The Economics Of Insurance: Unraveling The Affordability Paradox

Even with insurance, many people struggle to pay their medical bills. This is due to a variety of factors, including high deductibles, high out-of-pocket maximums, and unexpected costs. For example, a person with a $7,000 deductible would have to pay that amount before their insurance company starts covering their medical expenses. Additionally, insurance often doesn't cover the full cost of treatment, and there may be hidden or unexpected costs such as transportation to and from medical appointments, childcare expenses, and lost income due to illness. Furthermore, medical billing can be opaque, making it difficult for patients to know how much a procedure will cost upfront. All of these factors can contribute to financial stress and even bankruptcy for individuals and families.

Charging medical bills to credit cards

Credit cards are a widely accepted form of payment for medical bills, but it's important to consider the potential risks before going down this route.

Firstly, it's worth noting that medical debt is treated differently from credit card debt. Medical debt won't affect your credit score unless it is sent to collections, is over $500, and remains unpaid for a year after the original delinquency date. By putting medical debt on a credit card, it becomes regular credit card debt, and you lose the 365-day grace period that medical debt enjoys. You also lose the ability to negotiate a payment plan or a reduced bill with the medical provider.

If you're considering paying medical bills with a credit card, here are some key things to keep in mind:

• Interest rates and fees: Credit cards often come with high-interest rates and fees, which can add significantly to the cost of your medical bill if you're unable to pay off the balance in full and on time. The average credit card interest rate was 22.77% as of August 2023, and many cards have even higher rates.
• Credit score impact: Charging a large medical bill to a credit card can negatively impact your credit utilization ratio, which is a key factor in determining your credit score. A high credit utilization ratio can lower your credit score, even if you make your payments on time.
• Alternative options: There are often better options for financing medical bills than using a credit card. Many medical providers are willing to offer interest-free or low-interest payment plans, and you may also qualify for financial assistance or charity care. It's worth exploring these options before resorting to putting the charges on a credit card.
• Rewards and perks: If you have the ability to pay your medical bills in full and on time, using a rewards credit card can be a good way to earn points, miles, or cash back on your medical expenses. However, if you can't pay off the balance, the interest and fees will likely outweigh any rewards earned.
• Convenience and safety: Credit cards offer a convenient way to pay for medical bills, often with added fraud protection. This can be especially useful if you don't have the cash on hand or need to make a payment quickly.

In conclusion, while charging medical bills to credit cards can be tempting and sometimes necessary, it's important to carefully consider the potential risks and explore alternative options first. If you do decide to use a credit card, make sure you understand the terms and conditions and have a plan to pay off the balance to avoid accruing high-interest debt.

Skipping checkups and cutting corners

• Hidden, sky-high prices
• Busy schedules and a general aversion to doctors and hospitals
• Aversion to medical tests and procedures

As a result, many people decide to cut corners and skip annual checkups, failing to detect and treat health issues early on. This can lead to bigger, more expensive problems down the line. For example, someone with a chronic condition may not keep their condition under control by skipping checkups and not taking their medication as prescribed.

Additionally, preventive care, such as annual physicals, flu shots, and immunizations, is often covered by insurance with no out-of-pocket costs. By skipping these checkups, individuals miss out on the opportunity to detect and prevent serious diseases and medical issues early on. This can result in more costly and invasive treatments later on.

Furthermore, skipping routine preventive care can have serious consequences for both employees and employers. According to a survey by Aflac, one in four employed US adults skips regular checkups because they feel healthy, even though it puts their health at risk. Other reasons for skipping care include conflicts with work hours, not thinking about it, dislike of going to the doctor, and insurance issues.

To address this issue, employers can incentivize employees to prioritize preventive care by offering cash incentives or aligning their company culture to encourage and prioritize overall health and well-being. Offering support in understanding insurance policies and providing resources about the importance of preventive care can also help.

Getting a serious medical diagnosis

• Get to Know Your Condition: Understanding your diagnosis is crucial. Learn as much as you can about your condition by talking to your doctor, asking questions, and gathering information from reputable sources. Consider keeping a notebook to organise your medical information, including appointment dates, medications, and any questions that arise between appointments.
• Manage Your Emotions: It is normal to experience a range of emotions, such as denial, fear, anxiety, and anger. Give yourself time to process these emotions and consider seeking professional help or support from family and friends.
• Build a Support Network: Surround yourself with positive people who can provide emotional support. Don't be afraid to ask for help and accept assistance from those who care about you. You can also connect with others who have the same diagnosis through support groups or online communities.
• Focus on Self-Care: Prioritise self-care and healthy habits. Maintain a healthy diet, get adequate rest, and incorporate physical activity into your routine, as recommended by your healthcare team. Taking care of your physical health can help improve your energy levels and manage stress.
• Set Realistic Goals: Avoid putting too much pressure on yourself. Set small, achievable goals and focus on what is important to you, such as spending time with loved ones and engaging in meaningful activities.
• Practise Self-Compassion: Avoid comparing your current situation to the past. Instead, focus on your abilities and modify your activities as needed. It's okay to set boundaries and say "no" to protect your energy and well-being.
• Explore Coping Strategies: Find healthy ways to cope with the diagnosis. This may include meditation, deep breathing exercises, journaling, seeking professional counselling, or engaging in activities that bring you comfort and meaning.
• Communicate with Your Healthcare Team: Open and honest communication with your healthcare providers is essential. Ask questions, express your concerns, and ensure you understand your treatment plan and options.
• Consider Financial Implications: A serious medical diagnosis can have financial implications. Review your insurance coverage, understand your out-of-pocket expenses, and explore options for financial assistance if needed.

Encountering opaque pricing

Opaque pricing is a pricing strategy where the seller does not disclose the exact price or full details of a product or service until after the purchase commitment is made. This strategy is commonly used in the travel and insurance industries to drive sales, maintain brand value, and discourage comparison shopping.

In the context of insurance, opaque pricing can refer to situations where policyholders are unaware of the costs of treatments or procedures until they receive a bill. This lack of transparency can make it challenging for consumers to understand the financial implications of their healthcare decisions and can lead to dissatisfaction if they feel they have not received fair value.

The healthcare industry in the United States is a notable example of opaque pricing. Consumers often have no idea what the costs will be until after receiving medical services. This lack of price transparency disrupts normal market dynamics, with prices bearing little relationship to cost and quality. The quasi-regulated nature of the healthcare industry, combined with a third-party payer system, further complicates the issue.

To address this, regulatory efforts have been made to increase price transparency in healthcare. The Transparency in Coverage final rule, released by the Department of Health and Human Services, the Department of Labor, and the Department of the Treasury, aims to empower consumers by providing them with critical information to make informed healthcare decisions. This rule requires health plans and insurance issuers to disclose pricing and cost-sharing information, allowing consumers to access personalized out-of-pocket cost estimates in real time.

While opaque pricing can offer benefits such as significant discounts and attracting price-sensitive customers, it is important to maintain a balance between profitability and consumer trust. Ensuring transparency and fairness in pricing practices is essential to avoid customer dissatisfaction and potential regulatory interventions.

Insurance doesn't cover everything

Even with insurance, many people struggle to afford their medical bills. In fact, a 2017 survey showed that 19% of US households couldn't pay for medical care immediately. While insurance does help to keep costs down, there are still many reasons why you might find yourself facing large medical bills.

What Your Insurance Plan Covers

Your insurance plan is a cost-sharing agreement between you and your insurance company. Many insurance companies cover the costs of preventive care, such as check-ups and vaccinations, but for other services, you may have to cover all costs until you reach a specified amount, known as a deductible. Once you've paid this, the insurance company will start to pay for covered services. However, you may still have to pay a copayment (a fixed dollar amount that you pay every time you receive medical care) and coinsurance (where you pay a percentage of the total costs).

Out-of-Network Providers

If you have a plan like an HMO or EPO, your coverage is usually limited to in-network providers. If you go out-of-network, you may be responsible for the entire cost of your treatment.

Lack of Pre-Approvals and Referrals

Some plans require referrals or pre-approvals for certain types of healthcare, such as surgeries or hospital stays. If you don't get these, your insurer may deny your claim.

Medical Necessity

Your insurer might deny your claim if they feel the treatment wasn't medically necessary. In this case, you can ask your doctor to submit a "Medical Necessity" form.

Non-Covered Benefits

Finally, your insurance might not cover certain treatments, such as cosmetic procedures, fertility treatments, off-label drug use, or brand-new technologies.

What to Do if Your Insurance Won't Pay

If you receive a bill that your insurance won't pay, there are several things you can try:

• Contact your insurance company and healthcare provider to see if there has been an error.
• Appeal the decision and go through your insurance company's official appeals process.
• Negotiate with the hospital to see if they'll reduce the bill.
• Work with a medical billing advocate to look for errors in your bill and negotiate on your behalf.

Frequently asked questions