Best Financial/Health Advice Part 3: Which Health Insurance Is Best For You?

For Part 2 in this series, click here.

Fifty years ago, health insurance worked like this: you went to your doctor, whose office was above a small drugstore or in a Michigan Avenue building. You paid cash for your visit. For larger medical expenses, like surgery or having a baby, Blue Shield paid your doctor and Blue Cross the hospital. Either you or your employer or a combination of both paid the insurance premiums.

The big fears were either being unemployed or getting too old to work, because you wouldn’t be able to afford health insurance in either case. When President Lyndon Johnson signed Medicare into law, just about everyone breathed a sigh of relief except the American Medical Association (AMA), which had bitterly opposed Medicare as being the first step to the dreaded “socialized medicine.”

To the AMA’s surprise, Medicare turned out to be a big success for everyone. Both the elderly and the disabled now had coverage and the Big Three–doctors, hospitals, and Big Pharma–made oodles of money. Today, more than a half century later, although some doctors and patients still grouse about certain aspects of Medicare, enrolling in it is one of the pleasures of turning 65.

When you compare them to commercial health insurance, Medicare premiums are low and enrollees have a large selection of doctors. One flaw is that every time the government announces that physician reimbursement will be lowered for one reason or another, a certain number of physicians resign from Medicare. Currently 87% of primary care physicians (PCPs) do take Medicare. The number is even better for specialists (99%) simply because no one could afford them without insurance.

(The physicians at WholeHealth Chicago are not enrolled in Medicare because during a Medicare inspection many years ago we were told we spent too much time with patients. Our reviewer said, “I know doctors who can diagnose fibromyalgia in 15 minutes. Yet you take a full hour. We’re not going to pay for this.”)

A majority of Americans (67%) rely on private health insurance before they have access to Medicare. The premiums are either shared with their employer or completely paid on their own. Unfortunately, premiums for individual policies can be very high and at one time placed limitations on coverage for pre-existing conditions.

The Affordable Care Act (ACA or Obamacare) helped a lot here. Premiums became federally subsidized, the exact amount depending on your annual income. Pre-existing conditions were declared illegal. And yet because of the escalating prices of virtually every aspect of health care–from the room rate at Northwestern and the fee for a surgical procedure to the tube of ointment the pharmacist tells you went from $60 to $1,200–insurance premiums are high.

Although the ACA drove down by 50% the number of personal bankruptcies due to health expenses, nonetheless every year more than 750,000 people do go bankrupt in the US due to overwhelming health care costs.

The most visible consequence of rising healthcare prices is a dramatic increase in insurance deductibles and premiums. Individual ACA policies required deductibles and premiums so high that many people either had to go into an HMO offered by an insurance company nobody had ever heard of or stop their insurance altogether and hope they wouldn’t get sick.

Most of us have experienced an abrupt change in health insurance when our employers deemed their previous policy unaffordable. Suddenly there’s a mad scramble to find a new doctor in a new network, get medical records transferred, and sometimes even change pharmacies.

Choosing insurance
When your employer changes insurance, you’ll be offered a variety of plans from that company and making the right choice can be challenging. Really large employers may offer multiple plans from several different companies and then you’ll truly feel overwhelmed. Here are some scenarios that might help you get started.

(I’ll remind you of this later: if Blue Cross is available, take it. Remember, Blue Cross in Illinois is not for profit. Their goal is to provide health care, not please shareholders with a fat bottom line.)

Your main choice is generally between a PPO (preferred provider organization) and an HMO (health maintenance organization). Generally, if you use the healthcare system only as a last resort (you dislike doctors, invest in taking good care of yourself, are a Seventh Day Adventist or Christian Scientist), enroll in an HMO. The prices are lower than those for a PPO and many have no deductibles.

Let’s take a closer look at these options
If you’re working part time or are unemployed altogether, you are eligible to enroll in a plan under the ACA. The HealthCare.gov site can be daunting but is worth the effort. You’ll be eligible for a variety of options, including Blue Cross, with coverage for you, your family, and for a pregnancy. You’ll receive a federal subsidy for your coverage based on your income.

PPO  A physician (or medical group or an entire hospital/physician system–Advocate, for example) signs a contract with an insurer and they agree on discounted rates. By doing so, the doctor, medical group, or hospital enters what’s called the insurance provider network. As a patient, you’re free to go to anyone in the network. Pick your own primary care doctor, go to any specialist. Every year, you’ll be responsible for some costs (your deductible) and you’ll pay a small fee with every visit (the co-payment).

You’re covered for second/third opinions if the opinions are from in-network physicians. The moment you see someone out of network, your out-of-network benefits apply. These are commonly 50% of the doctor’s charges after you have met your deductible. Mayo Clinic is actually in network with most PPOs. Thus, if you want to go to Mayo Clinic to get a splinter removed from your hand, you’re probably covered. However, if you want to go to a practitioner not in network, say to have your surgery done by a nationally known rock-star surgeon, you’ll be only partially covered at the out-of-network rate.

HMO  A physician (or medical group, etc) signs a contract with an insurer in which she agrees to be paid a certain fee regularly (usually monthly) for every patient who enrolls in the HMO and selects her as their physician.

Unlike a PPO, an HMO physician is not paid every time you visit her office. If you think about it, she actually earns more money the less often you see her. An empty appointment book is financially a better day than a full one. She is both your primary care physician and a gatekeeper, meaning you can’t see a specialist without her OK. Some plans won’t let you have a surgical procedure or emergency room coverage without her clearance. The physician must follow HMO guidelines when managing patients because she or her group are held financially responsible if your healthcare costs run high. There are absolutely no out-of-network benefits with most HMOs, although this aspect proved so unpopular with patients that some insurers have developed HMO-PPO hybrids to cover them.

Here are some sample people making health insurance decisions
Patient #1, age 25   Twenty-somethings are generally pretty healthy. They secretly believe, as we all did, that they’re both indestructible and immortal. Heck, it wasn’t that long ago they said adios to their pediatrician. Overall health philosophy: if they never see a doctor, that’s fine with them. They can always get contraceptives and Pap smears at Planned Parenthood. For this patient, an HMO is just fine. She’ll choose a doctor who’s probably not much older than herself and they’ll hardly ever see each other. If she has a part-time job or her employer doesn’t offer insurance, she can enroll in HealthCare.gov and her premium will be subsidized by the government.

Patient #2, age 35  She shops at Whole Foods, goes to yoga twice a week, is healthy, and wants to stay that way. When on the rare occasion she experiences a new symptom, she’s prone to worry. For this reason, she wants a physician she can talk to who is knowledgeable about prevention and doesn’t roll her eyes when she pulls out her supplement list. She wants her health concerns taken seriously. For this patient, a PPO is definitely the best choice. The PPO is more expensive, but is being offered by more and more employers and she’ll share the cost of it with her employer. If her income is low, she and her family can still get PPO coverage under the ACA.

Patient #3, age 45  He’s pretty indifferent to his health, plans to stop smoking and maybe even lose weight one of these days. He wants coverage in case he gets hit by a bus. His big fear about insurance began when a friend went bankrupt after being hospitalized for appendicitis. For Patient #3, an HMO is fine. When he’s pulled out from under the bus, he might find himself being transferred from the non-HMO hospital where he’s been taken to the HMO-affiliated one of lesser repute, but that’s the way the system works. If a heart attack gets him before the bus does, he’ll get perfectly good coverage through the doctors in his HMO network. Most physicians, including cardiologists, are salaried employees of large hospital systems, like Advocate and Northwestern. They make exactly the same income whether their patient is in an HMO, PPO, or on Medicare.

Patient #4, age 55 (up to age 65)  This patient developed several chronic health issues and finds herself in a lot of doctor offices. It took four physicians to diagnose her fibromyalgia (which went undiagnosed when she was with an HMO because her primary care physician refused to refer her to a rheumatologist). She’s read a lot about fibro and wants physical therapy. She also wants to be tested for chronic Lyme disease, toxic mold, and food sensitivities. Her partner thinks she should go to Mayo Clinic. Most of her needs, including the visit to Mayo, will be covered with a good PPO that also offers out-of-network benefits. She can cover the remaining expenses if she has access to a Health Savings Account (HSA). If her income is low, she and her family can get PPO coverage under the ACA.

Although the not-for-profit Blue Cross/Blue Shield is less than perfect, virtually every physician in the Chicago area agrees it’s best for both HMOs and PPOs. You may have already experienced some grief with one of the for-profit insurers who have made benefit denial into a fine art.

If you’re at the point in your life where you need to make a decision about health insurance, pause a moment. Think about what you actually want from the healthcare system. You’ll likely make the right choice.

Be well,
David Edelberg, MD