Why Health Insurance is Now a Bigger Nightmare Than Ever

In the good old days, health insurance was an irritant but not a nightmare. If you had high premiums, you had low deductibles. And if you had high deductibles, you had low premiums. Now we have high premiums and high deductibles. Sweet deal.

OK, I admit it, I’m a lapsed ObamaCare supporter. I thought we could engineer a solution. I thought the very real issue of the low-income uninsured was a readily fixable problem. Boy, was I wrong.

Source: Wikimedia Commons

Let's start with a quick look at a few numbers and we’ll see why. I’m not going to embarrass individual health insurance companies by naming them. They should already all be equally embarrassed.

In my neck of the woods (Colorado), if you’re a married couple, say, in your early 60s, and your annual income is anything above $62,000, you can get health insurance for as “low” as $1,655 a month, with deductibles of $5,000 per person and out of pocket maximums (basically just deductibles by another name) of $6,850 per person. In other words, if your income is $63,000 and you’re unfortunate enough to max out your “out of pockets” ($6850 x 2 = $13,700), and combine that with your premiums ($1,655 x 12 = $19,860), you could wind up paying $33,560 of your $63,000 income on health insurance. Nice product. And this is the low cost option. Does this seem even remotely reasonable? Is anyone out there listening? (Anyone? Anyone? Bueller?)

“It’s like another mortgage”

I spoke with a number people selling health insurance during the current open enrollment period because I was curious how consumers were responding to these bizarre excuses for health insurance products. Not surprisingly, reaction breaks down clearly into two camps, depending on which side of the federal subsidy one falls. If income is low enough to qualify for a subsidy, people are pleased by the affordability. If they don’t qualify for a subsidy, however, a sampling of reactions is as follows:

“Yikes!”

“Sticker shock.”

“Very angry.”

“It’s like another mortgage.”

And these are just the more upbeat, printable descriptions.

Management by unintended consequences

So what’s gone down here? How did a well-intentioned idea go so badly awry so quickly? Unfortunately, this is management by unintended consequences. Nature (and business) abhors a vacuum, and amid a chaotic and uncertain state The Law of Unintended Consequences asserted itself swiftly and powerfully. Here’s my own abbreviated version of the highlights, or more accurately lowlights.

On the employer side: Frustrated by mandated employee coverage, companies have reduced costs by 1) by providing lame excuses for coverage; 2) having fewer benefited employees (e.g. more contractors); and 3) jettisoning coverage (e.g. for retirees) whenever possible.

On the health insurer side: Frustrated by having to cover everyone regardless of pre-existing conditions (a reasonable actuarial concern, by the way) and being forced into a scheme they never wanted any part of, insurers have "energetically" taken advantage of this new marketplace (note premiums above) by charging extortionary rates and offering paltry benefits. (The old movie title “The Empire Strikes Back” comes to mind.)

Of course you can choose not to play and then be subject to real financial risks and be fined by the government. Nice options. Again, the consumer is caught in the middle with no place to turn. If this isn’t legalized extortion, I don’t know what it is.

One thing I do know: This is not a sustainable health care path.

We solved one problem (health insurance for the low-income uninsured) but created a far worse one (health insurance for everybody else).

The one constructive thing this quagmire has motivated me to do is order a copy of Thoreau’s essay On the Duty of Civil Disobedience. If ever a dysfunctional situation feels ripe to me for thoughtful civil disobedience, we’re looking at it.

If I come across any good ideas, I’ll be back in this space. As always, I welcome readers’ thoughts.

This article first appeared at Forbes.com.

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Victor is author of The Type B Manager: Leading Successfully in a Type A World (Prentice Hall Press).

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