cases it is usually not very large and sometimes completely negligible; e.g., capping claims did reduce costs and did appear to lower the amount of defensive medicine practiced but clinics didn’t reduce fees and insurance companies didn’t reduce premiums, they pocketed the bigger profits. The most recent CBO estimate I am aware of (http://cboblog.cbo.gov/?p=389) indicates that a typical package of tort reform proposals nationwide would reduce total U.S. health care spending by about 0.5 percent.

    The major provisions of Romneycare/Obamacare (federal HCA is nearly identical to Massachusetts in all major respects) haven’t been implemented nationally so blaming HCA on anything at this juncture doesn’t make much sense but one thing the HCA does that I think will have a bigger impact than realized is mandate a consistent medical record system nationwide. I haven’t seen any stats on this but it wouldn’t surprise me to learn that a great deal of duplicate testing is not defensive but is instead due to lack of access to records when the patient visits a different caregiver.

    When my wife and I last moved it cost us a couple hundred bucks to duplicate all our medical and dental records. I suspect most folks don’t do that and the ones that do discover what we did which is that some of those records are insufficient, lack some critical data required in the new state, or in the case of digital copies simply unreadable by a different system.

    I’ve argued for single payer from the start because health care as a species of goods is simply not amenable to market discipline: the goods are non-fungible — the relationship between cost(s) and health benefit(s) is unstable and unreliable — so price signals are not only ambiguous but may not even be present; in the absence of clear price signals the invisible hand is helpless and chronic market failures become a given.

    Reply
  18. Right – you either have to regulate capitalism into the market (since we don’t have it now) or go single payer.

    Reply
  19. Please explain single payer.
    Thanks.

    Reply
  20. Single payer is a red herring. You can substitute “government payer” or, in this case, Obamacare. They are one and the same.

    Reply
  21. Folks can substitute “government payer” for single payer if they like — they can stick a fork in their own eye too if it pleases them — but there are alternative models (see Switzerland) and Romneycare/Obamacare is not one of them; i.e., it subsidizes those who cannot afford insurance only and otherwise has no public option.

    A true single payer puts the health insurance industry out of business. Period.

    Reply
  22. @billm – how about the next time you go in for an annual physical and your bloodwork has a MINOR variance easily explained by recent diet or exercise, you ask your physician not to order 7 redundant and expensive tests in order to “simply rule out a problem”? When questioned why 7 tests are necessary, he explains that he needs to do so in order to protect himself from malpractice claims…all the while he is investing in the diagnostic center that conducts the tests as a “passive” investor.

    Keeping your head buried in the sand doesn’t mean that over testing doesn’t occur AND raise our medical insurance premiums. Massachusetts Medical Society has found that 83% of its doctors practice “defensive medicine.”. Noooo, this isn’t a problem! Harvard School of Public Health states 40% of medical malpractice suits filed in the US are “without merit.” Correlation?

    Reply

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New Insurance Premium, Ouch

Every year in late October we get our annual notice from our health insurance provider telling us how much our monthly premium is going to go up. Last year it went up by 20%. This year’s notice came with news of an almost 12% bump.

Maybe I have this wrong but while there may be uncertainty on what will happen with Obamacare not much has actually happened yet (in relation to what was promised, or threatened depending on your perspective) but the newness of the Obamacare concept is no longer with us and so I don’t think they can legitimately blame a policy that is no longer new for the gouging.

It seems pretty obvious that this expense is going to continue to increase at a rate well above the reported rate of inflation.

One aspect in my role on the Fire Department is that I participate in just about all of the medical calls. One normal part of the process is to ask what medications the patient is taking which can be important in treating the patient in the field and for whatever treatment the patient might receive at the hospital.

The reason to bring this up is that based on my casual observation people have a lot of prescriptions that must be refilled on some regular interval. The costs of these prescriptions of course goes up as well and depending on the insurance coverage this could result in more expense for the patient.

As this relates in large part to retired people living on a fixed income it underscores what most people know on some level even if they haven’t tried to map it out which is healthcare expenses will be a nasty variable expense.

A couple with $2000 in social security income and taking 4% from a $200,000-$300,000 portfolio probably can’t easily absorb a 50% increase in medical costs every five years (simple math) or in our case a 30% increase in two years. Sadly portfolios of even $200,000-$300,000 is probably unrealistically high.

There is no answer that will make people happy. I don’t think it is realistic to expect the government to create an effective regulatory framework that creates a competitive industry, doesn’t create resentment by customers or otherwise have hideous unintended consequences.

While I don’t think there is a happy answer there is a simple answer. Save more and spend less.

On a different note the Madoff interviews on 60 Minutes were fascinating although I’m not sure I can pinpoint exactly why. Whether they were guilty or otherwise complicit they have clearly been crushed as a result. Ruth seemed very medicated and I can believe she blocked out as much as she apparently did even if it was along the lines of “it’s not a lie if you believe it.”

I have to admit I don’t watch 60 Minutes very often but it seemed like every commercial was either for pharmaceuticals or financial services which was interesting too.

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