Thu 23 Mar 2006
As I’ve been telling friends about my story, they’ve been sharing their stories with me, and one really stood out as a good reason why even a little health insurance is better than none. It’s not just because you at least have some coverage if something really awful happens, but because you can still save money even when you don’t meet your deductible.
A friend of mine is self employed and so is his wife. Getting an individual family plan with a low deductible and the insurance paying a big chunk of the bills would be outrageously expensive for them. So they have what is called a “catastrophic coverage” plan. Basically, it has a high deductible of $5,000, and even when it’s met, they still pay a good chunk of the bill.
Normally, I’d think “that’s good to prevent being bankrupted by medical bills, but it doesn’t do much for you otherwise.” But I was wrong, very wrong.
Remember, if a doctor or hospital takes your insurance, they’ve agreed to charge the insurance’s maximum allowed rate which can often be much less than they charge uninsured people. Let me demonstrate…
For a three-day hospital stay, not including the separately billed doctors, radiologists, etc., an uninsured person could see a hospital bill of over $14,000. But let’s say a health insurer’s maximum allowed rate for that was around $3,700 and the hospital would accept that as payment in full for the $14,000 bill.
I know, it seems totally kooky that the hospital would let an insurance company pay them 27 cents on the dollar, but I’m not pulling these numbers out of thin air. I’ve experienced them firsthand.
Now, if I had a cheap insurance plan that didn’t pay a penny until I’d met a $5,000 deductible, I’d have to pay that whole $3,700. That seems pretty steep until it sinks in that it’s a heck of a lot better than paying $14,000. You saved over $10,000 because you got the insurance company’s rate for the hospital stay rather than the jacked-up charges they’d nail you with if you had no insurance.
But even if you’re not looking at a huge hospital bill, just the barest shred of insurance can help you save on regular doctor visits, prescriptions, and other things because you’re getting the insurance company’s price.
I’m not trying to shill for the insurance companies here. If I wasn’t on a group plan, I couldn’t get insured, because after decades of stellar health, it seemed like my warranty expired when I turned 35 and stuff just started going wrong for a year. And with that stuff on my record, I was a bad risk. With a group plan, the risk is “pooled” and they take everyone in the group. But if you’re a bad risk, just forget getting an individual plan on your own.
Furthermore, I believe it should be illegal for hospitals to charge someone who has no insurance nearly 4 times more than they charge an insurance company. But it isn’t. And until it is, even the barest shred of insurance may save you a lot of money because the insurance companies can get deals like that.
A quick visit to a health insurance sales site showed a 40 year old man, in good health, non-smoker, could get a PPO plan with a $5,000 deductible for as little as $61 a month. Of course, that is for someone who is a good risk. I tried that site when I went the self-employment route, which is how I found out about being a bad risk and how low my chances were of getting insured. Why do you think I’m not linking to that site? I’m just using their price as an example, not recommending it.
On the other hand, if you can qualify for it, it does cover you in case some drunk plows into you head on, plus it means a trip to the doctor when your back is acting up… and the X-ray… and the pain pills… could cost you less because you’re paying insurance company rates instead of average Joe rates.
But, as you may have learned from the experience that inspired me to start this site, the insurance only helps if your doctor takes it.
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March 27th, 2006 at 5:43 pm
Hospitals (or docs) do not bill uninsured 4x the amount billed to a carrier. All patients are billed at the same rate for the same services.
The difference is, the hospital (or doc) has agreed via contract to ACCEPT something less than the billed rate as payment in full.
The press keeps missing this critical point and insists there is dual pricing. They also miss the fact that one reason why providers agree to accept less than billed is for prompt payment in a lump sum.
The uninsured rarely pay anything for their care and when they do it is usually dolled out in small monthly payments.
May 30th, 2006 at 7:54 am
I worked for a large outpatient provider (as a clinician) for a year. The billed rate for each procedure/code was determined by the maximum allowed for that code by *any* insurer (with whom we participated) in the state. So, for example, if Company X pays $50 for procedure A and $20 for procedure B, while Company Y pays $10 for procedure A and $60 for procedure B, each patient receiving procedures A and B would be billed $110, even though either Company A or Company B would pay only $70. The rest is written off or otherwise discarded. The private pay patients get hosed, even though the paperwork involved is much simpler. In other words, the cost to the provider is lower for private paying patients, while they are expected to pay significantly more. Bob is right when he says that private paying patients aren’t “billed” more, but they will always pay more unless they make a deal with the provider before services are rendered. If you pay privately, please inform your provider that you will not be reimbursed, and negotiate a special private pay rate. If they cannot recognize your situation and compensate or adjust for it (private paying patients are relatively rare), then walk out and seek another provider if possible. I went on to work for a small private practice where private pay patients were billed ridiculously low rates, which is the way it should be. If you read this as a provider, cut the private pay guys a break and help them get better without breaking their bank accounts.
BTW, Bob, the uninsured frequently pay back everything (sometimes incrementally), hoping to avoid bad credit ratings. If they were billed reasonable amounts, it would be much easier for them to do.