What is the Point of Having a Health Plan if I Can’t Afford to Use it?

Some defenders of the AHCA (the American Health Care Act) say “what good is health insurance you can’t use due to cost?” We address this question.

First, let me explain the problem. Right now people are mandated to buy coverage, even if it has higher cost sharing than they can really afford after the cost of living (childcare, putting food on the table, sending the kids to school, student loans, the mortgage, credit card debt, etc).

So, the idea is “what good is paying a premium for coverage one can’t use due to out-of-pocket costs?”

That is a great question, so I’ll try to offer a few simple ideas that help frame the reality of insurance and address the question:

  1. Part of what everyone likes about health insurance under the Affordable Care Act is free preventive services, a free wellness visit, and a maximum out-of-pocket limit under the ACA. Premiums aside, there are some services that have no additional out-of-pocket costs (so there is always care everyone with coverage CAN use), and on the rest, everyone is limited to spending X per year out-of-pocket. This isn’t much of a perk, unless a worst case scenario happens, in which case it is a lifesaver (or a savings saver at least). Under the current system there is no infinitely expensive insurance for in-network care, but without insurance, there is no limit to what one can spend in an emergency (and that can lead to being denied non-emergency care). So having insurance is, at the most difficult of times, the difference between bankruptcy (or even death) and being able to keep your lifestyle in an emergency (even if you don’t live a very stylish life, it at least avoids crushing debt and bankruptcy). This means, even on a high-deductible plan, you get some benefits. This is more than can be said about car insurance, which does nothing but prevents you from being fined until you use it.
  2. Insurance with a high deductible doesn’t do much for a healthy person except give tax advantages. A smart shopper with some extra bucks will benefit from a high deductible plan, as they get tax breaks from their HSA, catastrophic coverage, and will save some costs when they go to their physical and if they need the doctor. It isn’t a great deal, but it is a decent one for the healthy person who has money to put in an HSA.
  3. Insurance for those with cost assistance who would otherwise be priced out of coverage (like the sick and poor) is not “too expensive” by most measures. It is far less expensive to have it than to be without it. Those in this group who need coverage are grappling with the same sticking point of cost. People who are not healthy or young benefit because any coverage is better than no coverage. If you have medical insurance, hospital bills are capped at what insurance companies have agreed to. If you have no coverage, there is no cap. It’s open season on the sick.
  4. There are exemptions for those who truly can’t afford coverage in states that expanded Medicaid. Most people get their coverage through their employer if they work full time. You can find an interesting statistical table of numbers of people in the current population who work in Labor Force Statistics.[cite]Labor Force Statistics[/cite]This means only a small part of the population is going to pay full cost for insurance and not have the money to pay the full deductible or to get a lower deductible higher premium plan.
  5. If you are uninsured, emergency medical care must be provided for you by public hospitals under the 1986 Emergency Medial Treatment and Labor Act.[cite]EMTALA[/cite] The problem with relying on EMTALA for care is that no treatment is available until a medical condition becomes a life-threatening emergency. Prevention and early intervention are far less costly than emergency treatment and have a better outcome. The cost of this law eventually falls on all of us.

There is a section of the population who struggle with costs and don’t get assistance. Their care is rationed based on their ability to pay yet they must get coverage or owe the fee. Honestly, that group is has been a casualty of the ACA and should get better treatment under the law. It’s why we say, “what good is health insurance you can’t use due to cost.” For the rest of America, the quip is almost an aside because the reality is that without the assistance or ACA or their employer or Medicare they would be even worse off.

Having coverage that you can’t use without really stretching one’s income and savings is hard. Being barred from coverage and not getting assistance is 100% worse. We are facing a choice between the two in America. We need to stop giving handouts to the rich that leave the middle class struggling with costs.

People may be upset with the cost of car insurance or home insurance. They shop around, but most carry legal minimums. Everyone is a critic when it comes to health insurance.

Health insurance is expensive, and there is a lot to complain about, but it is very hazardous to avoiding getting covered. Insurance isn’t something you buy to use because you know you’ll need to use it. It is something you buy and hope not to have to use.

Health insurance is a bit like term life insurance; you are really hoping not to get the full use out of it. People who own homes pay for homeowner’s insurance, flood insurance, car insurance, and a bunch of other financial products which do nothing for us but safeguard us in an emergency. Health insurance is like this. I know everyone knows the purpose of insurance if they think about it (and even with health insurance being a complex type of insurance, it still acts as insurance).

We clearly have a healthcare crisis in the US because care is rationed by cost. We need to address the problem. America’s difficulty in remaining healthy is going to get worse while politicians play politics with tens of millions of lives and pocketbooks.

High costs under the ACA aren’t acceptable, and care rationed by price is a real sticking point, but the answer to being frustrated with health insurance isn’t just giving up and walking away. The reality of the healthcare crisis is twofold. First, it is complex. Second, it is here to haunt us until we deal with it.

People can’t try to be as healthy as possible. We can eat sensibly, exercise,  and do everything we are supposed to do and still get terrible diseases or have catastrophic accidents no matter what our ages. Nobody can be sure of their health, so we insure our health. Healthcare insurance is a product with no purpose beyond helping people with unaffordable costs. The fundamentals don’t change. People don’t know when they’ll need essential health services but everyone needs health services. We all need to pool our money for the inevitable rainy day and help each other.

What do you think?

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