Obamacare could help fuel a tech start-up boom
computerworld.com
computerworld.com
Because of the way co-pays and deductibles work, you have to be in the top 10% or maybe 15% of health care spenders before you even break even with what you've paid in on a Bronze plan (by far the most popular self-purchased plan). Catastrophic injury type health insurance has been available for awhile, at reasonable rates, unless you had a serious pre-existing condition. So there's not much new here except for improved access for the chronically ill (or their breadwinners), who seem unlikely to be prime candidates for entrepreneurship.
It's incredible how much disinformation there is around ACA fueled by political agendas on both sides, and how little most consumers understand of the law's actual impact on the health care and employment markets.
The nature of catastrophic events are that they are rare... and catastrophic. If buying insurance protects me from an event that would have otherwise pushed me into bankruptcy 10 or 15% of the time, that sounds like a pretty okay deal, I mean, depending on how much that insurance costs. But if an event that could bankrupt me did have something like a 1 in 10 chance of happening, and I could insure against it? Yeah, I think I'd look into that.
(Add to this the perception that you get different treatment when you show up to the hospital without insurance.)
Now, I don't know that's how the numbers work out... it sounds like you pulled 10-15% out of total healthcare costs, and I didn't see any reference for that number. just saying, the point of catastrophic injury insurance isn't to 'break even' - the point of that insurance is to not be bankrupt when that catastrophic event happens.
Further, we're talking about entrepreneurs here; a special case of folks who often don't have insurance even when they have income that would normally come with insurance, so the fact that most people are going to go for the super high deductible plan isn't all that relevant to the discussion. My understanding is that the affordable care act would enable me to purchase a full freight health plan, assuming I could pay, without worrying about pre-existing conditions (which have prevented me from doing that in the past.)
I mean, I think contractors, really, more than Entreprenuers are the big winners here. At this point, I've got employees and a group plan, so I'm in okay shape. But, this would have saved me from spending as much time in W2 jobs as I did when I was contracting; Generally, I'd go a year or two as a contractor, then spend a year or so as a W2 to top up my cobra.
Even among the relatively few people I know interested in doing startups (probably 5?), one is in that category: an early-30s software engineer with a congenital heart defect. He had surgery in his early teens for it, and has not had a major issue since then. It doesn't interfere with his daily life, but obviously there is added monitoring and a significantly elevated risk of future complications, which disqualifies him from non-BigCorp health coverage.
Didn't HIPAA Title I already change that?
http://www.dmhc.ca.gov/dmhc_consumer/hp/hp_hipaacp.aspx If you qualify for a conversion plan, you cannot be denied insurance because of your medical history
https://en.wikipedia.org/wiki/Health_Insurance_Portability_a...
Is there some issue with this I am missing?
That's a symptom of another problem, but it's true. A broken knee in a car accident can cost $100k or more, which could be financially devastating for far longer than it takes for a full medical recovery.
I live in California which, as the first state to comply with ACA, has numbers available for me up at coveredca.com.
The bronze plan requires me to pay a 30% deductible for the category of "High cost and infrequent care". So if I get cancer, my $200k bill (just to start, cancer treatment can go on and on) is still a $60k bill. I'm still bankrupt.
The Silver 87 plan also has a percentage-based deductible. Have to go up to the normal Silver plan to have a flat rate. For my age it'll cost over $200 a month if I make $30k/yr or more.
Also, all the plans, whether bronze silver platinum or anything else, include MANY MANY things other than "catastrophic injury coverage". Everything from prescription medication to preventative care visits.
I really really want a "catastrophic injury only coverage" option but I don't have it. That's what insurance SHOULD be, to cover you in case of significant financial loss. Imagine how expensive car insurance would be if it covered oil changes, or homeowner's insurance would be if it covered minor repairs?
For someone that's lamenting the "disinformation around ACA", I really don't think you've checked the actual costs/plans involved. Well, I have, and let's not pretend that Obamacare offers plain and simple catastrophic coverage because it doesn't. Look at the website and see for yourself. That's California only of course but I doubt the other states will be able to do much better.
Consider that if a plan is to include many high cost "catastrophic" treatments, excluding prescription medication and preventative visits could easily make no financial sense for the insurers as it opens the door for numerous types of situations where insurance payouts rise drastically because the people insured can't or won't spend the money on drugs or preventative treatments.
It is in other words not at all a given that an insure limited only to catastrophic events would actually turn out to be cheaper to you.
> Imagine how expensive car insurance would be if it covered oil changes, or homeowner's insurance would be if it covered minor repairs?
It would be more expensive, yes, but there is no reason it would increase your total costs unless you were irresponsible in how you treated your car yet lucky enough to escape the consequences.
The plans all have maximum annual out-of-pocket expense caps, above which you get 100% coverage, so it wouldn't be nearly as high as $60k. Checking the website, the out-of-pocket expense for the California Bronze plan is limited to $6,350/yr for an individual, or $12,700/yr for a family. This is precisely so that you can have a finite exposure that can be self-insured by keeping savings in an account.
So in your example, if you were on a family plan and hospitalized, you'd pay the first $5,000 entirely out of pocket (the Bronze-plan deductible). Then you'd pay 30% of the next ~$25,650 in expenses (~$7700), which would bring your out-of-pocket expenses for the year up to $12,700. At that point you've hit your out-of-pocket cap, so if there are still bills past $30,650, the plan would cover the entirety of the remainder.
The Bronze plan is essentially a high-deductible plan, but with the partial-coverage in between zone: you pay everything below $5,000, and nothing above $6,350/$12,700. The minor exception is that you get one deductible-free preventative-care visit per year.
For one thing, because 100% coverage for medically-necessary care doesn't mean that everything that the provider would like to get paid for is medically necessary, and insurance companies are very enthusiastic (to say the least) about pursuing and denying and even clawing-back-payments-after-the-fact for unnecessary charges, even when they are only on the hook for some portion less than 100%; with 100% coverage, they are 100% motivated.
But the small amount I pay in insurance is well worth it to avoid bankruptcy in the event it burns down and I'm on the hook for my mortgage plus rebuild costs.
The chances that I'll die before my son is old enough to make his own living is likewise miniscule. Yet the life insurance payments are small compared to the peace of mind they give knowing he'll at least not want for money.
The point of catastrophic insurances is not to break even - on the contrary: You should hope it's a loss, because if it's not it means something really bad has happened to you. Maybe the threshold for what constitutes a "really bad" financial blow is high for you, but for most people it is quite low.
You may consider it ok to run the risk of going bankrupt over relatively minor medical issues. I don't.
And your bankruptcy example demonstrates the point of making this mandatory: Otherwise everyone ends up paying, without any ability to steer how the payment burden is distributed. This is likely to further disadvantage those who are least able to pay for their treatments in the first place.
I suspect that despite the shortcomings of ACA it's going to turn out politically much like the UK NHS: When it was introduced, in 1948, the Conservatives fought it tooth and nail, and vowed to repeal it - one might have been forgiven for thinking it would be the End of Britain if one were to have listened to them. A year or two after it was introduced, the NHS had become so popular that they dropped their opposition to it with the realisation that they'd never form a government again if they kept up their opposition.
Chances are good that unless the ACA implementation is botched beyond belief that Republicans will find themselves in a similar situation in a few years, which might just explain why they are so rabid now.
However when it comes to your health, even billions of dollars will not be able to give you a new live arm if you lost it, or save your life if you have terminal cancer.
So health insurance will always be bounded to a point where you can get injured, and simply just die regardless of insurance.
Life insurance is less tricky, since you're not really insuring your 'life' but rather the income that your family would lose due to your being accidentally dead.
>>> The average age of people who create a tech start-up is 39, and not 20-something
This may be true, but how many of these people can not afford any health insurance? I know a lot of startups created by millionaires, but also a bunch created by penniless students or completely middle-class people. In what proportion are they among startup founders? Again, if I wanted to evaluate how many startup founders benefit from ACA, I can not do it based on the article.
>>> There is a big difference between mortgaging your house on something you can control, and risking going bankrupt by an illness because of something you can't control,
This does not sound convincing - most startups depend on thousands of factors they can not control - from Google releasing competing product a week before their launch to sudden storm in East Asia taking out one of the vital suppliers to fashion change driving clients to or from particular product. Presenting it as if startup founders control everything besides their healthcare costs sounds very non-convincing.
Unfortunately, this article makes a claim that is not properly supported by the data in it and can not be evaluated by the reader due to low relevancy of data provided.
You seem to be under the impression that all potential entrepreners are young, without dependents, and without pre-existing medical conditions. Not true.
That's the argument. The premiums you pay when you're healthy are beside the point.
I've also heard many self-employed people now face a significant increase in their healthcare costs due to the fact that many high-deductible catastrophic insurance plans are illegal under ACA and plans that cover everything from contraceptives to mental health problems cost a lot more. At least I've seen many reports from self-employed people that they got notes from their insurance companies that their plan is cancelled under ACA and is no longer available.
What's happening is that some existing catastrophic plans don't meet the requirements of the ACA with regards to coverage, cost-sharing, annual spending caps, and other metrics. Some of these plans are closing rather than conform to the law. But there is no blanket provision against high-deductible plans.
There are some suspiciously similar stories floating around the conserv-o-sphere involving vaguely specified elderly couples who are just spitting mad about having to give up their cheap, crappy, high-deductible plan because of the ACA. These stories smell very much like astro-turf propaganda, and should be treated with high levels of skepticism.
Of course, the mere fact that plan is high-deductible does not make it illegal. However, as far as I know, under ACA it is illegal to offer plans that restrict coverage of certain options. Which makes specific plans that were restricting them (and thus making the plans cheaper) illegal, and they are getting cancelled because of this.
>>> There are some suspiciously similar stories floating around the conserv-o-sphere involving vaguely specified elderly couples
I've personally seen multiple scans of officially looking letters saying things in the vein of "our insurance company discontinues this plan because of ACA". Are you saying all of these scans are fake and produced by astro-turf propaganda? To choose most "propagandy" one, just to get it out of the way, here's an example: http://michellemalkinblog.files.wordpress.com/2013/09/screen... This is from Michelle Malkin, google who it is if you don't know, it is a very real (though not that elderly) person. Is it true or fake?
Regardless, high-deductible plans are legal under the ACA.
The net effect is that exchange-listed plans -- because of the two forms of subsidy -- have lower per member acquisition costs than traditional individual plans, meaning that for any given premium level, they can provide more profit and/or more coverage. These plans can expect to lose lots of their existing customers to exchange plans in the short-term, and its not really worth the effort to replace them -- so, for the insurer, it makes sense (especially since if they are also offering exchange listed plans) to just cancel the no-longer-viable non-exchange individual plans rather than continue to bear the fixed overhead of operating them when their sales prospects aren't good.
[1] - http://www.nami.org/Content/NavigationMenu/Find_Support/NAMI...
It'd be better I think to separate the systems into basic health care, and catastrophic insurance.
>>> You should also cover things that are preventative so that people don't end up needing catastrophic coverage.
Some people will end up needing catastrophic coverage, that's what it is for. But what you are saying people should not have a choice between buying only catastrophic coverage and managing other issues according to their current financial needs and abilities - possibly, yes, taking some limited risk on themselves - and buying comprehensive, but more expensive full-care all-included package. That would make it more expensive for those who were willing to take the risk, since this risk would be taken now by insurance company, and they will want to get paid for it, risk-shifting is never free.
>>> Paying for someone to see a therapist and take an anti-depressant is cheaper than paying for inpatient treatment if things spiral out of control.
Paying for car maintenance is cheaper than buying a new one. Yet nobody says car insurance should pay for routine car maintenance - those are different things, and people manage to take care of their cars just fine without car insurance paying for it. You're again confusing healthcare and health insurance and seem to be under impression that the only way to administer healthcare is under the umbrella of all-encompassing "insurance" policy. My point is exactly that it is not true, and that ACA moving in this direction makes it more expensive, especially for people that otherwise would like to take a bit more risk than average person in order to allow them to profit later. Those exactly people are entrepreneurs, so the claim that ACA makes them better off sounds a bit doubtful for me.
Not spending money on gas doesn't make things that existing mandatory car insurance does cover (liability) more likely or more expensive. In fact, it makes them less likely. Not spending money on mental health and contraception, OTOH, does make things that catastrophic medical insurance would cover more likely.
Financial incentives to defer costs is one of the reasons why the US healthcare system is by far the most expensive, not just in total but on a per capita or per GDP basis, in the world, despite it nor producing better results that other developed-world systems and, unlike every other OECD country except Mexico, not providing universal coverage.
But of course, not knowing your specific situation (and not being a lawyer) I don't know what happened, but it seems like whoever denied your coverage may have violated the law.
I've been self employed since getting off my parents insurance, have always had health insurance and never had trouble getting a policy.
There are legions of stories of insurance from reputable companies (BCBS, etc) that fail to deliver value when they're needed. Theoretically, ACA holds the issuers to standards that guarantee service.
In combination with all of the above, this ends up being more expensive. There are other causes as well.
"The Kauffman-RAND Institute for Entrepreneurship Public Policy in Santa Monica, Calif., says the law could increase the number of new U.S. businesses by as much as 33% over several years"
[1] http://online.wsj.com/article/SB1000142412788732405970457847...
I simply do not understand how the 80% of insurance costs being spent or refunded is going to be true.
If you pay $5000 a year for insurance and you go for one checkup that year - are they going to give you $4000 back?
Somehow I suspect not. And I doubt it covers dental.
Everyone is quick to point out you won't lose your insurance for this or that - but can't they just raise the rate to the point where you miss a payment? Last time I checked your car insurance or life insurance is quick to drop you when you miss a payment or two.
And just like student loans, I suspect costs are going to rise to the point of your maximum insurance coverage.
This is the end run around price controls, call it profit controls.
If provider prices go up, insurers can raise their premiums and still stay at 80%.
You think $20 Billion in profit is going to hurt them?
Do you actually think the callcenter and data processing jobs are going to be in the USA? I would bet there is absolutely no law requiring those jobs to be domestic.
Writing laws that mess with markets without just making everything worse is _hard_.
Or get more customers, or lower costs.
If they start charging more, then unless there is collusion or price fixing, wouldn't people move to a cheaper plan?
And finally, you can always run your company as a non-profit, like Kaiser.
For example, rebate checks have already been sent out to millions of people:
http://abcnews.go.com/Politics/obamacare-health-insurance-re...
Basically, if insurance coverage is really creating "Job Lock" then the potential entrepreneurs will also likely be locked in by salary needs to.
It's worth noting that the "job lock" that you're referring to is a rather recent phenomenon. Employer-sponsored health insurance was essentially an accident of WWII wage and price controls (source: http://www.nber.org/bah/2009no2/w14839.html). Because health benefits were exempt from WWII-era wage controls, employers used them to attract employees. Furthermore, because the employer contribution is paid in pre-tax dollars (i.e., employer-sponsored health insurance is effectively subsidized by the government), it became an attractive way to provide greater overall compensation to employees than otherwise possible.
However, the issue of coupling employment to insurance was quickly apparent, which is why we have COBRA (since 1985), but even that is more of a patch than a fix. Regardless of the merits or demerits of Obamacare, uncoupling employment from insurance is (theoretically) a positive outcome for everyone, whether one is an entrepreneur or not. We're already seeing firms shift their cheapest plans to exchanges (http://online.wsj.com/article/SB1000142405270230479580457909...). Increasing health insurance portability should make jobs less "sticky" and result in a more efficient distribution of labor.
The problem is we have used health insurance to chain people to jobs for a long time now, and the result is that it is very hard to be self-employed in the US (much harder than in any other country in the world). This needs to be decoupled whether it is "buy your own insurance," or whether it is something like Canada's province-by-province single payer approach.
If you were actually in the middle of ongoing treatment at the time of the job change, it's a particularly big hassle to get everything handed off properly.
I guess it's not implausible that there's a separate factor that makes the US a better place to do a startup, and the current healthcare situation counts against that factor. But still.
There's pretty much more of everything in the US (except maybe castles and titled nobility) than there is in the UK.
~40 times the land area and ~5 times the population has that effect.