Photo (cc) by 401(K) 2013
This post comes from Mitchell D. Weiss at partner site Credit.com.
Five years ago, I retired from the company I had owned and run since the mid-1990s. My wife and I were in our 50s back then — healthy and thinking little about the 14-karat-gold health plan we had at the time. It cost a little more than $200 per pay period (approximately $5,000 annually), the deductible was very low, and co-pays virtually nonexistent.
When I left my firm, I took advantage of COBRA continuation health coverage to which departing employees (voluntary or otherwise) are entitled under federal law, and maintained our insurance through my former company’s group policy.
But COBRA prices often aren’t the same as employee prices. That’s because companies typically subsidize their employees’ health care premiums — a benefit that evaporates along with your paycheck. In my case, a roughly $400 monthly payment more than doubled to more than $900. Still, I didn’t have an issue with that, because the plan was terrific and I was fortunate enough to be able to afford the post-paycheck cost.
All that changed as I drew close to the 18-month mark (the end of the COBRA plan).
I hired an insurance consultant to help us replicate what we had in place. The news was shocking. My wife had a pre-existing condition at the time and the only coverage that was available for her involved our state’s high-risk pool — at more than $3,000 per month! Thankfully, my own health was good, so my share of the policy would run only $1,600, for a total of nearly $5,000 per month, roughly the same amount I had been paying for a year’s worth of coverage.
That, by itself, was eye-opening. I knew that privately purchased health care insurance was more expensive but I hadn’t realized how obscenely unaffordable it had become.
In an effort to bring down our cost to a more rational level, my adviser suggested that I apply for coverage through the limited liability corporation I formed for my consulting and publishing work, and to consider a high-deductible health plan supported by a health savings account. Of course, that meant we would be insuring against catastrophic illness rather than for routine doctor visits that had previously been covered, but we were interested to see how the dollars and cents added up.
My first disappointment was in the apparent lack of competition. Only two insurance carriers responded to our request for proposals and one’s premiums were significantly higher than the other’s. We ended up choosing a plan that had a $5,000 deductible for each of us ($12,000 maximum out-of-pocket). Initially, the premiums ran about $1,200 per month, but that increased to $1,600 after I turned 60.
The health insurance exchange
Early that morning, I went online — and guess what? I found virtually the same policy from the same insurance carrier. This time, however, the coverage cost $600 less per month — even without government subsidies — and $100 or so lower than when I first signed up for my current plan. What’s more, I had 15 other plans to choose from as well.
As questionable as the pricing tactics of the insurance carriers may have been in the run-up to the ACA’s implementation, the level of misinformation pertaining to this legislation — that it’s a government takeover, that it will cost consumers more, and so forth — deserves equally harsh criticism, if not calls for accountability. Perhaps some of the loudest voices on this issue are as out of touch as I once was. I say that because many of my corporate friends and colleagues were shocked to hear of the pricing and coverage disparities my wife and I encountered. Fear mongering and demagoguery, however, should not be tolerated.
The issue of employee coverage
We’ve also heard news reports about companies announcing plans to downgrade or discontinue employee health care coverage, supposedly in response to the ACA.
Let’s think about that for a moment.
Companies that subsidize a portion of their employees’ health care premium costs are, in effect, providing additional compensation — just in a different form. For example, since my former company’s policy was to offset the cost of its employees’ coverage by roughly half, it could just as easily have paid the same amount in salary and sent folks off to fend for themselves. We elected not to do that because prior to the implementation of the ACA, group health care coverage was almost always less expensive than individually purchased policies.
Today, however, that may be changing, so past practices are legitimately worth revisiting. For example, I recently heard about the owner of a large trucking company who, after realizing his employees would be better served through his state’s health care exchange, decided to discontinue coverage — but only after increasing their salaries to compensate for the value of the subsidy his company once paid.
That is precisely the point.
If the full cost of company-sponsored health care coverage were simply passed through to its employees, little would be gained from terminating this highly valued benefit. However, companies that had been subsidizing these costs and are now pointing to the ACA as the reason for curtailing or eliminating that support, without making their employees whole in the process, are just taking advantage of a still-weak economic recovery — where too many applicants are chasing too few jobs — in order to boost the bottom line.
Those business owners and managers might want to keep in mind an old saying: “All that goes around comes around.” At some point, the economy will strengthen and the talent they’ve spent time and money hiring, training and cultivating — but failed to treat fairly — will take all that education, skill and experience to an employer who will.
This story is an op-ed contribution to Credit.com and does not necessarily represent the views of the company or its affiliates.
More on Credit.com: