What is the best health insurance you can buy? Do lower co-pays make it better? What about the deductible and co-insurance portion? Oh, that’s right. Since they never seem to come into play, they don’t matter.
WRONG!
The old Major Medical plans had a deductible and maybe some co-insurance that included all medical expenses whether inpatient, outpatient, physician office visits, or prescription medications. Since co-pays are affordable, these plans are far superior to the old Major Medical designs…Or are they?
NY Times Article – “Co-Payments Soar for Drugs With High Prices”
Robin Steinwand had been paying $20 a month for her multiple sclerosis drug, which she keeps in the refrigerator. When she went to pick up her prescription in January, it cost $325.
Some people think an HSA qualified High Deductible Health Plan (HDHP) is a new concept. In reality it is an old design that was used long before co-pays encouraged people to use health insurance like it was a never-ending pot of money. Since most HSA qualified plan designs we recommend have their calendar year deductible (averaging around $2,500 per year for an individual), then cover all qualified medical expenses at 100% for the rest of the calendar year, these plans frequently offer the lowest out-of-pocket risk of any plan design.
Robin Steinwand would have loved to have a plan that covered her prescription medication at 100% once she satisfied her calendar year deductible. Now her co-pay plan is costing her almost $4000 this year just for one of her prescription drugs. This doesn’t include any other medications, physician visits or procedures that would require additional co-pays, deductible or co-insurance.
Oh, I almost forgot. HDHPs are typically 20% to 60% lower monthly premiums!
HSA qualified HDHPs offer the best health insurance value available today.
Scott
1 Comment(s)
Comments RSS TrackBack Identifier URI
Leave a comment
Let’s look at what a copay is for a minute. It is a slight variation of coinsurance. What is coinsurance? Coinsurance is the percentage amount of a claim the consumer is obligated to pay. Often, the percentage of coinsurance is capped at a certain dollar threshold.
Like coinsurance, a copay is the amount of a claim the consumer is obligated to pay Unlike coinsurance, the copay does not use a percentage, but instead uses a fixed dollar amount.
The concept and introduction of a copay in the market was designed to appeal and attract those consumers who prefer a fixed dollar amount of coinsurance versus a percentage amount, which is a lot of people. Psychologically, a copay just “feels” better to us.
When copays were first introduced, they covered a whole gamut of services. Some products were all copays. Over time, however, we’ve seen the copay paired to mainly two types of services: 1) Office visits; and 2) Prescriptions. What happened?
Well, because copays are a fixed dollar amount of coinsurance, utilization of one type of service versus another makes a big difference in the profitability or lack there of for an insurance company. As we all know, the bottom line for the insurance company is to make money. The evolution of copays has demonstrated that although they are attractive to the consumer, they haven’t been profitable for the insurance company. For many services, copay options were thus eliminated.
What does this tell us? Insurance companies will do whatever they deem necessary to make a product profitable for them by pricing it at an amount needed to do so. No big revelation here, right?
But, what if that price they begin to charge becomes unaffordable to the consumer, then what? Aha. That’s where we get to the title of the article, “Do copays make sense?” Maybe, it could have been titled, “Do copays make cents?”
Clearly, copays are not a money maker for the insurance company, but they continue to persist because of the psychological factor for consumers, so insurance companies continue to use them and will do so until the cost of the copay becomes unaffordable to the consumer. Many consumers are at that place now.
So, what’s my point? The copay has never lowered utilization of health care by consumers. Utilization drives the cost of health care. Therefore, the copay does not make “cents” for health insurance companies or consumers.
The HSA plan, on the other hand, has proven to change consumer behavior and lower utilization of health care, a win-win for the consumer and the insurance industry.