Since I left my full-time job in April, my wife and I get our health insurance from the ACA healthcare exchange (called Covered CA in California). We have an HSA-eligible Bronze PPO plan from Blue Shield of California. We pay the unsubsidized premium of $1,200/month to cover the two of us. We received a notice last month from the insurance company that the premium for the same plan would increase 16% to $1,400/month next year. Meanwhile our deductible will also increase by 25%, from $4,800/person, $9,600/family to $6,000/person, $12,000/family. We are far from meeting the deductible currently. Now the goal post will move even farther.
We are not sure whether we will be able to receive a subsidy next year. So we need to consider both possibilities. Blue Shield PPO is the most expensive plan offered on Covered CA in our area because it has the widest provider network. Among all Covered CA plans in our area, only Blue Shield PPO includes Sutter Health in the network. Sutter Health is a dominant health system in our area, with more than 5,500 primary care doctors and specialists across Northern California. Our primary care and specialist doctors work for Sutter Health. If you are getting insurance on Covered CA, and you’d like to cover Sutter Health doctors as in-network, you have to pay the higher premium to Blue Shield. Coincidentally just this morning I received an email from Sutter Health with this subject:
Make sure your health plan includes your Sutter network doctor.
I don’t blame either Sutter Health or Blue Shield for exercising their powers in the market. Other than their higher prices, we don’t have any problem with either company. We like our Sutter Health doctors. Their clinics are new, bright, clean, and very well staffed. Blue Shield processes claims very fast. When I had to use their customer service, the representatives were professional and helpful. In a way it’s like Whole Foods, 5-star hotels, luxury cars, or any other premium products. The products themselves are great. They are just more expensive.
However, with a deductible as high as $6,000 per person, $12,000 for the two of us, which we don’t expect to meet, the only benefit we are getting from the more expensive insurance is the negotiated price discount off the billed prices. With its exclusivity, Blue Shield didn’t get much discount from Sutter Health. I pulled all the Explanation of Benefits we received so far this year. Here are the results when I added them up:
- Total Billed: $1,018
- Network Savings: $100
- Applied to Deductible: $918
The network savings were only 10% off bills from Sutter Health. Basically when we don’t meet the deductible, staying with Blue Shield for having Sutter Health in-network isn’t much different than just paying cash directly to Sutter Health, even at the full billed prices.
With this insight, we are going to change our strategy for next year. We are going with a less expensive insurance plan from Kaiser HMO. Until we find doctors we like at Kaiser, we will still go to our doctors at Sutter Health, but we will go in as cash payers. Sutter Health offers a 30% discount to cash payers if their bills are paid within 20 days. That’s a larger discount than we are getting from insurance!
Here are our premiums for an HSA-eligible Bronze plan from Blue Shield PPO and Kaiser HMO:
|Without Subsidy||With Subsidy|
|Blue Shield PPO||$1,410/month||$600/month|
ACA plans of the same metal tier are standardized. Both plans have the same $6,000/person, $12,000/family deductible. Whether we end up receiving a subsidy or not, by choosing the less expensive Kaiser HMO, we will have extra $5,600/year to pay for any services from any doctors we like. That will more than cover our expected expenses.
In our case the high deductible has a silver lining. When we have to pay 100% before the deductible no matter which insurance plan we choose, we might as well choose a less expensive plan and use the difference in premiums to just pay cash, especially when there isn’t much discount for having the doctor in-network anyway. We will save money and keep our doctors.
Sometimes I hear insurance plans on ACA have a “narrow networks” problem, in that many plans offered are HMOs that limit the providers covered. To the extent a plan with narrow networks is less expensive, coupled with a high deductible, the premium savings can be used to turn yourself into a cash payer. As a cash payer you have the largest network because you can go to any provider. Insurance isn’t going to pay anyway.
When health insurance really behaves like a tax, for the vast majority who are are healthy, choosing a less expensive insurance plan makes you pay less such tax. It makes health insurance behave more like other insurance. Think how often you filed a homeowner’s insurance claim.