Insurance is designed for sudden expensive exposure that most of us cannot afford. If you look at those words again: sudden and expensive. It does not spell out the predictable and affordable. For years though, we had someone with the bigger purse paying the bills. Most of us had very little to pay out-of-pocket for any of our own medical expenses. At least until now.
It’s common knowledge that those who have more money tend to have more to spend without question. Insurance companies are not any different; they are the ones with the bigger purse. Medical providers know this as well. Over the last 50-60 years, the providers increased their prices to see what they can get away with, at the same time the insurance companies were negotiating for bigger discounts. This is how healthcare became big business. The insurance companies fronted this cost, and now we have to cover the expense of higher premiums today.
The pricing transparency is null in the healthcare industry. Partly because we never needed to know because someone else was paying the bulk of the bill. The other reason is that no one shopped their healthcare expenses like they do other consumable items. The medical providers know this and took advantage of this. The price for something billed to the insurance company and what is the ‘cash price’ can be completely different. Which one are you going to pay?
It’s highway robbery if you ask me. Take a typical generic medication at the local pharmacy. One could cost about twenty dollars to the insurance company, but your price if you pay the cash price could be ten dollars. Why? It is because they can.
The opposite is also true. If you ask for the cash price, it could be double what the insurance companies negotiated price. Many providers will charge the patient the billed amount versus the discounted amount. It’s kind of like since you asked I’ll charge you more.
Personal case study: My kid injured his hand. The specialist could not tell that it was fractured or not. They wanted to lean on the side of caution, but I wanted to know if it was just a deep bruise or a fracture. The doctor suggested that we do an MRI on his hand just to be sure. As any caring father would, I inquired how much would this cost me if I paid cash, I have a high deductible health plan. He said the insurance company’s approved amount is $350 (this was a small MRI machine). He continued and said I don’t make anything from them. So if you pay cash, I would charge you $450.
With many policyholders having High Deductible Health Plans (HDHP) or Health Savings Account Plans (HSAs), many providers realize the patient is responsible for the initial expenses. This can be good and bad depending on the view.
First, there is a negative view. Many are expecting the first dollar coverage to be paid for by the insurance company. Every doctor visit, lab test or prescription drug is coming out of your pocket first and is applied toward your deductible. Some may not like this idea.
The flip side to this is you have more control of your expenses while saving in premium costs. The net gain is worth it for many. They can ask more questions about their healthcare. Why? It is because it’s their money. More importantly, you should be asking more questions about your healthcare.
At the end of the day, it is your healthcare and your money. Finding that happy middle ground between the cost of the coverage and what you get for it can be overwhelming and expensive. Figuring out what is important to you and asking enough questions so you can make better-educated decisions will save you thousands of dollars over the years. After all, it is your money.
Arthur “Butch” Zemar is a 2014 Broker of the Year Finalist, an insurance specialist, author, and President at Elite Benefits of America. Butch Zemar is actively developing informative resources, such as articles and videos that deliver vital information on health care reform and employer options. Elite Benefits of America has consultative packages for employers, as well as insurance solutions, to keep employers compliant with health care reform and keep skyrocketing premiums under control.