Buying health insurance (or, How I Stopped Worrying and Love Consumer-Driven Health Care)
insuranceThis week, I returned to the working world after a two-year hiatus (vacation?) at the Harvard Business School.
One of the myriad shocks of resuming full-time employment was that I now have to PAY for medical care. Ridiculous, I know.
I am fortunate enough to work at a fabulous, progressive healthcare software firm that offers its employees a choice of health insurance plans administered by Blue Cross Blue Shield of Massachusetts, my state's largest insurer.
I'm afforded the opportunity to choose between three plans --- an HMO (they pick the doctors), a PPO (basically, pays 80% when you visit out-of-network doctors), and a more gnarly PPO with provisions for a Health Savings Account --- a sort of 401(K) plan for healthcare expenses.
Cue "the paradox of choice"
On my first day of work, a plethora of paper slips and brochures and supplemental booklets (really --- dead trees!) explained the benefits afforded under each plan.
There were lots of tables and footnotes and appendices.
I had no idea which plan to choose.
But wait, you ask: how is this possible?
Colin, you worry about healthcare for a living! (actually, healthcare information technology --- but whatever)
How can you be totally bewildered by something as simple as how to insure yourself?
I wondered this as well.
After I got over my initial feelings of shame, I started thinking about my bank account.
In most matters I am a ridiculous cheapskate --- so I decided I should probably understand what I was buying.
And because I am an MBA, "understand what I was buying" usually means a bunch of spreadsheets in Microsoft Excel.
So without further ado, a several-part analysis of my health insurance options.
My options appear (based on some cursory and admittedly quick research) to be relatively typical of people employed by mid-sized companies in New England.
A caveat: I know a little something about exchanging clinical healthcare data. I am far from an expert in the insurance side of healthcare. I am not licensed to dispense advice about insurance decision-making. I have no particular desire to become a credible advisor on individual health insurance.
So take my analysis with many grains of salt. If you buy healthcare based on a blog post, you're completely insane. Think about your particular situation yourself.
Background
An HMO-style plan typically offers low premiums and a low deductible ($500), and assigns the patient to a primary-care physician. HMOs make it extremely expensive to visit out-of-network doctors --- generally, you'll pay out of pocket --- and attempt to deter emergency room visits in all but the most dire of circumstances.
In contrast, a PPO-style plan offers higher premiums and higher deductibles, but enable the patient more choice in picking doctors. The payer reimburses visits to out-of-network physicians at some pre-determined rate --- if you pick your own orthopedic surgeon, you'll pay 20% of the cost and the insurance company will pay 80%.
Effectively, PPO insurance is buying an option --- if you have some complex medical problem and you want treatment from the best doctor in your area, the insurance company will still pick up most of the tab.
Also, PPOs generally involve less "hassle" --- if you fall down the stairs and you know you broke your leg, you can go straight to an orthopedic surgeon without first visiting a primary-care doc to confirm that, yes, your leg is actually broken.