Saturday, February 16, 2008

Explaing Rugby (Health Insurance) to a Civilian

Ever try to explain Rugby to your Mom? Ruck, Maul, Line-out, Scrum, Touch, Knock-on, Grubber, 10m line, 22m line, 22m line kicking laws, Cut, Scissor, Skip, Loop, and, my favorite, TRY!

Health Insurance has it's own list of terms: Deductible, Co-pay, Co-insurance, Out-of-Pocket Maximum, Lifetime benefit, Mental Health limitations, preferred providers, in-network, out-of-network, authorization, premium, and, my favorite, CLAIM!

Over the three day weekend, I'll explain what each of these terms means. And, yes, you'll have that expression on your face as that friend of a friend who came out to watch a match. He, and you, will be completely fucking confused. Enjoy!

Deductible (Proper Definition): The portion of a claim not paid for by the insurance company.

Deductible (BMK's Definition): What your ass is gonna pay when you get hurt.

Example: An average ER visit is about $650. If your health plan's deductible is $500, you pay the hospital $500, and your insurance carrier will pay the $150, sorta. There's co-insurance too. Nice, huh?

In general, the higher the deductible, the lower the premium. Caution point: Your health plan might have a SEPARATE ER deductible, over and above the plan deductible.

Co-Pay (Proper Definition): A small fee you pay to see a doctor.

Co-Pay (BMK's Definition): A nickel-n-dime tactic to keep you from seeing a doctor.

Co-pays usually don't count towards your deductible (or your OOPMAX, see below). The theory is that if you pay $40 every time you visit a medical provider, you won't waste time with a headcold. The idea is cost sharing, share more of the cost with the insurance company, and you'll use services less.

Insurance companies get crushed by frequent medical visits for two reasons: The cost of services is increasing, and the paperwork is astounding. 600 Billion a year is spent in paper shuffling back and forth between providers and claims offices. Now the RAND Institute, has done a few studies on this, and yes, the higher the cost sharing between insurance company and patient tends to keep the patient away from the doctor.

Co-insurance (Proper Definition): A method to spread the cost of a loss among multiple parties.

Co-insurance (BMK's Definition): Holy shit, are you fucking kidding me? I've got to pay what?

Okay, now that you've paid your co-pay(s), and met your deductible, the remainder of the bill is split between you and the insurer. The split is typically 80/20, 80% them 20% you. (Read your policy, b/c it could be 70/30, or even 50/50 for out of network claims.)

So let's go back to the ER Example: $650 to get your head stitched. Let's hope you don't have a separate ER deductible, your main Deductible is $500, and your Co-insurance is 80/20.

$650 - $500 - $150 x 20% = $120 This is what your insurance provider will pay. How do those 300/month premiums feel now?

So your ER visit is $530 out-of-pocket to you.

[You best be pissed off by now]

Out-of-Pocket Maximum (Proper Definition): Also known as a stop-loss, it's the absolute maximum you'll pay in a year for medical expenses under your plan.

Out-of-Pocket Maximum (BMK's Definition): The final squeezing of the last drop of blood from your lifeless body.

Remember the concept of cost sharing. If you and the insurer share costs, you're less likely to use the services, and thus save the insurer money. The insurer can't control health care costs, so they control your cost sharing.

So final Example before I go work-out. Let's say a prop falls on you, and you tear you acl. Ambulance ride, ER, MRI, surgery, and physical therapy. Let's say all the bills come to $10,000.

You've got a $500 deductible plan, 75/25 with a OOP Max of $3500, like Blue Shield's PPO 500 here in CA. I'm adding the $100 ER Deductible, and the $250 out patient surgery deductible that don't go towards your OOP Max. [Oh yeah, did I mention that this shit is complicated?]


$500 + $100 + $250 + $9,150 x 25% = $850 + $2,287.50 = $3,137.50

This is does NOT include your premiums. This plan for me (I'm 37) is $459 a month: $5508

So for this year you spent over $8600 on health care. Can you afford that?

Even better, you still have over $1200 to go to reach your OOP Max for the year.

Now I have an HSA plan, $4000 Deductible, and an Accident Medical Plan that pays $5000 per year, with a $100 deductible per incident:

What I'd pay:


Add to that my premiums: $96/month for the HSA plan, and $45/month for the AMC: $1692

Remember, my plan has no co-pay, no co-insurance, no OOP Max. I spend $4000 and I'm 100% covered after that. My Accident Medical Plan pays for all the stuff my insurance doesn't minus a $100 deductible.

That's a difference of $6,853.50. And I can put back $2900 into an HSA and deduct that money from my taxable income!

Do you NOW understand why I promote HSA plans and AMC plans?

Now here's the downside of my way of doing things. If I don't get hurt, but I need to see a doctor, I pay whatever the doctor charges. This could be upwards to $200. I pay for prescriptions outright, unless they're on the Walmart list. Also, if I get a debilitating disease, I must come up with the the $4,000 every year for the deductible, not including the premiums, to keep my coverage. This is about risk analysis. I'm more likely to get hurt playing than get sick, so I chose a plan combination that covers injuries, not long term illness. I've made a choice.

I chose simplicity. And isn't Rugby essentially a simple game. Create space for the ball carrier. Simplify the rules of insurance, and health care might become as pretty as scoring tries!

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