If all you do is get your annual rate increase notice from a California health insurance carrier, you may be wondering...What exactly is going on! The rates keep going higher and the benefits keep getting better for years now.
We'll address what's driving this constant inflation and what we can expect going forward. We'll also look at how to truly understand the real "cost" of your California health insurance plan.
Look...the health insurance carriers are no angels but they're pass through entities and now that's locked in law. The MLR (Medical Loss Ratio) rule as part of Health Reform states that for every dollar of premium, the carrier must pay out 80%-85% directly to medical benefits (doctors, hospitals, RX, etc). That number is actually pretty close to what the big carriers were already doing but even with that, the rates will continue to go up. This is the deal. We use more expensive health care and at a much higher clip. Let's look at just a few examples. Take medication. The allergy medications at $100/monthly caused first panic but we now have medications that cost 10's of thousands of dollars that didn't exist 5 years ago. MRI and CT scans used to be locked up in Universities for research and now doctor's offices are purchasing them and guess what...using them. That's short of a $1000 for each scan and the use has skyrocketed. Now compare all this new technology against the backdrop of worsening health. We only need to look at one metric here. Obesity. The trend lines for employment in the dialysis industry almost exactly tracks our medical cost inflation. As long as those numbers go up, expect your monthly premium to track accordingly. Health Reform will probably exacerbate this trend unless you can qualify for subsidies based on income and even then, based on the mandated rich benefits (compared to now), it will probably still be high. We'll have to see what happens. Now, what about the total cost of your plan.
So what is the real cost of our health plan? First we need to start with the annualized health plan premium that we pay. This is going out the door even if we don't use the plan at all.
That's not it though. We need to look at worst case so we know potentially what's out there. The best way to do this is add the premium amount to the annual deductible and annual max out of pocket. You may have copays that continue after but the real exposure should be those two numbers. Now, if you have a plan with a high separate deductible for prescription, we need to include that as well. This is worse case after fall. If you have more than one person on the plan, we need to look at potentially two people having catastrophic medical bills. That's worse worse case! This is the potential for truly catastrophic coverage plus the premium you pay for the health plan.
In an average year, you're probably looking at $500-800 in medical expenses per person plus your annualized premium amount. Preventative benefits are now covered at 100% on newer plans after 10/23/2012 so we can likely disregard those expenses. The plans also do not have a lifetime or annual cap in benefits which is important. If you use out of network providers, you can expect to pay much more than the standard benefits including the difference between what they charge and what an in-network provider would charge.
On some plans, out of network providers are not covered at all.
Guide to Covered California Plans
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