Portable Insurance

I consider myself a reasonably intelligent person, but when I try to understand medical bills or medical insurance payments, I am befuddled.  In talking with my co-workers, it appears that I am not the only one.  Many have expressed frustration when trying to understand coverage and can’t understand why it is so difficult to get a straight answer from the insurance company.  Other co-workers have complained about having to change health insurance companies when they change employers.  One co-worker asked, “Why isn’t health insurance portable?”

That’s a good question.  If I buy a new car, I can use the same insurance company to insure it.  If I buy a new house, I can use the same company that insured my old house.  Or, in either case, I can shop around for a better deal.  But, if I change employers, I can’t keep my health insurer or shop for a better deal, I am stuck with the insurance company of my employer’s choosing.  The employer determines my health benefits and fees by their selection of a health insurance provider.  It is a take-it-or-leave-it decision for me.  And the reason for that is simple; taxes.

Indirectly, employees get a tax-break on the premiums their employers pay for employer-sponsored health insurance.  Instead of getting the money the employer spends on insurance premiums in the form of wages, which would be taxed, the employee gets a non-taxed “benefit”.  And many employers get a tax break for having an employer-sponsored health insurance program.  While a tax break sounds good, it comes with a consequence.

First, I’m not the customer.  Because my employer pays the bulk of my insurance premiums, the insurance company has less incentive to make me a happy customer because their customer is my employer.  I have little recourse if the insurance company fails to cover my medical needs or limits which doctors I can see.  Second, I have little incentive to reduce the premiums or insurance costs.  The full cost of my health insurance isn’t apparent, i.e., some of it is paid to the insurance company without first passing through my wallet.  For example, if I knew I paid over $1,000 a month in health insurance premiums, I would shop for the best value for my family to manage my costs against my needs.    

Finally, the insurance company has little incentive to work with health care providers.  They are also put in a take-it-or-leave-it situation.  Either limit who they will see as patients or accept the payments the insurance company is willing to pay.  Sometimes the insurance companies don’t pay health care providers promptly or deny coverage.  If the health care provider doesn’t like the way they are reimbursed, the providers may refuse to see patients covered by an inferior insurance company.  But rejecting patients covered by an under-performing insurance company would be financial suicide for doctors if the insurance company is popular in the area.  Often, patients must manage their care between what is covered by their health insurance plan and which doctors are willing to accept them as patients because of the constraints of their health insurance provider.

Congress has passed laws that make it attractive for employers to provide insurance; therefore it is the employer, not the employee, who controls the health care dollars.  Is my employer more interested in getting me the best insurance coverage or the least expensive coverage?  Because of the tax code, I don’t have much of a choice in either the quality or cost of my health insurance.  By tying health insurance to employment, I lose my health insurance if I lose my job.  Undoubtedly, there are many workers experiencing “job lock”, stuck in a job they don’t like, but stay to avoid losing insurance.  If the laws were different, I could take my insurance with me and avoid being stuck in a job I hate.

If health insurance companies had to compete for my business, then the insurance companies would have an incentive to provide good customer service, reasonable premiums, and easy-to-understand coverage.  If I don’t like their customer service or believe their premiums are too expensive, I can go somewhere else.  If enough customers are disenchanted with a company, the company will either change to attract customers or go under.  At the same time, in order to minimize cost and risk, the insurance company could provide me with incentives to stay healthy or reduce coverage in areas that I don’t need, such as well-baby care, by reducing premiums.  And, if I can keep my insurance company when I switch jobs, then the likelihood of being rejected for a pre-existing condition is minimized.

Politicians like to talk about health care reform, but rarely do they do anything meaningful.  It’s time we tell our elected officials to change the law.  To simply force all employers to provide insurance isn’t the fix to the health care problem in this country.  We should all have access to quality medical care.  But we should all have the opportunity to buy health insurance that meets our needs and is not tied to our employer.  The insurance companies should compete for our business.  Incentives offered to large groups may help the employer, but what does it do for the employee?  We should not allow the insurance companies to become complacent because they have a contract with employers that tie the hands of the employees.  Having options opens up competition that leads to better products that more directly meet the needs of the individual.  Contact your elected officials and tell them to find a solution that makes the employee the customer.