Forget interest rates, what about health insurance?
Small businesses in New Hampshire, and undoubtedly throughout the United States, continue to reel from astronomical increases in health-care costs. Health-care premiums are going up in annual double digit increases, but coverages are shrinking at the same time — the classic pay more for less. The New Hampshire Legislature has tried to step in with little benefit. This year they reversed some of Senate Bill 110, which was passed last year. The whole question seems to be beyond their comprehension. When you add in our regional demographics, the aging of the population (which is projected to be even more acute in New Hampshire), it is daunting. Clearly the current model does not work. Why? Well simply put, everyone wants first-dollar coverage for instantaneous, 21st century, excellent health care. There is a price, a very large price, to provide that level of service to more than 250 million Americans. For a family of four (including my 19-year-old daughter and 16-year-old son) I paid $11,880 in premiums last year. Each one of us had a $5,000 deductible with an 80/20 co-pay to $10,000, then the insurance company pays 100% up to $2 million (lifetime). Last year I paid over $16,000 out of pocket on top of the premiums. We at Norton Asset Management Inc. started a Health Savings Account program. But only three employees are eligible and participating. Most of our employees have better programs through retirement from companies like Verizon, or their spouses have access to better programs through their employers. Rational system If I were in charge of bringing some rationality to this chaotic system (which I am not) I would divide coverage into three brackets. The first would be the user out of pocket. This would be at least $1,200 year. The first costs would be cash payments by the user. The amounts might be moderated for a family. Perhaps $1,800 for a couple and $2,400 or $3,000 for a family of four. The last bracket would be over $15,000, $20,000 or $25,000, which would be catastrophic coverage. This would be an insurance piece, because the actuaries can model and predict their exposure for any given population. There could be add-on riders for maternity coverage and perhaps joint replacements, etc. The major risks would be accidents, cancers, major surgeries and issues related to aging and the final years of life. The latter is where federal and state assistance might apply. What happens between the initial payee amounts and the catastrophic coverage? This is the hardest piece to predict and therefore to price. We tend to go for the best if someone else is paying. But if we were managing our own health-care dollars, we would likely be more prudent. How this bracket gets priced is less clear to me. But having every user pay the first $1,000 and specialty insurance coverage for the catastrophic coverage in the third bracket, the management of the risks and costs in the middle bracket, should be definable. It drives me crazy when I or a member of my family goes to the doctor. I know very well the insurance is not going to cover the charge (remember the $5,000 deductible) but I must process it through the insurance company in order to get credit toward my deductible. The first thing I get is an automatic reply letter acknowledging receipt of my charge and telling me that they will review it and let me know within 30 days what, if anything, they are prepared to pay on it. Despite technology improvements, these letters cost money. Why can’t I simply pay cash at the doctor’s office (and get a small discount for the timely payment)? At the same time, my insurance company can receive an electronic posting of my payment, which it can acknowledge by e-mail as a credit toward my deductible. Haven’t we just saved $20, $30, $50, on this one transaction? How many thousands of these transactions are there every day? Why can’t New Hampshire, with 1.3 million of the healthiest Americans, be a model to improve this cumbersome and expensive system? By breaking the risks (and costs) into discrete brackets, the market can be much more efficient. Congress recently passed legislation, the Small Business Health Fairness Act, allowing small businesses and individuals to band together through trade and professional associations to negotiate lower costs. Chambers of commerce and other trade groups may use this vehicle to champion a better and more cost-effective system. nhbr Bill Norton is president of Norton Asset Management. In addition to his active brokerage work, he is a Counselor of Real Estate. He can be reached at email@example.com.