Wednesday, October 30, 2013

Critical Information About Health Plans

This is to follow-up on my original "Analyzing Health Plans" post.

First a recap of some key details

  • Our family is currently insured through Aetna on a COBRA policy that we went on when I was laid off from Rosetta Stone.
  • COBRA premiums are about $1400/mo
  • When you leave a group plan (even under COBRA) to join an individual plan even for the same company you get no special treatment (i.e. you have to go through the same underwriting/quoting/etc.)
  • I've spent most of my time researching Anthem because, a. we had it in the past and b. I had a contact who pointed me there to get started.
Prior to the launch of I was 95% convinced that our best approach was to sign up for the Lumenos HSA Plus plan with a $10k deductible.  It offered a nicely bounded worst case scenario (about $25k ... premiums + in-network and out-of-network OOP maximums) and a very favorable best case scenario (~$450/mo premiums or $5400 annually).  However, when launched and with the prospect of a subsidy (since I'm starting a company and our only income currently is Shiree's) it seemed like a good idea to explore our options in the new plans.

Like everyone else did not work for me.  I was able to complete an application but could not view eligibility results, shop for or enroll in plans.  Knowing that is just acting as a broker for plans offered by private companies with constraints (like covering certain things, no pre-existing conditions, etc.) I figured I try to find the ACA plans on Anthem.  It wasn't hard.  In getting a quote you simply indicate that you want the plan to be effective in Jan. 2014.

The quoting process for ACA-approved Anthem plans takes you through a Kaiser Family Foundation subsidy calculator and then you end up with 11 possible HealthKeeper plans from Anthem summarized in this PDF.  Given our current income it appeared as if the coverage we could get under ANY of the plans was great and the subsidies made the premiums REALLY affordable.  So, I started to reconsider my Lumenos strategy.  I, instead decided to look into a 90-day short-term policy with Anthem that would cover us until January when we could sign up for plans under the ACA.

However, sensing the likelihood that a misunderstanding of the fine print (despite spending HOURS reading and analyzing it) might result in a giant mess I reached out to the local company LD&B.  My 10 minute phone call with Michelle Wodey was by far the most useful 10 minutes I've spent on any of this.

Without further ado, I give you a few more lessons...
  1. When short-term policies say they don't cover pre-existing conditions they mean it.  You find IDENTICAL language in long-term policies, but so long as you've been covered by insurance within the past 62 days it doesn't apply for long-term policies. NOT SO for short-term ones.
  2. Short-term policies have the same underwriting/qualifications process.  So you can be denied them just as easily as anything else.
  3. ACA subsidies are paid monthly but qualified for annually and you have to repay subsidies if you are no longer qualified at the end of the year.  For example... In January I qualify for 94% subsidy on my premium given income and that amounts to $800.  The rest of the year I no longer qualify (because I started making money).  In taxes for the year I have to repay the $800 subsidy I received in January.
  4. If you qualify for a long-term plan you lock it in for a year but aren't obligated to keep it that long.  So, as the kinks in the the ACA get ironed out and as it's clearer what our income for 2014 will look like we could cancel our policy and enroll early in 2014 (I think there is another open enrollment until March)
Given those additional tidbits I'm now 99% sure that the Lumenos strategy is the right one for our family.  It's not possible to be 100% certain when profit-seeking entities are involved; their interests and mine aren't really aligned.

Wednesday, October 9, 2013

Public debt and private wealth

One of my biggest complaints about typical conservative dialog in America is that it is, generally, argued by wealthy people and it, generally, understates the role that the government played in the accumulation of their wealth.  Try asking a conservative this question:
What percentage of your wealth is due to government spending, support, or intervention?
A totally reasonable response would be "how on earth could I possibly know that?"  However the response tends to gravitate towards "What do you mean 'I didn't build that!?'" to borrow a line from the rhetoric in the 2012 election.

Similarly, conservatives are very concerned about the national debt (to the point that we're legitimately risking a default on our debt obligation).  If you tweak the question and instead ask:
What percentage of the national debt should you be responsible for?
The response does not tend to take personal responsibility but instead blames "government bureaucrats", "entitlements," etc.

All of that got me wondering about the relationship between the public debt of America and the private wealth of America.  Consider two graphs:

This one pulled from the wikipedia article on the US national debt.

The second from the wikipedia article on wealth in the United States:

This is obviously an unscientific comparison, and the scales differ by multiple orders of magnitude but it doesn't take a scientist to suggest that the shape of the curves are nearly identical.   I contend that there is a strong hypothesis that there is a correlation between the dramatic increase in private wealth over the past forty years AND the dramatic increase in public debt over the same interval.

That is NOT to say that this trajectory is sustainable, even the most liberal voices on public debt (Paul Krugman ?) agree that we have a problem to address eventually (but now is the wrong time).  It does however give credibility to the question above ("what percentage of the national debt are you responsible for?") and arguably takes it further suggesting that the wealthy should be responsible for more of the debt since they have gained more wealth.

It has always been true that there is no such thing as a unique idea (I'm always stunned how most Nobel prizes are awarded to multiple people who discover amazingly complicated things "at the same time") and in the Information Age it's typically easy to confirm that...

A paper entitled "Public Debt and Private Wealth" by a Candian academic makes this exact argument.  He starts the paper...
The purpose of the present study is to show that, contrary to common belief, prosperity and “democratic wealth” in a capitalist economy depend in a crucial way on a greater government intervention.
and later concludes that
[T]he creation of private wealth and its equal distribution in capitalist societies depend in a crucial way on the implementation of a democratic public policy. In particular, it was shown that public deficits are an important source of wealth for the private sector, which also benefits from the positive effects of low interest rates (with the exception of the rentiers) and a more generous public spending on social programs. 
To be fair the paper feels a little flimsy and some of the macro-economic explanations and formulas are likely open to withering critique (having never formally studied economics myself) but nonetheless I believe it asks the right question.

What portion of your wealth are you willing to contribute to solve our national debt/spending problem?