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The below article was published by The New York Times.  It was written by Paul Downs, who kindly gave me permission to re-post his article in my blog.

There is a lot to learn and understand about insurance selection and medical claim payments.

This is the second in a series of posts about Paul Downs’s efforts to buy health insurance for his small business.

The Affordable Care Act’s metallic levels — platinum, gold, silver, bronze — offer buyers four different ways to pay for health coverage. One can choose to commit to paying higher premiums (platinum and gold) or to minimizing premiums (silver and bronze) and taking a chance on having to pay higher out-of-pocket costs when medical care is needed.

A year ago, when my company’s policy was up for renewal, I was surprised to learn that the policy I had bought in 2012 offered gold-level coverage. My perception was that the coverage that I had been buying for myself and my employees had been of low quality, as I had been changing plans every year for a decade, accepting enrollment in an HMO and an annual increase in co-pays, in a failed attempt to keep premiums down. (From 2001 to 2013, my premium costs tripled.)

As an experiment last year, I decided to enroll my family in a cheap plan: Independence Blue Cross’s PPO Bronze with HSA. This is a plan with a high deductible ($3,000 individual and $6,000 family in network – and triple that for out-of-network care), significant co-insurance after the deductible is met (50 percent for most procedures) and a high out-of-pocket maximum ($6,350 individual and $12,750 family in network, triple that out of network). In other words, a skimpy policy.

But the premiums to cover my family (I’m 52, my wife is 51, I have 19-year-old twins and a 17-year-old) were the lowest I could find for a policy with a health savings account: $1,073.28 a month, or $12,879.36 for the year. Premiums for a platinum plan of the same type and with the same network were much higher: $1,641.09 a month or $19,693.08 a year. The gold level plan, with some co-pays but no deductible, cost $1,513.22 a month or $18,158.64 a year. If these premiums seem high (or low) to you, keep in mind that they are determined by adding up the premium for each family member. They would have been much lower if we were all younger (and higher if we were older).

The difference in premium cost between the bronze and gold plans was $5,279.28, which was less than the deductible for the bronze plan. But if my family didn’t go to the doctor very much, we could end up thousands of dollars ahead. And if we did? Before I made my final decision to go with the bronze plan, I labored mightily to get some idea of what routine visits to the doctor might cost — without much success. In the end, I decided to roll the dice and see what happened. And now we’re 11 months into the year, and I can report what my “cheap” plan has cost me.

I decided early in the year to pay attention to my out-of-pocket costs, and started keeping all of the Explanation of Benefit forms that Independence Blue Cross mailed to me. I also kept all of the many bills I received from health care providers. Recently, I organized all of this information into a spreadsheet. It took me about six hours, over two evenings, to enter all of the transactions, covering the first 10 months of the year. It was not possible to simply download this information from my insurer’s website — I had to examine each E.O.B. carefully and then enter the details manually. When I finished, I had a financial portrait of a moderately eventful year in my family’s health history.

My wife and I are both what you would call healthy — no chronic conditions, neither of us smoke, we get regular exercise, we each have one drink a day, and neither of us is obese. My sons are active, healthy teenagers. Two of them are runners, and the other (who has severe autism) lives on a farm and works outdoors much of the day. My wife cooks for us most evenings, and we eat a balanced diet. So there’s no obvious reason we should be going to the doctor any more than an average person.

And yet, so far this year we have ended up in a doctor’s office 25 times. Most of those visits were centered around three events: My wife had a colonoscopy in January, my youngest son hurt his knee playing Ultimate Frisbee in April, and I decided to see why I was suddenly having heartburn and had an upper gastrointestinal endoscopy in October. The colonoscopy and endoscopy were simple, three-hour procedures performed in a non-hospital setting, but they did involve anesthesia.

The knee problem was much more involved. It started with a visit to our regular doctor, then an orthopedist, then an MRI, then back to the orthopedist, then a morning in surgery (with anesthesia) that didn’t fix the problem. So my son went back to the specialist in the fall, with another trip to the MRI. Twelve visits in all. Other than those things, my wife went to the gynecologist and I got a flu shot. We also used various prescription drugs.

Laying all of this out on a spreadsheet, some things jumped out at me. First of all, the list price, or the sum of what the health care providers billed to Independence Blue Cross, is a very large number: $63,878.42. Presumably, if I had had no insurance, this would have been my responsibility. Maybe I could have negotiated it down a bit, maybe not. Twenty-three of our 25 doctor visits were with providers who are part of the Penn Medicine network, but I still received bills from 14 different entities, and without insurance, I presumably would have had to dicker with each one. I have no idea how that would have gone, and I never want to find out.

The fees negotiated by Independence Blue Cross for all of the services I received amounted to a substantial discount. They managed to knock $38,685.38 off the list price, for a resulting cost of $25,193.04. The insurance company split that cost with me per the provisions in my bronze plan. My portion, not including the premiums I paid, currently totals $9,648.65, or 38.3 percent of the $25,193.04 that Independence Blue Cross has paid out.

Were the out-of-pocket costs a problem for me? No. I’m a prudent person with above average income, and I keep cash on hand to cover unexpected expenses, even of this magnitude. I do wonder, though, how easy it will be for people like my employees to manage out-of-pocket expenses. How many people in the median American household, with an income of $53,891, have an extra $10,000 lying around?

What if I had chosen another policy: gold or platinum coverage? If you add my premium costs to my out-of-pocket expenses, my total expenditures under a bronze plan so far this year have been $23,160.49. Would the sum of my premiums and out-of-pocket costs been higher or lower with a gold or platinum plan? Unfortunately, I can’t answer that question. I have the plan descriptions from last year, but I have no way of knowing whether the negotiated price for the procedures is the same for all metallic levels.

What does all of this mean? As boss, I’m supposed to make decisions about what policies to offer to my employees. Some have families and some don’t. Some are younger, some are older. Some make more money, some make less. Conventional wisdom is that bronze level policies are good for people who don’t go to the doctor. My experience suggests that this is true — if we had required no care, my choice of a bronze policy would have saved me a lot of money. But even though we’re all healthy, that’s not how things turned out.

Which leaves me asking: Should I recommend bronze policies to my younger, healthier workers? Only if I can be sure they won’t injure themselves doing the things that young people do. The largest portion of my out-of-pocket expenses came from my son’s knee injury. That incident, and all of its associated care, had a list price of $36,060.96, a discounted price of $9,931.85, and a cost to me of $6,874.24. I was able to pick up that cost. Would my younger employees have that money on hand?

My take away: Even though the premium costs are much higher, there’s something to be said for the gold and platinum plans. I’ll probably switch to one for next year — and recommend that my younger employees who buy bronze think about where they might find a pile of cash if they have bad luck.

Paul Downs founded Paul Downs Cabinetmakers in 1986. It is based outside Philadelphia.

Large part of my business is dealing mental health reimbursement problems. People with some problems that can be treated with therapy and medication is manageable.  The real problem is with severe conditions where daily supervision and guidance needed. The two most common issues  are mental health problems, and  or substance abuse.

The Affordable Care Act gave us a false hope that mental health and substance abuse treatment will be covered under the insurance policies. The false hope is arriving from the insurance administration of this care.  While the benefit is available it comes with managed care. Most expensive services require insurance prior approval. Many of the inpatient residential treatment facilities are not in network and have no idea, nor interest, to obtain prior authorization.  So, under the Affordable Care Act we have the coverage, but the law left it to the insurance companies to deny care.

Two parties, the residential treatment facility and the insurance company, supposed to work together are very far away from each other.  Most of these facilities are set up for cash payments and generally don’t participate, nor understand medical insurance.  In the other side insurance companies routinely deny care in out of network residential treatment facilities.

The major factor in treating mental illness is learning to make life changes.  Most insurance company denials state that services could have been provided in an Intensive Outpatient Program. That is almost always a false statement. Major life changes involves the patient relocation and close 24/7 supervision.  It cannot be done while living home and attending a daily sessions.

The usual story is that a parent takes a young adult child to a facility in remote location.  This is an effort from the parent to save that child from further harming him or herself, with a hope for recovery and healing.

In most cases the effort pays off. A few months later this young adult find a new direction is life.  They learn to cope with the illness, or give up illegal drugs. It can be a combined problem; mental illness brought on by drug use.

The  problem is the price tag of  about 40-60 thousand.  Most people expect the insurance company to pay for most of the bill.  Instead it becomes  a tag of war between  the facility’s inability to bill to the insurance company correctly and the insurance company wanting proper billing submission. Once that mess settles the next state is the insurance denial.  The majority of these denials states that the care could have been provided in an Intensive Outpatient Program.  We all know that is not true, but it is a good start to avoid payment as far as the insurance company concerns.

Fighting these denials after-the-services is nearly impossible.  Of course there are a few exceptions where additional considerations may help to overturn those denials.

The best course of action is to be proactive. Bring this person to the psychiatrist.  Do locate an in network Intensive Outpatient Program and enroll.  If it doesn’t work there is a proof, and very good reason for the residential treatment facility. Even so, do call your insurance and ask if there is an in network residential treatment facility.  It is always a good idea to ask and look and check it out prior treatment.  If there is none then ask for a prior approval to the facility of your choice.  By this time there is a psychiatrist and treatment facility on the record, so it would be very hard to deny.

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The government had released the demographic breakdown of ACA enrollment. The NY Times, like most people, jumped on the occasion to beat up the enrollment statistics. The financial viability of the ACA is questioned, due to the perceived low number of young people purchasing ACA plans. Quote from the Times:

“Of those who signed up in the first three months, administration officials said, 55 percent are age 45 to 64. Only 24 percent of those choosing a health insurance plan are 18 to 34, a group that is usually healthier and needs fewer costly medical services. People 55 to 64 — the range just below the age at which people qualify for Medicare — represented the largest group, at 33 percent.”

Maybe I am wrong, but I can play with numbers as well…

The age group of 18-34 is misleading to start with; ACA allows the parents to purchase insurance for their kids up to age 26. Not to mention that some of the states had based the ACA cost on age groups. But let’s not get hung up on facts and say the age group is correct. Maybe we should look at US population data, based on this age group.

The US Census Bureau last December released the 2012 population survey supplement. Based on this document, the population for the age group of 18-34 is 71.6 million; the age group percentage of the total population (308.9 million) is 23.3%. So, why the Times states “only 24 percent”, when statistically that is the correct percentage for this age group? Not to mention that, if one takes into account parents buying health insurance for their kids, the population of the age group of 25-34 is 41.1 million, or 13.4% of the population.

The number game being played out is just that, a game. The insurance companies behind these numbers are already “crying wolf” as a preparation to increase ACE provided insurance premiums. They really don’t care, if the increased premium will come from people, or the government. It’s all the same for them, more profits…

The Patient Protection and Affordable Care Act, ACA or Obamacare for short, created healthcare exchanges, and its implementation had been left up to the states. While 36 states had elected to have the federal government run their exchanges, with more or less success, Connecticut and 23 other states developed and opened their own exchanges.

In this blog, we are going to look at the Connecticut healthcare exchange premiums and the available plans for a couple in their mid-thirties, no kids, within Fairfield County. The target of this evaluation is the estimated yearly cost of these plans; however, we will not look at the actual coverage and provider networks. The cost tables will not take into account the copayments, or the separate prescription benefit’s deductible. Nor will it account for the preventive services that are covered 100% by the insurance companies.

For other age groups and estimated premium rates, please visit the Connecticut Health Insurance Exchange website

The couple in our example has 16 different plans to choose from and just to restate, the actual plan policies had not been evaluated.  The premium for these plans is along the line of metal rating of the plan in question. In addition to the non-metal (rusty?) rated catastrophic coverage, the ACA specifies the metal rating as bronze, silver, gold and platinum. The couple in question does not qualify for catastrophic coverage, due to their age, and Connecticut exchange does not offer platinum plan. After accounting for these restrictions, these are the plans available for this couple:

Based on the estimated premium alone, and depending on the couples yearly income, these premiums certainly seem affordable for an HMO type plan. The ACA introduced HMO plans however are not the traditional HMO plans that we’ve got accustomed to and embrace; these plans are integrating the indemnity plan’s deductible as well. Let’s look at the actual estimated cost of these plans with the policy specified medical deductible added:

The size of the deductible substantially changed the actual cost of the plans, based on the yearly basis, when the couple in question requires medical care. The low cost plans with large deductible are quickly subset in favor of the high premium and lower deductible plans in the total yearly cost of the plans.

The ACA has also introduced the “maximum out-of-pocket” cost limitation; however, the deductible does not count toward the maximum out-of-pocket cost. Let’s add this to the table below to the annual estimated cost of insurance for this couple, who’d actually use their plan:

Adding the maximum out of pocket cost to the yearly total just further underlines the advantage of the gold level plans. It also proves that the “pay me now, or pay me later” is true once again.

Basically the bronze level premium plans end up costing much more than the gold level plans, when all costs are included in the evaluation. The plans available at the Connecticut exchange show similar cost trends for all age groups, with or without children. The difference is that the premiums increase substantially for couples with kids, older couples, and smokers. In the case of older couples for example, the premium rates presented here will double, or more, for a couple in their mid to late 50s in all metal levels.

Selecting a suitable exchange plan for your needs will take time and the evaluation should include:

1. Check for your doctors in the plan’s provider network (Use Connecticut’s exchange site)
2. Based on your medical condition, estimate the care that you may need in the future
3. Evaluate the yearly cost of plans, that includes at the minimum the yearly premium and deductible
4. Select the plan that best fits your needs

Shopping based on the policy premiums only does not take into account the provider network, deductible, and the out-of-pocket maximums. The deductible alone can more than double of the plan’s annual premium cost in case of bronze, and to a certain extent the silver rated plans as well.  Therefore, it is strongly suggested that the estimated yearly cost is taken into account prior to selecting from the Connecticut exchange provided health insurance plans.

Note: These are estimated premium rates, the actual premium rates may increase/decrease if and when the plan had been finalized and purchased from the insurance company in question. And again, do read the plan policy prior to signing on the dotted line.

The PPACA (Patients Protection and Affordable Care Act) a.k.a. Obamacare did address some of the issues with the current healthcare and health insurance problems. The good part of the act is a relatively short list:

1. No preexisting condition denials in getting health insurance
2. Removed lifetime cap for health insurance coverage
3. Extended health insurance coverage for children up to age 26 under their parents insurance
4. Required the creation of health insurance Exchanges for both individuals and small businesses
5. Mandated health insurance coverage for everyone
6. 100% coverage of preventive care

One of the major problem with the US healthcare is its cost. However, the PPACA did not actually address cost. In another word, there’s nothing in the PPACA that would prevent the cost of healthcare to continue spiraling out of control.

Establishing  health insurance Exchanges is left up to the states.  States that elected not to establish their own Exchanges are  operated by the federal government. The health insurance premiums rates are “loosely” controlled by the PPACA and impacted by four factors; no other factors are permitted by the PPACA:

1. Geographic region (generally, counties within states)
2. Whether such plan or coverage covers an individual or family
3. Age, except that such rate shall not vary by more than 3 to 1 for adults (1 being the youngest and carries the lowest rates and conversely, 3 the oldest group that carries the highest rates);
4. Tobacco use, except that such rate shall not vary by more than 1.5 to 1

In addition, the PPACA also mandates the coverage of health care for insurance companies participating in the exchange, through the establishment of metal named levels. These levels’ actuarial value is the proportion of medical expenses an insurance plan is expected to cover in the form of insurance/member payment percentage; deductibles must be paid prior to medical expenses:

1. Bronze: 60/40
2. Silver: 70/30
3. Gold: 80/20
4. Platinum: 90/10

The participating insurance company is required to offer, at the minimum, silver and gold coverage. In addition, there’s a catastrophic coverage that has no metal name or rating. One could call it “rusty”, since this plan really does not cover “standard” illnesses, only catastrophic/chronic illnesses, after the high deductible had been met.

In the Is PPACA really affordable” Part 2… blog, we’ll look at the estimated premium rates for the State of Connecticut…

The premium rates of the metal named plans vary by states based on family status, age, region, and income. For example the estimated Connecticut health insurance exchange premium rates for a couple in their mid 30’s, living in Fairfield County is listed below:

The estimated premiums in Connecticut for a couple in their mid 50’s would be:

(For other age groups and estimated premium rates, please visit the Connecticut Health Insurance Exchange website)

The estimated monthly premium rates vary between the younger and older couples, $570.04-938.76 and $1,119.91-1,844.32 respectively. Depending on the plan chosen, the deductible ranges between $2,000 to $12,600. As a general rule, the higher premium rates tend to have lower deductibles.

The given plan’s deductible need to be met, prior to the insurance company paying for any medical bills. The sole exception is preventive care, that is covered in full for all these policies without consideration of deductibles.

The total yearly cost is calculated as ((MP x 12)+AD). As such, the total cost amounts to for the younger couple 12-19%, and for the older couple 20-26% of their respective income. The  cost of the various plans is based on $100,000/year total income for both couples.

The question is: can they afford spending roughly 20% of their income for getting health insurance through the exchange?

That depends whom you ask? Based on the current median income level in Connecticut, about $70,000/year, the chances are that people at this income or lower levels cannot afford purchasing these plans. Certainly, there are people who can and they will purchase health insurance at the CT exchange. There are people who makes less than the median income level, who cannot afford these premium rates.

The Affordable Care Act specified provisions for providing federal assistance for people, whose yearly income is at or below 400% of the federal poverty level.

In the Is PPACA really affordable? Part 3… blog, we’ll look at the PPACA mandated exchange premium rates for people, whose income at or below the federal poverty level…

Section 673(2) of the Omnibus Budget Reconciliation Act (OBRA) of 1981 (42 U.S.C. 9902(2)) requires the Secretary of the Department of Health and Human Services to update the poverty guidelines at least annually, adjusting them on the basis of the Consumer Price Index for All Urban Consumers (CPI-U).

Subsidizing the health care exchange premium rates starts at 100% of federal poverty level (FPL), and ends at 400%, as required by the PPACA, or Obama care, and defined as such:

Let’s look at the subsidies that people in this income level will receive:

Interestingly, the yearly cost of the exchange’s silver plans, (plan premium x 12) + deductible), also about 20% of the yearly income at $32,000 and above. The chances are that people in this yearly income range also not going to be able to afford paying for these premium rates.

While total cost is indicative of the upfront cost of having health insurance, this calculation does not include other payments required after the deductible had been met.

In the Is PPACA really affordable? Part 4… blog, we’ll look at what the plan plays, after the deductible had been met..