health care is not free

A few days ago, some additional mandates went into effect (well, sort of)1 under the Affordable Healthcare Act. Many of the new services covered were for specifically for women, and included things like annual exams, domestic violence assessment2, and contraception. Most of the media attention focused on the later, and most incorrectly called it “free”.

It really concerns me the way that “free” is tossed around, especially when discussing healthcare, or more specifically, health insurance. Nothing is free when it comes to health insurance.

I couldn’t help but cringe when I saw an image of the Big O, with the words “And you get free birth control! And you get free birth control!” floating around the Internet. It really isn’t free, even if the Big O declares it so (although I am sure she did not endorse the use of that image, or at least I hope she did not). In order to receive these benefits, you must be enrolled in a health care plan that has in-network coverage (and you must use a network provider to access these benefits), and of course the drugs prescribed must be covered under your plan. The way they were celebrating this, it sounded like any woman could walk into her local Walgreens, and get a 28-day pack of birth control pills for free – that isn’t how it works now or ever.

For those unfamiliar, let me try to explain how health insurance works for most people in the US. I fear that even those covered, don’t understand, and that is also a large part of how we have found ourselves here.

All health insurance has a premium. Whether it is a group plan or an individual plan, there is a premium.  It is usually paid monthly. The company you work for may agree to pay part or all of this premium, but someone is paying it. In addition to your premium, most plans also have a deductible (some have several depending upon if you use in or out of network providers, and inpatient or outpatient services), and many also require co-payments to top things off. Prescription drug benefits are usually covered with some sort of co-payment or percentage of the cost. Of course, some drugs are not covered at all, and it is true that birth control topped this list (although men could get medication for erectile dysfunction – go figure).

Let’s take a simple example to see how things work practically, in the real world. In this sample plan, the benefits for in-network outpatient care are as follows:

  • $250 monthly premium
  • $1500 annual deductible for in-network care
  • $25 co-pay for office visits with network providers
  • 20% out-of-pocket costs for services provided by network providers
  • $5 co-pay for many of the most commonly prescribed generic prescription medications
  • 80% coverage for non-generic covered prescription medications

If a woman in good health used only in-network providers and did not have a hospital stay during the year, she (or her employer) would be required to pay $3000 annually, even if she never used her insurance. If she did use it, she would then pay the first $1500 in services, plus any co-payments for office visits or medications that were prescribed (assuming, of course, that they were covered). Even after she met the deductible, she would still have to pay her co-payments and the 20% not covered for other services, until she met her annual out-of-pocket maximum – I guess you can say that that is when things really become free. Keep in mind that depending on when the benefit year starts and ends, these amounts would revert back to zero, and she would start paying all over again.

There is no way of getting around the annual $3000 premium costs. That is basically providing her with access to the network of providers and the negotiated rates. It is the pool of money which pays for all the services provided to each member, plus the cost of running a health insurance company. What is leftover pays for bonuses of the health insurance executives and stock holder dividends.

If in the benefit year, her first (or only) office visit was to have an annual exam, in the old system, she would have paid $25 at the time she went to visit the doctor. Her doctor’s office would bill her insurance company. She would then receive an Explanation of Benefits (EOB) that showed since she had not met her deductible, she would owe the negotiated amount that the doctor charged for the visit. Additionally, she probably would receive another similar EOB for any lab work that was done. She would then receive a bill from both the doctor’s office and the lab, and need to pay each directly. This is of course assuming that no billing errors were made. More than likely, the total bills for her visit would be under $200.3

If the woman in this case was prescribed birth control pills, she would end up paying up about $250 per year, if the prescription was covered and not a generic brand. The real issue with birth control pills is that these are a huge money-maker for drug companies. If you had to pay for them without insurance, they cost about $125 per month because most are not generic. In order to offset the costs, many health insurance companies started to only deal with certain drug companies, or more accurately, would drop a drug company they disliked, and change to someone new (until they didn’t like them any more either). That could mean that a woman who was prescribed brand X pills, which were covered when her doctor wrote the prescription, suddenly might find herself 6 months down the road, standing at the pharmacy window, being told that her health insurance company only covered brand Y pills now. This would leave the women with the choice of paying for the medication out-of-pocket, going back to her doctor to get a new prescription (and probably needing to return in 3 months for a follow-up to make sure they were working), or trying to fight the health insurance company.

If in this case, the woman had met her deductible before going for her annual exam (a visit to the ER would easily do that), then she would just be required to pay the $25 co-payment plus 20% of any lab work. She would still pay for her birth control pills as well, assuming the prescription was covered.

Under this new mandate, the woman with this plan, would now no longer have to pay the $25 co-payment at the time of her visit, the 20% of her lab fees, or the prescription costs. Whether or not she met her deductible, she would not have to pay any of the costs covered in the visit.4 This savings seems to work out to about $450 per year, which sounds great, but we need to step back and think about what these changes really mean. Is this benefit worth the risk we place on the system?

Remember the part where I explained that first this woman would receive an EOB from her health insurance, and then a bill from her doctor? What I didn’t explain is how much time might pass between the time the patient was seen, and the time the doctor got paid. The reality is that even when everything goes perfectly, it can often take 60 to 90 days for a provider to receive payment. That means that to keep things running smoothly, those $25 co-payments come in handy.

The other thing about providing services without a co-payment is that it sends the message that these are “free” services, and so patients (and doctors) may not assign as great a value to them – it’s human nature. Most doctor’s offices will bill someone for a missed appointment, and many will drop a patient who does it one too many times. Actually there are cases of doctor’s offices who will drop a patient who changes appointments too often, even if it is with proper notice. I only mention this,  because the thing that very few people are talking about is that as things stand right now, we do not have enough primary care doctors to meet the demand that 2014 will bring. In fact, currently we do not have the number of doctors we need in many areas across this country, because so few doctors entering the profession want to go into primary care. And can you really blame them?

Part of the reason that doctors pick other specialties is that the reimbursement is so low and paperwork and other requirements are so high for primary care doctors. Taking away one of the main ways they keep their offices running (by eliminating co-payments) is not a way to incentivize more doctors into the field. In fact, it will send many of them running from it.

While I understand the idea behind these changes in benefits is to help people get the care they need, it won’t do much good if there is no one there to provide it, or appointments become even more difficult to obtain. The idea behind offering these services at no additional cost was to try to get people seen while problems were still easily treatable. We know that catching things like cancer and heart disease early saves lives and money. But in the interim, how do we manage to provide such care, if we don’t have enough doctors to do so?

My beef with health insurance has always been that it makes little sense to pay large amounts of money and get little in terms of service. The idea is that you pay into the pool, so that when that unfortunate event happens to you, and you find yourself needing extensive care, you do not have to worry about losing your home or feeding your family.

The reality though is, that for most people who currently have health insurance, they are not worried about a co-payment for an office visit breaking the bank. What they are worried about is waking up one night with a strange pain that lands them in the ER and then perhaps surgery, along with a hospital stay. They worry how they will afford their health insurance premiums if they lost their job. These are the things that will put you out on the street – not $250 a year for birth control pills.

The other thing this mandate clearly proves is yet one more reason why your employer should not be involved in providing health insurance. Why would you want your employer to dictate how you decide to plan for a family (whether that family is no children or many)? Since as I have explained, health insurance and the care it provides is not free, religious organizations who opt to pay any part of an employee’s premium, would be potentially paying for services which may go against their faith. Using the word, “free” doesn’t make it so, any more than saying everyone who has insurance in 2014 will have access to care when there aren’t enough doctors to provide it, makes it reality.5 There are no health insurance fairies. Sorry.

What I do predict will happen is that health insurance companies will say that they cannot provide this level of care without raising premiums. The $455 in savings could easily become a $500 annual increase in your premium (that’s less than a 20% increase in premium in this sample case).

Additionally, more and more employers will stop either covering part of an employee’s premium, or providing benefits entirely. Rising health care costs will also continue to cause employers to lay off employees as well as to not hire new ones because they cannot afford the insurance costs. Health insurance is at the heart of getting people back to work.

Meanwhile, to make up for the loss of co-payments and reduced reimbursements, doctors will require cash patients to pay more. They may require patients with insurance to be seen more often for follow-up, which will ultimately cost patients more in money and time. Doctors will also become more picky in who they treat, as they will have more patients to choose from, and especially as we try to move to a system where payment is not based on amount of care, but quality of care.

Sadly, once again, the only people I see winning here are the health insurance companies, their executive officers, their stock holders, and the members of the legislature enjoying the perks from the health insurance lobbyists.


1 For most women whose policy does not already include these benefits, they will not go into effect until the new policy year. For most people with group health insurance that means January 1, 2013 or July 1, 2013.

2 While it is true that woman are the highest percentage of victims of domestic violence, there are men who are abused by their significant others. Also under this mandate, it remains unclear what services exactly may be offered to a woman who reports she is in an abusive relationship beyond a referral to counseling or a social worker. There currently are not enough safe houses to accommodate all the women and children in these situations, and it isn’t that simple either.

3Source: It was very difficult to find a number for insured women’s health care costs. The best I could find was $11, 842 was the average cost a woman expected to pay for co-payments for hormonal birth control and mandated doctor’s visits from age of 18. If you divide that number by 26 years (when she reaches age 44), you get $455 per year. This came from an article in Forbes.

4 A doctor may order tests that are not covered under the Well Woman exam. The patient would be charged for these costs.

5 Not that I think the bishops are right either.

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