Wednesday, June 7, 2017

On Health Insurance

There are a lot of things wrong with Obamacare, but Republicans and Democrats disagree on what exactly to do to fix it.  In my opinion, poor people should have the Gold plans.  Rich people can get by just fine with the Bronze plans.

Outrageous you say?  Hmm, let's take a look.  Buying insurance is taking a gamble on the future and hoping you lose.  Because to not lose, you have to suffer a loss, pay your deductible and, take the insurance payment and start over.

Take earthquake insurance for example.  These policies are priced based on replacement cost and how big a deductible you have.  We have earthquake insurance (we live in California!) and our deductible is $30,000.  Someone else who lives in Beverly Hills would have a lot higher replacement cost than we do, and would therefore have a much higher deductible.  If our house is destroyed in an earthquake, we can rebuild our house for $30 large.  We could handle that.  If a really wealthy person's house is destroyed, they might have a $200,000 deductible, but they could prob'ly handle that.

Someone who lives in Los Banos might have a house that wouldn't cost as much to rebuild, so maybe their deductible would only be $20K.  But wait.  There is still the matter of the premium which might, for this person, only be a few hundred a year, but there might not be room in their budge for that.  Plus, they absolutely couldn't afford the $20 large deductible.  So if an earthquake takes their home, they're out on the street.

Now consider health insurance.  In the examples above, let's say the Beverly Hills homeowner, the Los Banos homeowner, and I are all the same age and in the same good state of health.  Beverly Hills can afford a Gold Plan with almost no co-pay and a $1000 deductible.  I can afford a Silver, with a larger co-pay and $5000 for a deductible.  And the Los Banos resident has to settle for a Bronze, which has much lower premiums, but high co-pays and maybe a $10,000 deductible.   

In a good year, none of us use up our deductible because we don't have to see the doctor that much.  Beverly Hills's co-pay is very low -- no problem.  Mine is medium -- I can handle it.  Los Banos's is pretty high.  Los Banos hesitates before going to see his doctor because it's gonna mean skipping a meal or paying only the minimum on the credit card (and incurring more finance charge).  But he finds a way to deal with it, especially if it's his kid that needs the doctor.

But suppose the three of us have a bad year and need surgery.  We go into the hospital and we have our surgery.  The cost is $100,000 for each of us.  Beverly Hills doesn't have a high-end body with luxury organs, his premiums are not based on a higher replacement cost for his organs.  I need the same surgery and my cost is the same as his.  Los Banos also needs the same surgery and incurs the same charges. 

Beverly Hills pays his $1000 deductible and gets on with his life.  I pay my $5000 deductible and get on with my life.  Los Banos can't pay his $10,000 deductible and he and his family are bankrupt in one fell swoop.

The Bronze plans for poorer people should be the $1000 deductible plans with the little or no co-pays and cost the same as they do now.  The Gold plans should have the $10K deductibles and the high co-pays, and cost the same as they do now.  That's how you fix Obamacare.
This was inspired by the Summer 2017 Issue of UU World Magazine

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