Is NYC Insurance Really Worse Than Renting in Manhattan?

Looking at the numbers from The NY Post’s article “In$sure Poorhouse” on the cost increases for health insurance, they seem to be from a world gone mad. $4,354 for an average family plan, easily trumping the rental price of even an incredibly nice doorman building in my neighborhood!  It’s too horrific to believe!  Wait, no, it actually is too horrific to believe.

Congratulations, New York.  You got punk'd.

For one thing, we know that the average plan for a family of four is about $12,000 nationally.  That’s exorbitant, but you’d have to go to the outer boroughs or perhaps have a bunch of roommates for your rent not to exceed a $1,000/month premium.  I would expect NYC to have more expensive insurance than the national average, certainly, but nearly 4x as much?  It’s hard to see that being justified even if New York is one of the six states that has guaranteed issue – a law preventing exclusion on the basis of pre-existing conditions.

The key phrase in the article is “a Post analysis of new data” – suddenly sounds a little less than authoritative, doesn't it?  Sure enough, the number quoted is the one that sounds the worst – the premium for “out of network” service, meaning the insurance company is selling you a plan that covers you even when you don’t use their doctors.  But that’s generally not a good figure to base your average off of.  It’s a less-often purchased plan precisely because of its cost, and because it's a somewhat dumb consumer choice.  You’re not using the network offered by your plan effectively.  The much more common cost is in-network, where the numbers are a more modest $2,966/month.   Indeed, when I hopped on einsurance.com for some field research, I was able to find a family-of-four plan where no one smoked and no one was a full-time college student for $2,266.70 with Atlantis and $3,223.34 with Empire.  Here’s the other kicker, of course:  these rates are all on the individual market, the most expensive place to buy insurance because you’re not the beneficiary of the better rates that come with group purchasing.  The cost for small business and particularly companies with a lot of employees is much less.

Clearly, the numbers have been tilted to give the blackest possible eye.  Why?

Well, there are a lot of bugaboos and villains in this news story and, not surprisingly given it’s coming from the NY Post, they tend to reinforce the notions of a health care system being gained by lack of personal responsibility and government interference.  First off, it’s all those darn people who are becoming uninsured!  Double-digit increases in rates for premiums are because “tens of thousands of healthy New Yorkers opt to drop coverage and leave insurers with an ever-sicker, costlier client pool.”  This is the favorite canard of business alliances and chambers of commerce – that all these young people are dropping their insurance, leaving the poor private insurance industry to have an older, sicker clientele.  No doubt, private insurance has dropped -- “from 63.6% in 2000 to 59.7% in 2006” according to the American College of Physicians -- but the number one culprit is businesses cutting costs by cutting benefits or eliminating them altogether, including an expected 4% of employers this year.

Suffice to say, this villain is a manifestation of the logic whereby if you lose your job and your coverage, or if your employer doesn’t offer you benefits, you’ve somehow done something willfully selfish and wrong, and need an individual mandate to force you to buy the insurance you can't afford.  Funny, it was my understanding that the uninsured were, on average, less healthy than those with access to primary and preventative care, but whatever folks, don’t let the facts screw up a perfectly good story.

The second bugaboo are the recent tax increases on insurance plans in the state budget, which will of course immediately cause the insurers to “pass along more than $853 million in insurance-related taxes included in the state budget” to customers.  Stick a pin in this one – we’ll come back to it.

The third bugaboo is of course state mandates.  New York mandates certain treatments must be covered by all “standard plans.”  So try as they might, insurance companies can’t deny you treatments for autism, blood products, hospice care, chemotherapy, occupational therapists or rehabilitation therapy, to name a handful that are shared by fewer than 75% of states.   New York doesn’t have any state mandate that’s unique, and only three (psychotropic drugs, ambulatory cancer treatment and hormone replacement therapy) that are shared by fewer than 5 states.  Nevertheless, we’re often told about how state mandates jack up the price.  Sure enough, there’s a big graph in the NY Post showing that on the individual market, Aetna’s premiums have jumped +27%, GMI HMO Select jumped a preposterous +35%, while Oxford (+8%), Atlantis (+10%) and Empire (-6%) stand out as the few relatively sane increases.  We’re left to presume that this is entirely because of insurance companies being forced to cover chemotherapy, pay new taxes, and deal with the effects of too many employees losing cov… ahem, I mean, “willfully declining insurance (and/or employment).”

That’s one theory, certainly.  But note that the increases in premiums in New York actually aren’t that much different from the rest of the country, even with more mandates. “From 2000 to 2005, premiums for family coverage increased by 73% [or 14.6% per year], compared with inflation growth of 14% and wage growth of 15%,” again from the ACP.  Take out Aetna and GMI’s numbers and the rest of the field of insurers in New York are, gosh, average.  Here’s another intriguing piece of the puzzle.  Remember how the insurance companies were going to, out of financial necessity, pass on their new tax costs to their customers?  Not so much with the financial necessity.  The Northwest Federation of Community Organizers released a report this summer with a state-by-state breakdown of annual profits for private insurance.  For New York, they only cite Oxford and Empire.  Having read this far, you won’t be surprised to learn that from 2004-2007 annual profits for Oxford rose 36.2%, and Empire’s profits rose a stunning 71.6%.  So yes, any cost differential gets passed along to the customers – and I won’t be surprised if it got passed on in an exaggerated fashion.

A universal health care bill – either HR 676 or the one envisioned by the president – would define a standard set of benefits that would make state mandates moot, ensure guaranteed issue is the law of the land, prevent people from losing insurance because their business cut benefits or their job, and would reign in the obscene profits made by the insurance industry.  But it won’t do anything about the NY Post’s exaggerations in service to political ideology.  Those are here to stay.

(Photo credit:  Benjamin Harrison on Flickr.)