My Health Insurance Premium Is Going Down

At the end of last week, the open enrollment paperwork for my health insurance arrived.  I opened the big envelope to make sure that was what it was, but left the several-page information document sitting on my desk.  Afraid to look, to be honest, for fear of how much the premium would be going up for 2016.  It’s gone up every year for a decade, most often by double digits.  When I finally looked at it, for the first time I can remember in my entire life, the cost my wife and I pay was down compared to the current year.  A lot.  Like 12%.

Full disclosure: it’s a retiree plan and the coverage is pretty sweet.  I started my technical career at Bell Labs in the days of “one Bell System” (pronounce that in the same tone of voice you would use for Tolkien’s “One Ring to rule them all… and in the darkness bind them”).  After the breakup I moved around between various (original) AT&T fragments, but always got to keep my initial service date and grandfathered benefits.  There were a small group of us in that situation when Comcast bought the fragment where we were working and released us.  To the best of my knowledge, no matter where any of us have worked since, we’ve opted for the retiree health coverage because it was better/cheaper than what we could get through an employer.  It opened up a lot more options for me at that point in my life, and there are few days when I don’t think for at least a moment about just how fortunate I was.

As a general principle, my experience follows the rule of “Anything that’s too good to be true probably isn’t.”  Health insurance premiums going down?  Time to start digging.  The first difference I found is that the plans I’m eligible for are from United Healthcare (UHC) instead of Aetna [1].  But the coverage sheet, the copays, the deductibles are all the same.  What about actual care providers?  The largish practice that provides our primary care, and my wife’s specialists, are all still in-network.  The only routine contact we have with Aetna is the explanation of benefits (EOB) forms we receive.  I spent an afternoon on the phone with them once to find out if some unusual blood tests would be covered; I have a difficult time imagining that UHC can do a worse job on that.  So it appears that we are indeed simply being offered the same coverage at a lower price.

The cover letter from Comcast correctly points out that, as a retiree, I can waive coverage and buy private insurance on my state’s PPACA health care exchange.  The calculator there suggests that we would get a substantial tax credit.  Back in the days when I got my insurance as an employee, we used Kaiser and liked them a lot.  Based on the plan descriptions, my current coverage looks most like one of Kaiser’s gold plans.  The cost of that plan, after the federal tax credit, is about the same as what I will pay for my retiree coverage.  Kaiser’s best silver plan is quite a bit cheaper than my retiree coverage.  The Kaiser silver plan has higher deductibles and out-of-pocket maximums than my retiree coverage, though, which would shift more of the risk (uncertainty) to me.

Colorado’s exchange plans for 2016 demonstrate another form of risk.  In 2015, a non-profit healthcare cooperative joined the exchange.  The coop’s premiums were the lowest on the exchange and they captured a large part of the market (duh). As a side effect, the coop also caused a significant decrease in the size of the tax credits people received [2].  The coop won’t be there in 2016, so their customers will face an increase in pre-credit premiums.  The credit will also increase, mitigating some or all of that.  But if you had started with Kaiser in 2014 because you liked the care, and wanted to stay with Kaiser, you experienced a sharp net premium increase in 2015, and will see a similarly-sized net premium decrease in 2016.

That’s not how a sane health insurance scheme — or more accurately, a health care financing scheme with shared risk — is supposed to work.  One of the goals is, or at least IMO ought to be, to decrease the volatility in costs paid by the end consumer, not increase them [3].  Even though this year my wife and I could, through the exchange, buy coverage at the same level with a health care provider we would prefer for the same price as the retiree plan, we’ve decided there are too many degrees of uncertainty.  If our income goes up [4], we have to estimate the tax effects and prepare.  The tax credit estimates may be off.  Next year another low-cost insurer might enter the market and screw with our premiums unless we change providers again.

So for another year, we’re sticking with the retiree plan, and enjoying the unexpected (and probably temporary) decline in the premium.

[1] When the PPACA was being debated, one of the complaints was that the government would restrict your choice of insurers and doctors.  This puzzled me (as a complaint), because employer group plans were where most people got their insurance and my employers always restricted my choice of insurers and doctors.  As a retiree my choice is between two plans offered by one insurer.

[2] The tax credit is based on the premium for the second cheapest silver plan.  All else staying the same, a new low-cost insurer entering the market will change who that is.

[3] Some of you are thinking “tax-advantaged health savings accounts and high-deductible policies, because setting up a buffer to reduce volatility ought to be a personal responsibility and/or choice.”  Fundamentally, that’s what Singapore does, or at least claims to do.  To make it work, the HSA deposits are a percentage of your paycheck and withheld by your employer, the interest paid on the HSA balance is guaranteed by the government, and the government makes up the difference if the HSA balance hits zero.  From an individual flow-of-funds perspective in Singapore, you pay a percentage of your income and get a government-guaranteed level of health care.

[4] If you have an unusual project that requires a combination of math and real-time programming, I can probably offer you better contracting terms than most :^)  If it’s a cash-flow constrained start-up project, we can discuss alternatives.

Image credit: Front page, public domain image from Pixabay.com.