What is Health Insurance, and Why Do You Need It?: Health Care Triage #2

hi I'm dr. Aaron Carroll and welcome back to healthcare triage we're going to be doing this show every week now so make sure you subscribe right down there in the first episode we talked a lot about Obamacare and how people without insurance we're going to try to start getting it but that led to a lot of questions about insurance in general yeah exactly what am I going to stop having to pay for my insurance you're still going to have to pay for your insurance Obamacare is about access and this was supposed to be a big government giveaway to friends of Obama I am friends with Obama I don't understand what went wrong

nothing went wrong let's start this week with the basics of health insurance how does it work how much is it going to cost we're going to answer that and more in this episode of healthcare triage comprehensive health insurance isn't as old as you think the first real plans appeared in the u.s. around the time of the Civil War and really those were just types of accident insurance in case you got injured while traveling on a train or a steamboat this wasn't nothing since trains and steamboats exploded pretty regularly in those days but it didn't do much to help with what we would all consider routine health care well into

the 20th century there just wasn't that much need for health insurance after all what would you do with it there wasn't much health care to buy if he got sick it wasn't like there was an MRI scanner or artificial heart that you were gonna get you went to the doctor for leeches and laudanum but if you got really sick well you sort of died but as doctors and hospitals learned how to do more than amputate legs and shake their heads wistfully they realized there was real money in this gig so in 1929 a bunch of them joined up and formed an insurance plan called Blue Cross to help people buy their services doctors didn't like the idea of hospitals being in charge so

they created their own plan in 1939 which they called blue shield so you had your Blue Cross for hospital services and your Blue Shield for position services until they merged to form Blue Cross and Blue Shield in 1982 for the most part people bought health insurance on their own if they wanted it some jobs offered it but employer sponsored insurance wasn't really a thing until World War two wartime emergency plans put wage controls in place and so by law companies couldn't compete for workers by paying them more with so many men fighting overseas employees were relatively scarce so employers started

competing for workers by offering them benefits like health insurance those weren't restricted by wage controls and soon lots of jobs were paying for more and more comprehensive coverage after World War Two President Harry Truman proposed scrapping this system for one of universal public health insurance people love this idea but doctors hospitals and many businesses hated it they'd already invested quite a bit in the current system labor unions also realized they had a lot to gain by keeping insurance tied to jobs they'd fought hard to get benefits for their members and changing to a national insurance system would

have made these gains moot Truman lost employer-based health insurance won over the next 20 years private insurance increased in popularity but remained mostly unavailable to the elderly the poor and the unemployed no one wanted the cover seniors because they get sick a lot and a ton of money but this meant that more and more people were faced with the difficult decision of going broker letting their parents die this was intolerable to many Americans because all of them expected to be old one day and they had no interest being stuck in this dilemma after years of fighting

President Johnson signed Medicare and Medicaid into law to cover the elderly and the poor and today government programs cover about one-third of Americans the rest of the insured are covered by private insurance but why do we even need insurance to put it simply health care is very very expensive my oldest son had to go to the emergency department about a month ago he received just an ultrasound and a doctor read it turns out he was fine and he just needed an antibiotic the cost of that visit $6,000 and that's cheap compared to really big things like a hospital stay

last year we spent something like 2.7 trillion dollars on health care that's upwards of 18 percent of our GDP most people don't have the kind of money to pay for care if they get sick that's where insurance comes in everyone individually pays less but sick people get the money we pool risk and the money goes to whoever needs it by the way anyone that complains that they don't like paying for someone else's health care is completely missing the point insurance is always about paying for someone else's health care it transfers money from the healthy to the sick how

does insurance work well the first thing you do is pick a plan plans differ on the amount of actuarial value they have that's a fancy term for describing the approximate percentage of the cost of care that insurance will cover if a plan has 60% actuarial value then it covers 60% of the cost and you cover 40% plans with higher actuarial value cost more you pay more upfront and pay less later and the insurance exchanges which we talked about in our last video bronze plans have a 60% actuarial value silver plans are 70 percent and gold plans are

80 percent insurance also has networks of physicians these are doctors or hospitals with whom the companies have negotiated lower rates you get better coverage if you stay in-network and pay more if you go out of network so if there are certain doctors you really want to see you need to make sure they're part of your plan the money you pay upfront is called a premium that's often charged monthly that's what you see when you find out how much a plan costs but that is not all the spending you'll do pretty much every plan comes with a deductible this is an amount of money that you're responsible for paying even

after the premiums before insurance coverage kicks in the reason plans use this is that they think correctly that you're less likely to spend your money than their money it prevents you from going out and getting a ton of care that you might not need more expensive plans which have more upfront money usually have lower deductibles less expensive plans have higher deductibles not all care is subject to the deductible for instance most preventive care is fully paid for by your insurance right away even after you spend the deductible you're not done most plans come with

co-pays these are set fees that you have to pay each time you access the healthcare system they may be $20 for a doctor's visit or $100 for an emergency department visit and it gets better there's also coinsurance it's the amount that you yourself have to pay for care above what your insurance pays and then you have to give them a firstborn child two wishes and an ounce of ground unicorn horn just kidding it's actually only one wish okay I'm kidding about the whole thing it's just the coinsurance is real it's not all bad plans now come with an annual out-of-pocket maximum for

a family it's at most twelve thousand seven hundred dollars and for an individual at six thousand three hundred fifty dollars so after you've paid that amount of deductibles co-pays and coinsurance you are done it's all on the insurance after that even better there are no longer any annual or lifetime limits your insurance can never run out so if you bought a silver plan say with an actual rate value of 70 percent for yourself from the exchange in Indiana the premium might be around four thousand dollars a year or just over three hundred fifty dollars a month let's say it has a fifteen hundred

dollar deductible $20 in co-pays for doctor visits and 15 percent coinsurance when the year starts even with the insurance you'd be paying for almost everything until you spent the fifteen hundred dollars then you'd be paying $20 for each visit plus 15% of other charges until you hit six thousand three hundred fifty dollars in a bad year you could be on the hook for a total of about 10 grand or the cost of the premium plus the maximum out-of-pocket expenses this is going to come as a shock to people who assume that health insurance would now be cheap or even free but you have to look at

what might have happened without it what if it had been you had to go to the emergency department a month go instead of costing you $6,000 under this plan you would have been responsible for a $350 copay and $900 coinsurance payment that $1,250 is much less than $6,000 and this could happen a couple times a year or you could get really sick or you could have a kid the average price for having a baby in the United States is $30,000 if you have a cesarean section it's $50,000 people with insurance are way way way better

off than those without it so do your research figure out what you're willing to pay upfront and premiums but don't forget that networks deductibles co-pays and coinsurance matter to figure out if you'd rather pay more upfront or gamble that you won't need to and pay more later but make an informed decision now you know and knowing is half the battle I always wanted to say that go Joe you