Healthcare Questions, Answers and Conundrums

The Merriam Webster on line dictionary defines a conundrum as: “a riddle whose answer is or
involves a pun; a question or problem having only a conjectural answer; an intricate or difficult
problem.” In the practical world, as most parents will immediately understand, a conundrum is
usually associated with one of your children’s questions, such as, “how high is the sky, when do
fish sleep, when will we get there and why? My wife and I always tried to provide a good
answer, but frankly, the kids were often just as satisfied with “because” as an answer.

In this article I intend to pose some healthcare and health insurance related questions, provide
some answers and identify some conundrums and hopefully, stimulate a little thought. However,
I promise not to use “because” as an answer.

Circle the choice below that best answers the question or the statement.

1. A qualified health insurance agent is the most essential component for placing cost
effective health insurance coverage for my company?
a. True
b. False
c. I really don’t care. I continue to deal with my golf buddy in spite of the fact that
his last good idea died of loneliness years ago.

2. When reevaluating my health insurance policy, the best approach is to go to as many

agents as possible and select the agent that brings in the “lowest” quote.
a. True
b. False
(This arrangement will almost always guarantee that you will end up with a combination
of the lowest quote coupled with the worst agent. A better approach is to first interview
agents, select the one that best meets your needs and then let that agent represent you in
the insurance markets. Remember that the promise of good service is just the minimum
standard for consideration and sometimes, the lowest quote is not the best solution.)

3. Agents are paid a commission from the insurance carrier for placing your health
insurance policy. Their commissions are what percent of premiums?
a. 2%
b. 5%
c. 8%
d. 10%
e. All of the above and more.
(Each carrier has a different compensation schedule, but the most common amount is 5-
10%. Remember that the commissions are generally flat and level so that if you receive a
 20% increase in premiums, the agent generally receives a 20% increase in commissions.
Find an agent that “earns” his/her commissions.)

4. It’s simply wrong that I can walk down the isles of Publix and compare products based
upon cost and quality, yet I have no idea what my physician will charge me for a simple,
uncomplicated office visit, until after I receive the bill.
a. Agree
b. Disagree
(We will never be able to solve the problem of the uninsured or reduce the escalating
costs of health insurance, until patients are empowered with the information that they
require in order to be wise consumers of healthcare services, balancing cost and quality.
Healthcare costs and insurance have been increasing precipitously whereas the costs of
cars, computers, electronics, etc, have been reducing due to price transparency, which
leads to better competition. I may know nothing about how a computer operates, but I
certainly can research the myriad of information that is available before making my
purchase.)

5. Hospitals that treat the elderly are generally underpaid from Medicare for their services
and they have to overcharge Commercial Insurance patients to make up the shortfall.
a. True
b. False
(The following chart reflects this problem very clearly for just one condition, simple
uncomplicated pneumonia. This chart comes from published CMS (Medicare) data
regarding hospital costs. (HCRIS) This chart comes from NCN/Data Insight, a national
provider network that we use for data analysis.)

Charge Cost
For DRG089
6. The cost of free hospital care provided to the uninsured, usually through the emergency
room, as well as, the deep PPO discounts provided to singularly large insurers is one of
the primary factors accounting for the rapid increase in hospital expenses.
a. Agree
b. Disagree
(When you squeeze a balloon in one area, it simply bulges in another. Once again using
the sources listed in number 5 above, for the single, uncomplicated condition of
pneumonia (DRG 089), the phenomena of “cost shifting is clearly illustrated. This chart
reflects the hospitals “markup” over it’s cost, for the condition of pneumonia. In all
fairness, there are more than 500 other DRG codes, and the markup over charges will
vary considerably by DRG.)

7. Any plan deductible which is less than $500 is an unaffordable plan.

a. True
b. False

Mark up For
(Over the past several years, medical inflation has increased at a rate of between 6-10%
and 15-20% for Rx expenses. Due to the leveraged impact of inflation on fixed dollar
amounts, such as deductibles, we have caused the carrier to stand closer to the risk, which
will result in higher premiums. For example, a claim for $1000 would have cost the

DRG089
carrier about $400 in a typical $500 deductible/80% plan. However, if the charge is
increased by 10% for medical inflation, the carrier will be responsible for $480, or a 20%
increase. Now you know why your rates increase. Status quo is not your friend.)

South
Florida
 8. Office visit copay plans disconnect the plan participants with the real cost of healthcare.
a. Agree
b. Disagree
(Ask a participant what their physicians office visit cost and they will frequently respond
$15-$20, the cost of their copay, whereas the actual cost could have been over $100.
Until participants are reconnected with the real cost of the healthcare services that they
use, they will never be wise consumers of healthcare.)

9. HSA Plans (Health Savings Accounts) are an effective tool to reduce health insurance
premiums and healthcare costs.
a. True
b. False
(HSA plans are nothing more than tax advantaged, high deductible health plans. When
first introduced, the carriers were offering 25-30% discounts for these plans.
Unfortunately, many employers pocketed the savings and did not make any contribution
to the participants HSA accounts. Unfortunately, an unfunded HSA is nothing more than
a very high deductible plan which could bankrupt your lower paid employees.
Employers should help fund these plans.)

10. Offering one plan design to all employees is the most cost effective approach.
a. True
b. False
(The reason that underwear comes in different sizes is because people come in different
sizes. In a diverse workforce, employees have different needs and financial capabilities
and a single plan design cannot meet all of their needs effectively. Offer a menu of
services and designs. A single 25 year old employee making $30K per year will have
different needs than a family of four, making $150K per year. A good agent will identify
these demographic differences, and arrange for a reasonable “menu” of products for your
participants.)

During the past year I hope that my articles have helped some of you better understand healthcare
and the complexities of health insurance. While I certainly do not have all of the answers, I have
a few and I wanted to at least provide you with some of the questions. I sincerely hope that I
have succeeded. Given that the holiday season is approaching at the end of this month, I want to
wish all of you a happy and healthy holiday season!