garthmonroe

A. Introduction: what and why

I joined the faculty at the University of Connecticut, in fall 2020, to teach accounting. The University provided outstanding medical benefits; Blue Cross Blue Shield health insurance, with access to a good network, and a $2,000 maximum out-of-pocket (single member). My intention was to make a difference in the classroom; I was clearly misguided. I made the difficult decision to quit, and to surrender health insurance.

My health insurance expired August 31st 2021; I spent three months “shopping” for alternatives during the summer. I compared seven options: COBRA, ACA, off-exchange, self-insurance, direct primary care, indemnity plan, and cost-sharing.

• COBRA: Consolidated Omnibus Budget Reconciliation Act (1986) would allow me to continue my existing state of Connecticut health insurance; the premiums were four times more expensive than what I was paying as a state of Connecticut employee, and coverage wasn’t portable, limited to the state of Connecticut; out-of-network coverage was limited to emergencies, subject to a higher deductible.
• ACA: Patient Protection and Affordable Care Act (2010) does not exclude patients due to pre-existing conditions. Insurance premiums are based on ten-year age bands, and rates increase with age, consistent with the demand for health care. There are three primary issues with ACA, exchange-based insurance plans:
• If a person doesn’t qualify for subsidies, the premiums may not be “affordable”
• If a person is traveling, the insurance isn’t portable, limited to the local county
• In-network providers are limited; the quality of some providers are underwhelming
• Off-exchange: ACA individual mandate was eliminated by the Supreme Court in 2017, which has increased the availability of off-exchange, non-compatible, insurance plans:
• The plans are often less than 12-months; but may range from 1 to 36-months
• Coverage is not consistent with the ACA (ie. preventative care)
• Premiums are less expensive, however, benefits are also less generous than ACA
• There is often a ceiling on the maximum benefit (to be paid), which could be insufficient in the face of a severe disease diagnosis or accident
• Self-insurance: many large US employers choose to self-insure (ie. Apple, Boeing, HEB, etc.), paying medical claims directly to providers (using an administrator), rather than indemnify healthcare costs, using an insurance carrier. For these large employers, it may be less expensive to self-insure, versus indemnify, and it’s also possible to put in place stop-loss (reinsurance) coverage to limit overall exposure. While stop-loss coverage is not available for individuals, an individual could choose to self-insure, paying all healthcare costs directly. The individual bears any risk, including bankruptcy, in the face of a severe disease diagnosis or accident
• Direct Primary Care: is an alternative payment model that provides healthcare access with a monthly membership fee, and a greater focus on outcome-based medicine versus traditional insurance; there is no fee-for-service or third-party billing. Prescriptions, specialists, urgent care, or hospitals are not included in the monthly fee, and would require insurance or an insurance-like alternative.
• Indemnity Plan: pays a set rate for each type of health service (ie. doctor visit, x-ray, surgical procedure, etc.); an indemnity plan is not consistent with traditional insurance, as it does not protect against major medical bills (ie. severe disease diagnosis or accident) because there is no protection for out-of-pocket maximums.
• Cost-sharing: is not insurance; it is a group of like-minded individuals who make a monthly share-payment in exchange for the option, but not the right, to have future healthcare costs reimbursed. Originally, most cost-sharing organizations were faith-based, and were exempted from the ACA individual mandate (penalty). In recent years, there has been an increase in non-religious, or secular, cost-sharing organizations. Typically, an individual signs up for a threshold amount per medical incident; for example, $500. An individual is responsible for the first $500 of any medical incident before cost-sharing applies; there may be limitations on what types of costs are eligible for reimbursement. Individuals that sign-up for cost-sharing are often healthy, and often don’t qualify for ACA (income-based) subsidies. It’s worth noting that the premiums for ACA-based insurance plans often increase when healthy individuals drop out of the insurance pool; typically, the individuals remaining in the ACA-insurance pool are less healthy, and consume greater amounts of healthcare.

B. Seven article series

Seven articles will be posted weekly in November and December 2021, exploring issues and possible solutions in the US healthcare system. This article series is not about casting judgement; this series is not about suggesting good or bad, best or worst; the intention is to identify how the US healthcare system could be improved.

• Introduction: what and why
• History: of US health insurance
• Stats: key US trends
• International: policy focus
• Discussion: probe issues
• Alternatives: potential solutions
• Taking action: next steps

C. Structural healthcare issues

There are a number of structural issues that exist in the US healthcare system, evaluated on its own merits, or compared to the healthcare systems of other nations. The intention of these articles is to unpack, explore, and better understand these issues.

• US healthcare total spend represents 18% of gross domestic product (GDP)
• US healthcare spend per capita is twice as expensive versus the cost of other nations
• Certain healthcare performance measures lag other nations (ie. life expectancy)
• Despite ACA, 8% of Americans (20-million) remain un-insured or under-insured
• These Americans could risk bankruptcy due to severe disease diagnosis or accident

D. Background

I have experience with several different healthcare options, including universal healthcare in Canada, premium employer plans in the US, and cost-sharing plans. As a CFO, I also negotiated employer-provided health insurance benefit plans for fifteen years.

• Epocal: 2007-2011, Canada universal healthcare and employer-provided supplement
• Capital Royalty: 2014-2019, employer-provided, fully-paid premiums, low-deductible
• GP: my friend, Emily, helped me to find a general practitioner; I was fortunate to find a doctor who was thoughtful, caring, and compassionate.
• Surgery: in the Marine Corps, I performed heavy deadlifts in the gym; my record was 450-pounds, three times my bodyweight. I developed a hernia, and it required surgery when I was in Canada. Shouldice Hospital, in Toronto, performed the procedure, and specializes in natural tissue repair without mesh. The procedure was completed within three-weeks of diagnosis. My cost was $12, to park my car for two nights.
• MRI: I learned how to swim while in Canada, and competed in masters freestyle. I incurred a shoulder overuse injury, requiring a non-critical MRI; the imaging was completed within 30-days.
• O’na Healthcare: 2019, cost-sharing plan, on sabbatical
• Christian Healthcare Ministries: 2020, faith-based cost-sharing plan, on sabbatical
• University of Connecticut: 2020-2021, employer-provided, low-deductible
• Sedera: 2021, secular cost-sharing plan
• Selected Sedera; $300 monthly premiums, with $500 per medical incident
• Sedera started by UK-trained doctor as a medical bill negotiating company
• Combined Sedera with MedLion, a subscription-based telemedicine service
• COBRA: $800 monthly premium; returned to Texas, no out-of-network benefits
• ACA: $500 monthly premium (Friday Bronze | Molina Bronze | Oscar Bronze), with $9,000 deductible before insurance applies. I would be responsible for the first $13,000 of expense (premiums plus medical bills); for a family of four, without subsidies, this exposure could be as high as $25,000
• Off-exchange: premiums ranged between $250 and $1,000 per month (United Healthcare | Pivot Health), with maximum benefits ranging from $500,000 to $1,000,000 or $2,000,000
• Direct primary care: $100 monthly premium (Nextera), including telemedicine
• Indemnity plan: premiums ranged between $150 and $300 per month (Sidecar Health), with deductibles between $0 and $10,000, and maximum benefits at $5,000, $10,000 or $2,000,000.

E. Summary | conclusion

We will explore the many complications of the US healthcare system:

• Most Americans (80%) are “satisfied enough” with current healthcare system
• 50% of Americans receive employer-based healthcare
• 30% of Americans receive Medicare or Medicaid
• Wealthy Americans may be indifferent to healthcare costs
• Wealthy Americans may also be indifferent to rate of increase in healthcare costs
• Don’t anticipate politically-driven, near-term structural healthcare change
• Consumer behavior could be modified to reduce healthcare costs
• 60% of healthcare (ie. non-emergency) is shoppable, for example:
• Certain procedures like x-rays, MRIs, etc.
• Prescription medicines, including use of generics
• Current healthcare system tends to focus on sick care versus prevention
• US has a transparent market (to shop) for healthcare insurance
• US does not have a transparent market (to shop) for healthcare

F. Looking ahead | next post

Next week’s post will present a brief history of US healthcare, including the introduction of healthcare insurance, social security, Medicare, Medicaid, and the Affordable Care Act.

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