Last week was the opening of the Obamcare exchanges, and not surprisingly there was a lot of media coverage surrounding it. One story that caught my attention was the media coverage of Chad Henderson of Georgia, a 21-year old part-time college student with a very low income, who was widely covered in the news after reporting via social media that he’d signed up for insurance through the exchange.
There’s now some dispute over whether Chad Henderson’s story is accurate – apparently he only submitted information to find out what he qualifies for in terms of subsidies (the answer is nothing). At the very least there was some confusion and miscommunication over what he had actually done and not done.
But that’s not what caught my attention. What instead caught my eye was the premium that Chad Henderson is going to pay for his Blue Cross policy, $175 a month (there’s some confusion over this as well, as one person who looked into it further found that the cheapest plan available in Chad Henderson’s area from Blue Cross costs about $225 a month), which comes to $2,100 a year.
This got me to thinking – how would Chad fare as a self-pay patient? Would it make more sense, financially, to find an alternative to buying health insurance through an Obamacare exchange?
Assuming that Chad is reasonably healthy (which is true of most 21-year olds and the story doesn’t suggest otherwise), and given that his income is pretty low, about $7,000 (I’ve also seen his income reported as $11,500), it’s almost a certainty that he’d be better off as a self-pay patient instead of buying health insurance, assuming he found alternate coverage.
Consider one set of self-pay options Chad Henderson could take advantage of, providing him with sufficient coverage for his medical needs as well as saving him a substantial amount of money.
First, Chad could obtain a critical illness policy, which would cover him in the event he were to be diagnosed with cancer, have a stroke or heart attack, or some other catastrophic illness. As a 21-year old, his premium would be extremely low. Assurant Health gives an example on their web site of a 30-year old with a $25,000 benefit paying a $16.50 monthly premium. Being younger, Chad’s premium would presumably be less, but let’s assume that’s his base rate. If Chad wanted a $50,000 benefit (not a bad idea, since cancer treatment costs average around $36,000, according to the Medical Expenditure Panel Survey), the premium would be about double – let’s just call it $30 a month.
Now, how about coverage for injuries, such as a broken arm or severe cut? These sorts of medical events are usually much less expensive than treatment for a major illness, and one of the things about a serious injury is that patients have to be treated at any emergency room in the country. So if Chad didn’t have any sort of coverage, he could still get treatment – he’d just have a big medical bill at the end.
For that reason, it probably would be a good idea for Chad to get some sort of coverage that will help him to pay for treatment in the ER or elsewhere for an injury. Fixed-benefit policies are one option, as is accident insurance. I haven’t talked about accident insurance before, but your probably familiar with one of the largest providers in the country of these policies – Aflac.
Accident insurance essentially provides cash directly to patients each time they have some sort of covered medical event. So one AFLAC policy I found offers, among other benefits:
- $1,000 for initial hospitalization, plus $250 per additional day
- $625 for dislocated shoulder or knee (open reduction)
- $750 for 2nd degree burn covering between 65 -160 centimeters
- $250 for laceration between 5 and 15 centimeters
- $625 for a broken forearm
These benefits aren’t going to cover most or even a majority of the expenses associated with these events – the hospitalization benefit in particular seems pretty skimpy. But the benefits are paid directly to the policyholder, and in many cases the benefit combined with all the money saved on premiums is likely to be sufficient to cover the expenses.
I couldn’t find a price for this Aflac accident policy, but according to the website ehealthinsurance.com there are roughly comparable accident insurance policies available in Henderson’s area for between $18 and $23 a month. If he preferred, Henderson could spend more and get a fixed-benefit policy that would cost more and provide more generous benefits.
These two policies combined would cost Chad Henderson around $50 a month, significantly less than the policy he is apparently considering buying through the Obamacare exchange. His annual savings would be about $1,500, or about one-third of the deductible included with the high-deductible Blue Cross plan.
Does this mean Chad is definitely better off under this scenario? No. There is probably better than a 99% chance that he will come out ahead – catastrophic medical events among people Mr. Henderson’s age are extremely rare, and any primary care he might need is likely to be much less than the $5,000 deductible he would have to pay with the Blue Cross plan. But there is always the chance he’ll wind up in a serious car accident, or suffer some other catastrophic injury or illness.
For that reason, Chad Henderson might be interested in other self-pay options that provide more generous coverage. He might consider a health sharing ministry, if he qualifies. For as little as $45 a month, he could join a ministry that will help to pay bills beyond an initial $5,000 in the event of a major medical catastrophe. And as readers of The Self-Pay Patient know, there are numerous other options in the event of a highly-unlikely expensive medical need.
And regardless of whether Henderson were to choose the self-pay route or the Blue Cross policy available to him on the exchange, he is likely to save a considerable amount by visiting cash-only doctors and convenient care clinics, taking generic medicines, and following many of the other options written regularly about here.
One other thing to consider – based on his reported income of $7,000 a year, Chad Henderson would be paying about 30% of his income for health insurance.
It’s extremely unlikely that very many people in those circumstances will be able to afford health insurance. So the choice isn’t actually between health insurance purchased on the exchange and the alternative self-pay coverage described here. Instead, the real choice is between alternative self-pay coverage and no coverage at all.
Put that way, it should be an easy choice.