With the arrival of Federal, State and Private Health Insurance Exchanges, people expect many things to come. Here is a list of things that Health Insurance Exchanges will NOT accomplish:
- Lower Healthcare Costs—healthcare costs have been rising for those with insurance already. The general consensus from Warren Buffett to healthcare policy experts is that Health Reform, Obamacare, and The Affordable Care Act (ACA) will not lower healthcare costs.
- Fix the Moral Hazard that exists when people consume healthcare—the Moral Hazard is that people do not measure value (price and quality) well when someone else (i.e. insurance) is paying the bills. A better way of saying this is below:
- Remove the Externality that exists in healthcare—an Externality is when the decisions of one person affect another person without that effect being taken into account. For example, playing loud rock music affecting a neighbor, or in Healthcare the doctor and patient being wasteful and as a result causing everyone’s insurance premiums to rise. It is critical to educate employees that their medical purchasing decisions have a direct impact on their peers’ future premiums.
- Decrease the Confusion in Healthcare—if anything, an online Health Insurance Exchange may increase confusion. The fine print of health insurance policies, the foreign medical terminology used by doctors, and the cryptic codes used in medical billing require healthcare consumers to have expert, personal guidance—not a website of choices.
- Decrease Out-of-Pocket Expenses for Healthcare Consumers—According to an article in Forbes, the average premium for a silver plan will be $328 per month with deductibles ranging from $1,500 to $5,000. The article goes on to say that the deductibles will be more than twice the average deductible in employer-sponsored coverage.
So when considering a present-day Health Insurance Exchange, keep in mind you will NOT:
- Lower costs
- Correct the skewed incentives
- Align behavior
- Reduce confusion
- Decrease employee out-of-pocket cost.
Now, could Health Insurance Exchanges be fixed over time? Yes, but not in their current incarnation.
“Nobody spends somebody else’s money as wisely or as frugally as he spends his own.”
Economist and recipient of the 1976 Nobel Memorial Prize for economic science
About the Author: Carl C. Schuessler, DHP, DIA, GBDS is the Managing Principal of BenefitStrategies, LLC. an Insurance and Employee Benefits Brokerage and Consulting firm. We specialize in Insurance, Risk Management and Employee Benefit Consulting. BenefitStrategies helps improve your cash flow, save money and retain top talent with well-structured employee benefit and financial planning solutions. With more than 20 years of experience in employee and executive benefits consulting and financial planning experience, he guides large firms, privately held companies and executives through the challenges of evaluating planning opportunities. We pride ourselves on our ability to be creative in designing innovative, optimum plans and helping companies and individuals make the most of their financial resources.
For more information:
Carl C. Schuessler, Jr., DHP, DIA, GBDS
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