Monday, March 26, 2007

Stoopid Client Tricks -- Basic Economics II

Last week I received a call from an old client. He has been paying for his son’s health insurance policy and wanted to cancel it. It seems that the son had gone in for his annual checkup and, with a $1500 deductible, the policy didn’t pay for all the lab tests.

A bit of background…This family was uninsured and had virtually no assets when their teenage son almost died from Leukemia. Medi-Cal (a.k.a. the taxpayers) picked up the tab for his treatment. He fully recovered, but needed to have periodic exams to make sure that it had not recurred. When the Dad contacted me, I found out that he had a small business. With California’s guaranteed issue rules, this meant that he was eligible to set up a group policy. I set one up and the family moved off the dole.

Four years later, the business went under. Since COBRA wasn’t an option and the son certainly wasn’t insurable, he took out a HIPAA policy. Premiums were around $230 per month for a $1500 deductible plan, Rx coverage, and $35 doctor office co-pays. No annual maximum and a $5 million lifetime maximum. Altogether not a bad policy.

It’s now been three years since the HIPAA policy was issued and the Dad wants to cancel it. Not only didn’t it pay for the lab tests (It did sharply discount them.), the family’s now into “herbal medicine”. Herbal Medicine? That’ll help big time if the leukemia returns. Luckily, he’s probably again eligible for Medi-Cal.
Besides telling him that he’s an idiot, what would you do?

An editorial comment: This illustrates why the "high deductible" solution, as proposed here in California, won't solve our health insurance crisis. Health insurance simply isn't perceived as insurance. It's evaluated with a mental cost / benefit calculation and if the cost is greater than the benefit, many people make the (entirely rational) decision to not buy it. Medi-Cal limits the downside. Now, if that didn't exist, and the cost of a recurrence of the Leukemia was charitable care or a probable death, do you think he would be dropping the policy?
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