26 March 2014

Health Insurance By The Numbers

In a moment of morbid curiosity, I went through our 50+ benefits statements from calendar year 2013 and really took a good look at what healthcare costs for a family of four.  I should apply the disclaimer that we had two ENT surgeries so, our costs for this year are probably on the high end of what average middle class families incur getting routine medical care.  We get our insurance via Blue Cross Blue Shield of RI’s Federal Employee Program (BCBSRI FEP). Here is the breakdown:

Our total cash price for all medical care: $16, 371.58
The total price to our insurance*: $8227.49
Our total yearly premiums: $3711.50
Our total co-pays/out-of-pocket expenses: $1121.00
Our total “bill” for a year of healthcare: $4832.50
Total cash paid by BCBSRI FEP to providers**: $7106.39
Total cost to BCBSRI FEP on individual level***: $2273.99

So at this point BCBSRI FEP “lost” $2273.99 by paying for our healthcare.  We personally paid for 30% of the cash value of our healthcare. BCBSRI FEP paid for 14% of the cash value of our health care.   While an insurance system that reduces my yearly heath care costs by 70% is great, it should not go unmentioned that we pay, per dollar, double what BCBSRI FEP does.  Still worth it, but something to consider when we note that our premium payments are not the only premium payments in this equation.

Since we have employer subsidized health insurance, and our employer is the federal government via the DoD (so yeah, tax dollars really DO buy our healthcare, like the total commies we are) our employer pays a hefty chunk of our premiums as part of our benefits package.

Total premiums paid by NUWC: $11,135.02


Total premiums collected by BCBSRI FEP for our family plan****: $14,846.52

Comparing that to the total actually paid to providers for actual health care by BCBSRI FEP we see that, for our family alone, BCBSRI FEP made a profit of $12,572.53.  In total BCBSRI FEP paid a mere 15% of what they took in for our plan on actual payments to providers.

Consider that NUWC has 5000 employees, and assume our family is pretty average for a family of four, that means that BCBSRI FEP made $62,862,650.00 on the NUWC health insurance plan.  Even accounting for my generous assumption that we represent the average, we are looking at roughly 50 to 70 million dollars profit (before expenses) from one plan sold to one employer. Not a bad haul when you realize that BCBSRI insures 600,000 people or fully half the state’s total population.

Now, this doesn't include operating costs.  I will acknowledge that $60 million probably doesn't go as far as you would think once you have to pay personnel, have office space, do marketing, hire legal representation…you get the idea.  None the less, I can’t help but feel like BCBSRI is doing just fine on this deal.

For additional consideration, BCBSRI (including general programs and FEP) runs as a not-for-profit organization.  So they get lots of tax advantages, they get to keep a lot of the money they do make as profit for “insurance” purposes and they have to unload a lot of that money to keep the numbers in the acceptable not-for-profit ranges.  Like most organizations of this size, and of this status, that means not refunds to plan participants, but big old bonuses for higher-ups.  While BCBSRI offers their current president a “mere” $600,000 in base salary (as of when he took over in 2011) there is a lot of wiggle room for bonuses.  For example a quick peruse of BCBS executive salaries across the nation indicates base salaries around $1 million to $1.5 million  and yearly bonuses that boost salaries as high as $14 million.  What I am saying is that insurance is good business and these organizations are not hurting for money.

Now, it will be interesting to see how all this plays out in 2014 when BCBSRI will be required to pay 80% of premiums on actual healthcare.  Even assuming you can count operating costs and related salaries against what BCBSRI spends providing healthcare coverage, there just might be a lot of money left over.  What happens to those funds will be very telling.

Basically, when all is said and done, on a personal level our health insurance is worth its weight in gold. We get an average reduction in health care costs that makes getting said care reasonably affordable.  While we fall into a bracket where ACA provisions may not make a huge dent in our personal costs, the ACA saved us roughly $300 in out-of-pocket expenses due to having no co-pays for physicals/immunizations/cancer screening/related blood work and routine pediatric dental care.  For many families, that may constitute the bulk of their yearly medical needs so hey, you are getting some real mileage out of your premiums then.  This is great and we have no complaints about my insurance plan or the customer service we have received operating within the system.  However, having done the math I have been reminded just how much money there is to be made in this business and just how little of that money actually goes towards people getting the care they need or payments to the hard working providers who tirelessly meet our health care needs.

*Due to Plan Allowances as negotiated between BCBSRI FEP and Health Care Providers
**Total plan allowance minus our co-pays
***Total plan allowances minus co-pays and our family premiums as paid by us
****Our premiums plus the premiums paid by NUWC

NB: The “cash price” for health care is based not only on the actual costs of supplies, manpower and overhead, but also the proposed cost of tracking down a delinquent account, negotiating a payment plan and the cost of money lost in doing so.  Basically, the cash price includes the future cost of getting the money from you and some residual costs from all similar services that went unpaid in the last fiscal year.  These high cash prices are where health care institutions can try and make up some of their losses from uninsured patients.