Insurance works best when it’s rarely used. That’s why life, automobile and homeowner’s insurance are relatively affordable.
Death occurs only once, and we make every effort to avoid it. Auto insurance isn’t designed to reimburse us for oil changes, gasoline, car washes or tires. We don’t use our homeowner’s insurance to pay for light bulbs, lawn maintenance, cleaning people or paint.
Shouldn’t health insurance work the same way?
Ordinary health maintenance should not be treated as an event that triggers insurance coverage. Health maintenance should be encouraged, but not financed by an insurance company. Insurance should be limited to unpredictable and expensive medical events that seldom occur… the way all other types of insurance perform.
Deductibles that are too low, doctor visit co-pays and first dollar coverage for prescription drugs, encourage people to overuse health care services. They also drive insurance premiums to a level completely beyond the value of any benefits received.
Insurance companies are in business to make money, remember?
Your premiums are calculated to exceed the cost of any benefits that are likely to be paid out. On average, you would need to run to the doctor every month in order to justify and break even on the additional cost of a having an office visit co-pay benefit. Realistically, have you ever been that sick?
Prescription co-pay coverage can easily account for over 25% of the cost of insurance… and over 95% of the population is better off just paying cash at the pharmacy!
The term “medical insurance” has become a misnomer. The general definition of an “insurable event”… whether a traffic accident, tornado, heart attack or spinal injury… is something that is (1) unlikely to happen; (2) will occur without warning; (3) is not something that the insured person wants to happen; and (4) would create a severe financial hardship if paid for out-of-pocket. This definition applies to catastrophic health events… serious illnesses and injuries. It does not apply to routine health maintenance, does it?
Homeowner’s insurance covers fires, roofs destroyed by falling trees, and other costly events. Automobile insurance covers major damage and theft. But what passes as health insurance has expanded to include just about everything, including the routine, the predictable, and the easily affordable.
And, as you know, there’s no such thing as a free lunch!
Most health insurance plans use co-pays as the method of cost sharing. Co-pays became a standard part of drug-benefit and doctor-visit coverage during the managed care revolution of the 1990s. However, they are not consistent with any rational health plan design. When something is free or inexpensive, there is an overwhelming tendency to consume as much of it as possible. If there is very little cost (at the point-of-service) to see your doctor, why not schedule a visit for the sniffles, or pop the latest, greatest pill?
Co-pays are helping fuel the health insurance crisis in America.
The overuse and abuse of coverage is what drives annual double-digit cost increases. Insurance companies are forced to either pass on the costs in the form of rate increases or to reduce coverage… often in areas that can bring about financial devastation at claim time!
So, ironically, a major reason that health insurance has become so expensive is because co-pay medical care appears so cheap!
Health insurance is needed to protect against large medical expenses. The majority of our insurance agents (and their most enlightened clients) select high-deductible health plans for themselves and their families… to protect against true medical emergencies… and they “self-insure” for doctor visits and prescription drugs.
Doctors are often quite willing to offer deep discounts to those who are willing to pay in full by cash at the time of the visit because they rid themselves of the time spent coding and filing insurance claims. And most insurance companies offer prescription drug discount programs, free of charge.
In fact, outpatient prescription drug coverage should be a non-issue with the advent of low-cost retail generic drugs. Wal-Mart pioneered the concept of charging only $4 for generic drugs, and now more in-store pharmacies are adopting similar pricing. The good news is that there’s a generic equivalent, if not an exact chemical copy, of virtually every brand name drug in the world. So why waste hard-earned dollars on a $10 Rx co-pay plan?