GUEST COMMENTARY
The reality of health insurance
Published: Thursday, Mar 6, 2008
By DOUG ROFFMANN
I enjoyed reading last week’s guest commentary by Beth Grimes extolling the virtues of a single-payer health-care system and roundly criticizing our bloated health insurance companies. While there was certainly some truth in her piece, perhaps there’s room for another viewpoint.
Full disclosure: I’m a health insurance broker, helping ind-ividuals and business groups find some useful solutions to the knotty problem that is the American health care system.
First, maybe we should stop referring to it as health “in-surance.” This financial tool more closely resembles a home loan than anything else. It helps pay for our use of a commodity (health care) that’s ballooning in cost at nearly three times the inflation rate.
If it’s no surprise that a 90 percent loan on a million-dollar home costs way more per month than a 90 percent loan on a $200,000 home, why are we shocked that “insurance” premiums that finance our use of CT scans and MRIs are conspicuously higher than when penicillin was a wonder drug?
I routinely apologize to my clients on behalf of the American health insurance industry for the fairy tale they’ve force-fed to us for 30 years: It’s a wonderful idea to buy a plan where you go to the doctor, write a small co-payment check, then breeze out the door and dismiss any further thought about the total expense.
Truth is that’s a terrible idea. Separating the payer from the user of health-care services eliminates a vital curb against non-stop cost increases. If someone else paid for your dinner every night, wouldn’t you choose lobster over mac-and-cheese? And wouldn’t the restaurateur keep raising prices? It’s not as though you’d stop eating there. Why should you?
The same dynamic has been crippling American health care for generations. This dysfunctional system has been fostered by large hospital associations, physician groups, pharmaceutical companies, a campaign donation-hungry Congress and, yes, big insurance, among others.
Instead of discarding a health-care system that, in poll after poll, more than 70 percent of us rate “somewhat satisfactory” or better, we should, first, take maximum advantage of the system we have and, second, pursue the root causes of this mess and fire up the machine this country’s famous for: ingenuity, innovation, competition and profit.
How about financing our health care as intelligently as we finance something as mundane as auto maintenance? We don’t expect State Farm to pay for car tires; we do that ourselves. Because we do, there’s fierce competition for our business and constant innovation in the tire industry. Prices drop as a result.
Let’s take the same approach to our routine health care. Forget health plans that offer low copays or low deductibles. Imagine what your car insurance bill would be if they paid for tune-ups and wiper blades. But that’s the kind of first-dollar coverage we’ve been told serves us best for health care. Premiums for low-copay plans are way too expensive to be useful ($1,007 a month per family last year, according to Kaiser). You’re just helping your insurance agent retire early.
The best tool we have available to us now is the health savings account. Since HSA-compatible plans cost 30 percent to 60 percent less than traditional ones, the premium savings can be socked away, federal tax-free, into your own “medical IRA” — the HSA. Keep whatever’s unspent, and the account continues to build federal tax-free, into retirement. Spend the money on routine medical, dental and vision care necessities (the tune-ups and wiper blades), and, again, it’s free of federal tax.
Restoring innovation and competition to the health care delivery system is a subject worthy of a separate column (or two). So much is possible if we can harness the political will to do it. Stay tuned.
Everyone this election year has a different spin on how to realize universal affordable health care. The bad news is that none of it will make much difference until we use real campaign finance reform to throw the big-money special interests off the bus. The good news is that tools like HSAs exist right now to help us cope with this mess in the meantime.
(Doug Roffmann is a Petaluma health insurance broker. E-mail comments to doug@modern-benefits.com.)
