When I went the self-employment route three years ago, Debra took on the job of finding us some private health insurance. We finally settled on a plan that costs us about $300 per month and has a pretty high annual deductible–over $5,000. We also opened a health savings account so that our medical bills are paid with pre-tax dollars. At the time, $300 per month was about double what I’d been paying for much more comprehensive coverage (dental, eye care, short-term disability, prescription drugs, and $20 co-pays) through my employer. And that large deductible was something of a concern. Health care is expensive, right?
I had some tests done early last year. My doctor had quite a job convincing me that they were necessary, considering how much they cost. One test in particular was quoted at $4,000, and I cringed at how much that would deplete our health savings. But I really did need it, so I went ahead and scheduled the appointment.
The way our insurance works, we have the doctor or lab bill the insurance for any work, and the insurance company takes care of figuring out whether we’ve met the deductible. If we haven’t, the insurance company refuses the charge and sends it back to the doctor or lab, who in turn bills us. Since the test was done early in the year, I knew that I’d have to pay the entire amount because we hadn’t met our deductible.
Imagine my surprise when I got a bill for about $1,400, rather than the $4,000 that was quoted. How is that possible? I eventually discovered that there are two prices for health care: the retail price and the insurance negotiated price. Since I knew that I would be paying for the test myself (at least up to my deductible), I asked how much it cost and was quoted the full retail price. But I ended up paying the price that my insurance company had negotiated. The difference ended up to be about eight months’ worth of premiums. Not a bad deal.
Something similar happened recently. I had my annual physical a couple of weeks ago, and when it was done I was presented with a bill for $500. Since I have a high deductible, the doctor asked that I pay half up front and they would bill me for whatever the insurance company didn’t cover. We heard back from the insurance company the other day. Their negotiated rate for the physical is something under $100. So the doctor ends up owing me money.
If it sounds confusing to you, join the club. I’m pretty surprised that the insurance company can get a $4,000 test for $1,400, take 80 or 90 percent off the cost of a physical. It makes me wonder what the real cost of health coverage is. If you assume that care providers won’t negotiate rates that prevent them from making a profit, then it’s hard to understand why they’d set their retail rates so much higher. Although to tell the truth I can’t imagine how the doctor can make a profit when he spends an hour talking with and examining me and only gets $50 for his trouble.
In any case, you might want to reconsider if you’ve decided that you can’t afford health insurance. It’s quite possible that by purchasing even a very modest plan (and there are plans for quite a bit less than the $300/month that Debra and I have), you’ll end up making back the cost of the premiums by paying the reduced rates that your insurance company negotiates with providers.