Monday, September 16, 2013

Not All Insurance is Alike

In about two weeks people will be eligible to sign up for health insurance through the state and federal insurance exchanges as required by the Affordable Care Act. States are preparing call centers to walk their citizens through the complexities of subsidies and how to qualify for the different programs.  Meanwhile, according to this article much confusion remains about the law itself.  “Slightly more than half of 1,500 people polled by the Kaiser Family Foundation in August said they didn't know enough about the law to understand how it will impact their families. And 44% of 1,000 people polled separately…said they weren't even sure the law is in effect…”

This got me thinking about how different health insurance is from other types:  life, auto, homeowner’s, etc.  You can’t just say that insurance is insurance.

The first difference is that most people buy other insurance hoping they will never need it.  I don’t buy insurance on my house thinking, “Next time it burns down, I won’t have to pay” or buy auto insurance thinking, “When I wreck the car the insurance will cover it.”  Typical thinking is that we buy insurance in case something bad happens, but hope it never will.  Happy auto insurance customers are those that go many years without a scrape or dent.  They also tend to get better rates.  Health (or dental) insurance, on the other hand, is insurance we expect to use.  We think, “Next time I go to the doctor I’m covered.”  We hope for good health, but we realistically expect every year to pay premiums and receive some benefit.  Some people see a doctor once a year, some less frequently and some many times a year, but the rates are now based more on income than on usage or experience.

The second difference comes in the choices of coverage.  If my insurance agent tells me that my auto insurance also covers my boat, I would say that I don’t have a boat and don’t want to pay for boat insurance.  It’s my choice, and I don’t want to help subsidize all the boat owners with my premium payments.  If a health insurance policy tells me that it covers chiropractic visits, and I have never seen nor do I ever expect to see a chiropractor, and I don’t want to subsidize those who do; too bad.  That’s the policy.  Sometimes the law tells them what they must cover.  As obesity is declared a disease, those who don’t need the coverage for treatment and counseling, must buy it anyway.

With other insurance you get estimates for your car repair or an appraisal on the house damage so you have an idea of what it will cost.  With health insurance you often get the service first and the insurance surprise later.  Perhaps that’s because the medical charges are also a surprise, sometimes trickling in over a period of months from providers you never recall having seen.

Finally, have you ever gone for a car repair and been told that the price will depend on whether it’s covered by insurance or not?  Would replacing a house roof cost less because it was insurance-covered wind damage or just old age?  That’s not been my experience.  It’s common, though for doctors and dentists to charge the uninsured a higher fee than the one negotiated by insurance companies.  A flyer in my mail recently told me that a certain Medicare Advantage plan saved members on average $3,364 last year on prescription drugs – then the footnote explains:  compared to “retail prices paid for drugs purchased by individuals without insurance.”  Isn’t that insane?

Health insurance just doesn't look or act like other insurance.  It’s no wonder people are confused.

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