Health Insurance Is A Bad Deal, Until
You Get Sick
Or, How to Look at Health Insurance With a Skeptic’s Eye
October 21, 2005
We are constantly the recipients of marketing messages. A marketer’s
job is to make us think we couldn’t live without the AbBuster
or the new Chicken Soft Taco. Well, insurance is no different. Our
perception of what insurance is for is often influenced by what we’ve
received from plans we have had in the past as well as what we feel
constitutes “good” coverage. Thanks to marketing,
we know what we want and we won’t settle for less!
But what if you have to pay for all of it yourself? What would you
choose?
Saying Goodbye to the Gravy Train
For those of us who are fortunate enough to have health insurance,
it’s usually provided by our employer, or by our parent’s
employer. While the job at Widget’s Inc. or The Bookchain Corp.
may not be the best thing in the world, at least there’s free
or inexpensively provided healthcare.
But what it if you leave that company to pursue your musical dream?
A quick look at the simple economics will probably lead you to decide
that health insurance seems like an unaffordable luxury. But
we urge you to think again. There are ways to engage in the
health insurance system that ensure that you have coverage when you
need it most, without breaking the bank.
The Economics of No
On its face, health insurance sounds like a bad investment. An individual
health insurance plan for a mid-30s male can cost anywhere from $100
to $300 a month. Add a spouse and children on that plan, and
costs can reach up to $800 a month. This is for something that
has an intangible benefit. Sure, you can go to the doctor for
$10, but if feels like you’re paying $300 a visit with
monthly premiums like this. It’s not surprising at all
that many individuals/self-employed folks forego health insurance
entirely, either because it feels like a bad investment or because
they just can’t afford it.
But what if you’re in a car accident? What if circumstances
lead to an extended hospital stay? In either of these cases,
health care bills can pile up quickly, way beyond the monthly premiums
paid on your “bad investment”.
This is why you are buying health insurance: to pay for what you
could not afford to cover out of pocket should the worst happen.
That’s really all it’s for, so let’s avoid getting
bogged down in the little details that add expense to a plan and
focus on the big picture; the acquisition of “stop loss” coverage.
Stop Loss: The Important Part.
You probably want to pay a little as possible out of pocket when
you visit the doctor. In insurance jargon that means you’re
interested in a low per-visit copay. You probably also want
to pay as little as possible out of your own pocket over the year
on medical expenses, which means you want a low deductible, or the
amount you pay yourself before the insurance company starts picking
up the bills.
But picking these options – low copay, low deductible – means
that your annual premium – or your total yearly payment – will
be higher. If the sticker shock of that plan gets to
you, you can lower your annual payment by choosing to pay more per
visit (higher copay), and more out of pocket over the year (higher
deductible). Here’s an example:
Copay
Deductible
Premium
Expensive plan
$10/visit
$250
$500/month or $6,000/year
Affordable plan
$30/visit
$2,500
$200/month or $1,200/year
Whether you pick an expensive plan or a more affordable
plan, the important calculation is knowing the maximum you’d
have to pay personally if you were stuck with huge medical bills..your
Stop Loss amount. Let’s expand on our two examples from above:
Copay
Deductible
Out of Pocket Max
Stop Loss
Expensive plan
$10/visit
$250
$3,000
$3,250
Affordable plan
$30/visit
$2,500
$4,000
$6,500
The Stop Loss amount is the most you are going to have to pay in
a year. In our example above, if your hospital bills came to $50,000,
you are responsible for $6,500. If your hospital bills are $750,000
in a year, you are responsible for $6,500.
We’re sure you see the pattern that’s emerging here,
and how differences between expensive and affordable plans diminish
when it comes to major medical expenses.
The Bottom Line
If you have very little money, it’s in your best interest
to sign up for an affordable plan. In this scenario, you pay
a little each month for the coverage that you’ll need should
the worst happen. Yes, you will have to pay for routine visits, but
if you’re healthy and active, do you expect to be at the doc’s
office more than once a year? Might as well cough it up for
those preventative care visits and know that if you roll the van,
there will be costs to meet, but the burden will be much easier to
bear. It’s a heck of a lot easier to organize a benefit to
make $5,000 to meet your stop loss than it is to raise $80,000 to
pay the actual hospital bill.
In our next article, we’ll investigate the pros and cons of
Health Savings Accounts, or HSAs, which allow you to save money each
month, tax-free, in a dedicated bank account and use that saved
money for more services than you would get under regular health
plans. You can even invest that money if you are the savvy sort. When
piggy-backed with an affordable insurance plan, you can really
maximize your benefits and increase your piece of mind at a reasonable
price.
In any case, it’s in your best interest to reconsider what
you think you know about what you actually need, and what you demand
from your health insurance plan when you, your business, or your
band is footing the entire bill.
That can save you plenty of money so you can buy that AbBuster.
Health
Alliance right prescription for uninsured musicians Nearly
500 musicians have signed up for care this year, provided by Austin's
Health Alliance for Austin Musicians Austin American Statesman, March 13, 2006
Musicians who
juggle jobs say latest cuts are too great Shreveport Symphony musicians struggle with paycuts and reductions in health
insurance coverage Shreveport Times, February 14, 2006
Coverage and Access
NPR's Ed Gordon interviews David Nathan, chair of the R&B Foundation,
about the lack of health insurance coverage among many musicians. According
to Nathan, many people assume that recording and performing artists "have
some huge amount of money that they generate, but that's just not the case.
NPR's News and Notes with Ed Gordon January
20, 2006
Soundman Versus Flesh-Eating Bacteria. His next challenge: a six-figure
medical bill Chicago musicians organize benefits to help soundman Gary Schepers Chicago Reader, January 6, 2006
Band Aid: Musicians Taking Care of their Own Chicago musicians and labels organize benefits to help soundman Gary Schepers Chicago Tribune, January 20, 2006
Most Temp, Part-Time Workers Lack Job-Linked Health Insurance
Commonwealth Fund study shows that only 21 percent of America's 34 million
part-time workers have health insurance from their job. Forbes, December 1, 2005
A New Pension for Struggling Artists Though it's about visual artists, an interesting article about artists pooling
their resources to create long-term security.
by Julie Salamon New
York Times, July 20, 2004
Band Aid for an Ailing Musician Almost 90 percent of the musicians surveyed
had played a benefit for another musician, though even the most successful
benefit seldom makes more than a symbolic dent in typically huge
health care debts.
By Richard Harrington Washington Post, April 9, 2004
Health Insurance Crisis Lingers for Biz The number of uninsured musicians remains high
By Chris Morris Billboard, March 13, 2004
Songs in the Key of Major Medical
By Peter Margasak Chicago Reader, November 28, 2003
Chic drummer Tony Thompson dies Thompson, who was also one of the world's most famous session musicians,
died of renal cancer. A fund was set up to help Thompson with medical bills
last week, as the drummer had no medical insurance. NME, November
14, 2003
Health Care for Recording Artists? In 2003, AFTRA approved an agreement with BMG,
EMI Music, Sony Music Entertainment, Universal Music Group, and Warner
Music Group. The agreement
would make available health care insurance to all union-affiliated performing
artists under exclusive contract to a recording label, for the duration
of their contracts.
By Barry Willis Stereophile, October 6, 2003
Disclaimer: Future of Music Coalition provides basic
health insurance information to answer your basic health insurance option
questions. Insurance is regulated on a federal basis and by each state,
and each insurance carrier rules and policy terms may differ from state
to state and between individuals. Therefore, you acknowledge and
agree that any insurance-related information provided by or through the
Website is general information only, and may not apply to your particular
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and is not responsible or liable for any information provided on the
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of service
Fractured
Atlas is a nonprofit service organization for artists and
creators. One of the benefits they offer their members is access
to group health insurance. Visit the website and select your
state from the menu to see the state-specific insurance options.
Membership in the organization is $75 annual for an individual, but
there are also affordable group rates starting at $150.
AHIRC:
The Artists’ Health Insurance Resource Center is an
online database created by the Actors’ Fund with a grant from
the National Endowment for the Arts. Data is organized by state
and includes information about resources in each state for artists,
and lists of insurers of all kinds. Access to this data is
free.
Health
Alliance for Austin Musicians If you are an uninsured,
professional musician in the Austin, TX area, you may be eligible
for low-cost primary health care services, basic dental care and
mental health counseling provided by HAAM.
SIMS Foundation is
a non-profit organization that provides access to low-cost mental
health services for Austin, TX musicians and their immediate families.
Texas Music Office is a state-funded business promotion and information clearinghouse for the musicians of Texas. The insurance page provides a detailed list of health insurance options for residents of Texas.
A
Consumer Guide for Getting and Keeping Health Insurance Created
by the Georgetown University Health Policy Institute, this website
provides legal information about your rights as a health insurance
consumer for each state. Updated regularly.
eHealthinsurance.com A
for-profit broker that consolidates information about plans and premiums
on their website.
