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Stones & Bones: health care / volume 11 number 2, February 2009 DOSE OF REALITY In Alaska it is legal for an insurance company to refuse a person health insurance, or to severely limit policy coverage, if they have a pre-existing medical condition or other circumstance that makes it likely that the person will in future have high medical expenses. So, in principle, this person is essentially medically uninsurable. He or she is unable to buy adequate health insurance on the open market. It is a common circumstance: by their own admission, insurance companies refuse health insurance to approximately 10 percent of those who apply. That means that approximately 60,000 Alaskans under age sixty-five (and therefore not eligible for Medicare) cannot buy comprehensive health insurance from the for-profit insurance industry at any price. However, for these Alaskans there is an out: our state-operated high risk insurance pool. It goes by the name Alaska Comprehensive Health Insurance Association (ACHIA). Created by the Alaska legislature, ACHIA provides a mechanism for those who have been refused comprehensive health insurance to obtain it—at a very high price. To be eligible for ACHIA insurance coverage, a person must be an Alaska resident and not be covered by other insurance such as Medicare, Medicaid, Veteran’s benefits or Native Health Care. Additionally, the person must have been rejected for insurance coverage by at least one insurer during the last six months or have received restrictive riders that substantially reduce coverage. Beyond that, all one needs is money—lots of it unless he or she is very young. Several ACHIA insurance plans are available, including a traditional insurance plan which, after a per-year deductible, pays 80 percent of eligible expenses until an out-of-pocket maximum is reached. Then it pays 100 percent. Other ACHIA policies are PPO, meaning that the policy pays 80 percent of health care furnished by approved Preferred Provider Organizations, but only 60 percent of that furnished by provider organizations not approved. The plans all charge policy premiums based on how large a deductible is required and an allowed out-of-pocket maximum, and they increase with the age of the policy holder. Age definitely is a key factor that prices the policies out of reach for many older people. The cheapest ACHIA policy is a PPO plan with a deductible of $15,000 and maximum out-of-pocket expense of $25,000. A person twenty-five years old can buy this policy for $1,848 per year, but it costs a sixty-year-old person $6,384. Each of those persons is at risk for another $25,000, the out-of-pocket maximum, and each will have to pay the $15,000 deductible before receiving any benefit whatsoever from the policy. Thus the twenty-five-year-old will pay out only $1,848 for health care if he needs no health care during the year (all money goes to policy premiums) but at worst he might have to pay out another $25,000 for the health care he needs before the policy covers all costs thereafter. Thus, his worst-case expenses are $26,848 per year. By comparison, the sixty-year-old will pay a minimum each year of $6,384 if he needs no health care, and if he needs a lot he will pay up to an additional $25,000, for a total of $31,384. Keep in mind that this is the cheapest ACHIA policy. The thing to remember here is that a person’s health care costs are the sum of whatever is paid out for insurance and for other expenses, namely deductibles, co-pays, and whatever else, such as travel associated with getting health care. Insurance is just part of the cost of health care. Now let’s look at the most expensive ACHIA policy. This is the PPO policy with only a $1,000 deductible and an out-of-pocket limit of $2,500. For this policy the twenty-five-year-old pays $5,916 per year, and his worst-case outlay is the $5,916 in premiums plus the out-of-pocket maximum, for a total of $8,476. That is not bad, but it is quite a different matter for older policyholders because the premiums increase rapidly with age. By the time the policyholder reaches age sixty, the premiums are up to $20,436 per year, and the worst-case outlay for premiums and out-of-pocket expenses is $22,936. In sum, the Alaska Comprehensive Health Insurance Association policies for the otherwise uninsurable are very expensive, especially for older persons. Some 60,000 Alaskans are eligible for the ACHIA policies, but only about 500 of them have purchased the policies. The reason is obvious: these health insurance policies are unaffordable for most people. So few Alaskans are enrolled in the ACHIA program that one wonders why the program even exists. To learn more you can go to the ACHIA website at https://www.achia.com/contact_us.asp. The site provides information on eligibility, premiums, and benefits, but if you want to talk to a real person you will discover that it won’t be anybody in Alaska. The insurance and related organizations involved are all located outside the state. | ||
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