What the New Health Insurance Law Means for My Workers

Staying Alive

The struggles of a business trying to survive.

After working on our health insurance renewals for more than a month, I finally presented my findings to my workers the first week in December. Like many people, I have never paid much attention to how health insurance works. It was a challenge to understand it and an even bigger challenge to explain it. I needed to find language that conveys the essence of our system without getting too technical. If you are trying to do the same with your employees, the following recap may be helpful.

In America, I told my workers, health insurance pays for three kinds of care: routine, chronic and catastrophic. Under the old system, my company bought a single policy and used it to pay for all three. And as a business owner, I got to choose whatever policy I thought was best but without good information about the various plans that were available. I pretty much went with what my agent told me.

I also had no idea what our premiums might be from year to year. The insurance companies could jack our rates up or down for any number of reasons without explanation — although it appeared that if someone in the company got sick, we could expect a large increase in premiums the next year. So we always had that hanging over our heads.

Now, the Affordable Care Act has removed that risk. In the future, our costs will be driven by the overall average costs of the local population. The new law has also imposed some standards on what an insurance policy can be, so that every person can count on a basic basket of services. This kind of regulation is something the government does in many parts of the economy. When you take a bite of a hot dog, you can be reasonably sure that you aren’t eating horse, dog or kitten. We never had that kind of assurance in the insurance market.

The law has also created a single place (HealthCare.gov) where a shopper can see a variety of policy options from different insurance companies. And it has given us a wider range of choices as to how we split the costs between what we pay in premiums and what we pay out of pocket. This is what the metal levels are all about. Each level is a different split between a guaranteed outlay (the premium) and a variable outlay (the out of pocket.)

Platinum and gold policies have high premiums and lower out-of-pocket costs. They guarantee that you will spend more money, but the risk of significant further expenditures is minimized. For silver and bronze policies, the premium is lower, so you aren’t committed to a huge expenditure and you are still covered in case of a catastrophic event — but you assume the cost of routine care and the risk of a medium-size problem.

It’s more like car insurance. My auto policy doesn’t pay for oil changes, and I have to cover a blown head gasket. But if there’s a serious accident, the insurance kicks in. I was able to demonstrate that the younger workers had plenty of choices that would bring their premiums down, often considerably.

I then went through the definitions of deductibles, coinsurance and co-pays and pointed out how their costs increase in the silver and bronze plans (while the premiums decline). If they chose a lower-level plan, they would place a bet that the cost of going to the doctor for routine care would be much lower than the deductible and that they would come out ahead because of the lower premium. I also pointed out that some of the plans they could choose among would include a Health Savings Account, which would allow them to start saving money, pre-tax, for the copays and coinsurance.

I emphasized that the old system, where the boss chose the plan and everyone went along with it, is gone. We would all need to start paying attention to our choices and to how much they cost. I told them how important it was for the company to control costs to remain profitable. I can have that conversation with them because of the profit-sharing plan we adopted this year: If the company does better, they will do better.

I had found that Independence Blue Cross has a policy that allowed me to choose up to 10 plans to offer my employees, so I gave them the list: eight options, from platinum to bronze, with various divisions of costs. The company-employee splits I chose are 40-60 for platinum plans, 50-50 for gold, 60-40 for silver, and 70-30 bronze. And if there’s a health savings account, the company will put in money to get it started.

Using my spreadsheet, I was able to show them how varying the cost split allowed me to offer a wider range of plans while keeping company costs constant. And I was able to give each of them a sheet showing exactly what their own premium costs would be for each plan, based on family size and age.

After all that, I asked for questions. And I got quite a few, mostly about co-pays and deductibles. These vary by plan and can be substantial in the lower metal levels. But every plan caps the maximum out-of-pocket annual cost at $6,350 a person and $12,700 a family. That’s no small amount of money, but it’s also not an amount that will ruin your life.

Nobody in the room had been tracking how many times they had gone to the doctor in the last year. And nobody knew what they had spent in co-pays (although I went back and looked this morning, and was shocked to find that I had shelled out $3,400 in 2013 — my wife had shoulder surgery and went through rehab).

Most of the younger workers said they had gone to the doctor only once or twice, while those with families had been fairly often but wouldn’t hazard a guess as to the exact numbers. And even if we had that information, it wouldn’t help us figure out which plan would save us money unless we knew how much a doctor would charge for an ordinary visit. The meeting ended with my pledge to look into what doctors charge.

I went to my office and got to work, quickly determining that none of the doctors, hospitals or insurers that I use post their pricing on the web. I did learn that all of the doctors in my insurer’s network had negotiated a special price that is the maximum they can charge. Great. But what is that price? I called Brett Mayfield, my contact at Independence Blue Cross who is vice president of sales, and he told me that the information was proprietary and would not be released.

Next I went to my doctor’s office, which is owned by Penn Medicine, and had a long chat with the office manager. She was friendly and helpful but told me that she was not allowed to give me a copy of the price list — although she had it in her hand while we were talking, and I caught a glimpse of what was on it. There was a long list of procedures with corresponding prices.

Were those the prices they had negotiated with the insurance company? No. The doctors would send a bill for those amounts to the insurance company and get back some portion of that amount, but they could never be sure what they would receive. On the back of the sheet was a list of all of the insurers they did business with, with an estimated discount, ranging from 30 to 45 percent by each company’s name.

I asked the manager about charges for an ordinary visit for, say, a bad cold. The fee would depend, she said, on what I discussed with the doctor. Doctors can add charges to the bill as the visit progresses, and they are under no obligation to warn the patient when another item has been added — they can just bill as they deem appropriate.

I asked how the charges would count against my deductible. Would I get credit for the list price? No, she said, only the actual payment would be applied to it, and I wouldn’t know what that amount would be until I received a statement 30 to 90 days later. I thanked her and was about to leave when she stopped me and wrote on a sticky note a range of the list prices for an ordinary doctor visit: “between $147 and $292.”

What a sweet way to do business. There’s a price, but there’s no way for the buyer to find out what it is. And items can be added to the bill without warning. Do we want our doctors behaving this way? Probably not, but that’s the system we have. Soon, we may be looking at doctors the way we look at car mechanics: possibly trustworthy, possibly not. And when people who have chosen silver- and bronze-level plans start paying those doctor’s fees, they may forget all about the money they saved in premiums.

My insurance agent offered a possible solution. There are companies that act as advocates for all health issues, including billing. He would sign us up at no cost to me. The charges for this are apparently $1.50 to $5 per employee per month — a small piece of the $42-a-month commission that the agent gets — and it takes a lot of the work off his plate. That sounded good to me, so that’s what we will do.

I had another meeting with my employees last week to explain the pitfalls they might encounter at the doctor’s office, and I told them to use $200 a visit as an estimate of the expense they will face. They know that they should keep track of the charges, and have someone (besides me) call for help if there’s an issue. They all have their individual cost comparisons for the plan choices.

Now, I wait to see what they decide. In the next installment of this saga, I will tell you what they chose and how much it will cost us.

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