@bjdickmayhew has your new health insurance kicked in yet?
— Colleen (@Col1482) February 2, 2017
I was joking with my sister on Twitter about previous strings of mostly teenage bad judgment and she became eminently practical. Yes, I do have my insurance again. But this illustrates the end of a common use of a one way option that destabilizes the employer sponsored insurance (ESI) risk pool.
My last day at my previous employer was December 23rd. My ESI sponsored insurance ran through December 31st. I started at Duke on January 3rd. Duke has a very reasonable policy that insurance benefits start the first of the month after you get hired. So I started my benefits on Wednesday at Duke with their cheap narrow network plan as I am healthy and I am self selecting to the low cost option.
But the time between the end of my previous ESI and the start of my new ESI has some interesting policy implications. What are my choices as someone who is fundamentally healthy and an operating profit center for an insurer? The odds are that in any given month I use no services even if I am not trying to be careful.
1) Pay 102% of the full ESI premium to buy into COBRA for a month to cover me and my family
2) Get on my wife’s ESI sponsored plan at an incremental cost of $300
3) Buy a QHP for myself on Exchange
4) Buy a mini-med/short term policy for a month
5) Go uncovered
5-b)Go uncovered while planning on the Cobra option if I get hit by a meteor
I chose 5-b. But let’s go through the options first to see what the policy implications are:
COBRA requires the sponsor of an ESI plan to send a letter notifying employees who are losing coverage the option to elect to buy in. The buy-in option extends for 63 days after the loss of coverage or receipt of the letter whichever is later. Coverage is retroactive if premiums are paid in full to bring the account to current.
I rejected COBRA as it is expensive. My former ESI coverage would have cost me $1,200 or more per month to cover just me as my wife and kids had switched over to her ESI coverage on January 1. That is expensive.
Switching over to my wife’s coverage would have cost me $300 above and beyond adding my wife and kids to her coverage as her firm has a high spousal surcharge if the spouse has other coverage available. That option is becoming more common.
I would have qualified for a QHP during open enrollment. In Durham, a basic Bronze/hit by a meteor policy would cost me about $400 for January coverage.
Go uncovered has no out of pocket premium expense but it as the downside of unlimited risk if I get hit by a bolide in a short time frame.
All else being equal if there was no other options, I would have gone on my wife’s coverage for a month and then drop myself from her coverage on February 1st. But there is another option. Cobra is effectively a one way option for the first 63 days. If your healthy up to the 63rd day, you pay nothing. If you’re hit by a meteor, you have your spouse mail in the paperwork and the check and the insurer is on the hook to pay all claims. So the logic is healthy pay zero and get zero back or if unexpectedly sick pay full ESI price but get a lot back. It is a nice option if you know it is there, you have a way of activating the option in case of need and you can afford to come up with all of the owed premium at once. I had a check with the signed paperwork in an envelope clipped to the refrigerator for my wife to process in case I needed insurance.
I ended up being lucky for the month. My biggest medical expense was a box of peppermint tea to clear my sinus during a bout of the sniffles. I ended up paying nothing for insurance and the risk pools all got a little bit weaker as I took advantage of an option to get out for a month to save $300.
People who either know the system or know people who know the system will use completely legal ploys to benefit themselves at the cost of a sligthly sicker general risk pool. It is individually rational but collectively self destructive.
Nancy Metcalf
All the “replace” bills seem to substitute “continuous coverage” for the mandate as a way to force people into risk pools. But your post is a reminder that coverage transitions are a confusing nightmare even for someone knowledgeable like yourself, and absolutely impenetrable for regular people. I wonder whether the people drafting these bills know this, and are relying on the inevitability of lapses in coverage to make sure that sick/poorer people eventually get kicked out of the guarantee issue risk pool — or whether they genuinely have no idea.
Chet Murthy
Dude, did you not get the memo? There are no collective action problems. It’s libertarianism all the way down! von Mises unter alles!
*grin*
ETA: BJ needs a sarcasm font.
Isobel
So how does that month of no coverage effect you regarding the individual mandate? Will you get hit by the fine?
Asking because I’m also running COBRA naked while starting a new job, with benefits to kick in March 1.
Villago Delenda Est
Simple solution: universal health care, because, after all, that’s what people actually want, not health insurance.
Yes, I know, I’m a dreamer. But I’m not the only one.
Ohio Mom
This is the first time I’ve seen your picture. You look pretty much how I imagined except your hair is a lot shorter.
As for that actual content of this post, I wonder how many people on similar circumstances pick the most expensive option. It’s almost a tax.
ArchTeryx
Yeah, I considered this but I use enough medication every month that even a $900/mo COBRA premium pretty far understated the cost of my continuing care. Sad, but I too am skewing any risk pool I enter sicker. Especially now that I have Crohn’s, and my monthly medical costs may go from thousands to *tens of thousands* of dollars to keep myself alive. Chronic illnesses are such fun.
MobiusKlein
How about a way to start your new employer’s coverage on day one, or earlier?
That’s the stupid part.
Can you lobby your employer to change their policy about hires & coverage initiation?
Hal
@MobiusKlein:
That was what I loved about the old hospital I worked at; coverage started day one.
Calming Influence
Breaking: Trump administration’s Obamacare replacement will only cover injuries sustained during the Bowling Green Massacre.
Ken
@Villago Delenda Est:
Do you really want Donald Trump, Paul Ryan, and Mitch McConnell to determine what health care you can have?
JCJ
So what you are saying is that you were a freeloader. A burden on society. A parasite.
Seriously, the question above regarding the tax penalty is a good one. Assuming the individual mandate is not repealed for the 2017 tax year will you be subject to a fine?
David Anderson
@Isobel: You get 90 days of no coverage before the individual mandate kicks in.
David Anderson
@Ohio Mom: I tried to do long hair as a teenager and I got a patently offensive ‘Fro that just does not work for anyone
Villago Delenda Est
@Ken: They’re doing it now. I advocate all of them being exiled to the far side of the moon, without an oxygen supply.
? Martin
Would like to note that this post on balloon juice has more consideration of actual policy outcomes than the President of the United States will ever, in his life, give to the subject.
delk
My husband started a new job two weeks ago. For the last two years he has been on my policy. We are both 50-some males with some health issues. They offered him single coverage with United Healthcare for $294.00 a month. Currently we pay 274.00 for my far better BCBSIL ppo+. He opted to stay with me.
The funny thing is he is a pension actuary/ERISA attorney working for a boutique actuarial/benefits company.
Ohio Mom
@David Anderson: You look fine, and I really shouldn’t be surprised when people don’t totally resemble what I think they might look like. Like a lot of people, I used to think Digby was man — then I was shocked that I was shocked. I should have learned by now.
Ceci n est pas mon nym
I guess like investments, your decision depends on the level of risk you are comfortable with.
I am voluntarily leaving my coverage this year (call it that mid-life crisis thing where you get off the rat race and pursue your dreams) and accepting that if there’s no ACA by then, I *will* be paying COBRA, and that will be our major household expense for many months to come. That’s an acceptable cost.
What’s not acceptable is the risk of a trip to the ER or the physical therapist and the resulting costs. Even the office visits for dental stuff and my and my wife’s chronic eye issues would be large… not as large as COBRA, but not cheap either.
Maybe the cost of, say, 12 months of COBRA premiums is more than the cost of an ER visit and those out of pocket expenses. And then again, maybe it’s not. I’m not going to risk it, period. My decision to leave the job factored in the likely cost of insurance. It’s still worth it for my mental health.
Ceci n est pas mon nym
Question for David or Richard: What are the economics of Association-sponsored insurance? Pre-ACA, when we weren’t in jobs that offered employee insurance, we could usually get on a plan sponsored by some professional organization we belonged to or were willing to join for the benefit, and many organizations offered such plans.
I looked for those plans at one point during the ACA era to compare with healthcare.gov plans and found that nobody was offering them. Obviously associations had decided, either for legal or economic reasons, to get out of the health insurance business.
But if ACA goes away, could associations get back in that business? And if somebody wanted to start a non-profit purely to fill in the insurance gaps that ACA now covers and tried to keep operating overhead minimal, is that at all workable?
Yarrow
David, have you pre-signed all the paperwork for COBRA? What would happen if, worst case scenario, you were in an accident or had a terrible health emergency and were unable to sign the paperwork for some reason? COBRA doesn’t magically kick in unless the paperwork is signed and the check is received. Did you prepare for that in your decision to go with 5-b? Is your spouse allowed to sign in that situation? Do you need a power-of-attorney ready to go?
Mike in NC
COBRA is terrible. We paid $1000 per month until able to enroll in PPACA and then pay about $250 per month.
Yarrow
@Mike in NC: I think that depends where you are (Medicaid expansion state or not), your age and what your insurance is that you’re getting to COBRA with.
Did a comparison last year and COBRA was BY FAR the better option versus anything available on healthcare.gov. No question. It cost a little bit more per month but the deductibles and networks were much, much better. You have to know your anticipated healthcare usage but factoring that in, COBRA was unquestionably the way to go.
Pete Mack
I suspect medical insurance wouldn’t help much if you were hit by a meteor. Your decision was nonetheless rational.
Iowa Old Lady
I saw “cobra” and assumed this thread would be about Kellyanne Conway.
Wagner
Long time lurker, but this is a timely post for our family. Husband is leaving his job today, starting new job Monday. New company is old style east coast that requires three months on the job before going on their insurance. They are providing $3000 to cover the COBRA but we suspect that it will only cover two months worth (we don’t have any costs yet). Our plan right now is to pay for COBRA for March and April, not pay for May and hope that nothing happens in May until the new insurance kicks in. We should be able to pay the COBRA payment for May if something happens. My question is if there is any consequence for having a gap in insurance even if there is no need for it in that gap time?
Ruckus
@Yarrow:
When I left my job in 2005, cobra would have cost me $1200/month. Pre ACA my open market cost would have been, wait for it, $1200/month from quotes I got, except the insurance was far worse, less coverage (no pre-existing), higher deductibles. The ACA kicked in after I was in the VA system but my cost would have been $364/month, still deductibles/copays. My VA copay last yr was still less than than with a significant health care issue. (I pay for all visits/treatments/meds)
Sab
@Ceci n est pas mon nym: Those association insurance plans had been going away long before the ACA. Northeast Ohio has one with COSE (council of small business enterprises). It used to be available for all small businesses. Then they changed it around 2005 to only allow corporations to buy their insurance. If the corporation had an employee had with an expensive claim they jacked up the premiums and essentially blew up the health coverage for the whole company. ACA didn’t cause these problems. They were already there but people did not know until they were personally impacted.
sthfrk2008
@Ceci n est pas mon nym:
https://www.cms.gov/CCIIO/Resources/Files/Downloads/association_coverage_9_1_2011.pdf
JMS
I have personal experience with the meteor. My 2 previous employers (going back to 1998 for the first one), coverage started on your first day of employment.However, my current employer has a policy where the coverage starts on the first day of the first month after you’ve already worked a month. In my case, I left my previous job May 23, and my old employer covered me until May 31, but my new coverage wouldn’t start until July 1.
At that point I was covering me and 2 kids (my husband was getting insurance separately through his job). It seemed like too much hassle to figure out how to get me and the kids covered for 1 month at his job, so the choices were COBRA (at great expense) or just live dangerously.
I finally decided at the beginning of June that I wasn’t going to live dangerously, so I opted for COBRA, and I had gotten the bill for the first month’s premium, but hadn’t yet paid it (and was contemplating whether I could still cancel) during the 3rd week of June.
That’s when I had a week of feeling really feverish and gross, ending with discovering a nasty rash on my leg. I went to urgent care (still way cheaper than the COBRA premium), technically uninsured, and got a prescription which didn’t do anything, then had to go to the emergency room the next day. They eventually diagnosed Lyme disease and got me on the right meds (I told the urgent care doc I thought it might be tick-borne, but she decided it wasn’t, nor did the first doctor in the ER, which is a different story of how my illness ended up costing way more than it should have–if I’d gotten the right diagnosis and prescription right away, I would have gone home and been fine). This was still about a week from when my new coverage would start.
Since I’d already initiated COBRA, I sent the check for the premium in as soon as I got home (which was still before the payment deadline), but of course, at the hospital I was considered “uninsured” (necessitating a visit from someone from the county, who then told me that I made too much money for assistance). In the meantime, all my doctor and hospital bills were submitted as if I were uninsured, so I spent much time on the phone first making sure that my check cleared, and that I was updated in the insurer’s system as being insured back to June 1. Then I had to go back to each entity that was billing me (urgent care, hospital, ER doc, radiologist, infectious disease specialist, who knows what) and confirm that they needed to file the insurance claims and rebill me. All of this happened, and I didn’t have any undue issues, but it was more time and hassle for me, the insurance company, and the medical providers.
As it turned out, the extra I had to pay for the COBRA premium was offset by the unused vacation time I was paid for when I left my old job (although it would have been much more fun to use that money for something else), but it certainly illustrates that even those of us who have “good” employer sponsored health insurance are very much at the whim of happenstance.
Also, if many companies can offer insurance from the day you start work, I don’t know why they all can’t–in fact, they all should.