Broken Health Insurance

This week, “Obamacare” has been back on the news because the Supreme Court is hearing a case from the states against the individual mandate in health insurance. Health Insurance is still a broken model? Why because it’s not insurance. An annual physical, glasses, dental cleanings, a doctor’s visit for an ear infection, some simple prescriptions – aren’t serious risks – most of these even cost less than a monthly insurance premium.

Insurance for these simple things just distorts prices and adds middlemen.

My vision insurance is a great example here. I pay $108/year through my employer for vision insurance, for this I get a $10 copay on an eye exam, a $25 copay for glasses (up to $130.)

  • The fee on paper that the optometrist pays for the exam is $89 – but we know that the insurance company negotiates that rate.
  • The frames and lenses at the ‘insurance’ approved retail store are mostly over the $130 cap. A quick look online and I can get a similarly stylish pair for $30. But because of my ‘insurance’ it actually costs me less to buy the $130 frames. Do I need them? no.
  • Stipulations mean that I only get one pair of those frames up to $130 every 2 years.

Do the math! In 2 years, I pay $251 for two $90 (artificially inflated) eye exams, and one pair of glasses of which a similar pair could be had for $30.

I need insurance when I break a bone, have a heart attack, have a wife that gives birth, or find out that I need surgery and expensive medicine for a strange medical condition that I was unaware of (ie cancer or something on house.) Otherwise, we’ll continue to see inflated costs of medicine and doctor visits. But this is why dentists and doctors are starting to offer groupon’s – we can obviously see their inflated prices now ($80 Groupon for a cleaning that they would charge your insurance $160 for).

Health savings accounts make these costs transparent again – they do put the customer out for the small things (but often that’s less than a healthy person’s premium discount.)

The counter point is that an annual physical, those dental cleanings, and that eye exam are important for preventative care – so your doctor can tell you that you need to workout more, or get you on blood pressure medicine. But if ‘insurance’ removes the price discrimination from the market, prices will inevitably increase.