How to combat healthcare benefit costs as a startup | Hacker News Reader

How to combat healthcare benefit costs as a startup

siliconflorist.com

12 pointsturoczy39 comments

The concern I have with this article is that it dances around the core problem with US health care, which is that the underlying market for health services is --- in most cases --- coupled directly and inextricably with the health insurance establishment.

It's all well and good to tell people to fund HSAs or buy health discount cards or get savvier about spending and buy generic meds. But a trip to the emergency room or a serious illness is simply going to max out your deductable, no matter how cost-conscious you are.

The core problem is that medical services are priced by colluding hospital chains and insurance companies, and those prices are both (a) deliberately decoupled from the actual economics of providing health care and (b) a fig leaf covering the way hospitals and insurers actually resolve invoices.

Unless/until you can extract the insurers from medical pricing, no amount of free market cheerleading is going to fix the problem. We don't have a free market to fall back on.

Can you think of any reforms that would break up the collusion without nationalizing the entire system?

(Published price lists with limits on 'negotiated discounts'? Antitrust actions splitting up larger operators? Tax favoritism for processes that make true costs clear, rather than for processes which hide costs through multiple levels of indirection?)

I'm not averse to nationalizing the entire system, so that's as far as my thinking usually goes.

The US has two major nationalized health care systems: Veterans Affairs and Indian Health Service. If they can't do these two low population (relatively) systems right, I cannot imagine them getting it right for the whole USA.

http://www.guardian.co.uk/world/feedarticle/8557832

Fatalism isn't much of an argument. Meanwhile: what's the distinction you're making to keep Medicare and Medicaid out of the discussion?

It is if it seems to be the result of a service. Don't really have any experience with Medicare / Medicaid and they don't operate their own hospitals / clinics. I do have experience(s) with IHS.

I don't --- does anybody? --- advocate for the nationalization of health providers.

In the countries held up as examples for nationalization -- UK, France, Canada -- aren't almost all providers now government employees?

If there's essentially only one payer, and even the terms of every transaction outside that one payer are dictated by national legislation, then the 'fig leaf' that the providers are nominally independent isn't worth much.

Fatalism isn't much of an argument, but neither is, "I like nationalization, so I haven't thought about alternatives, and I don't think other existing federally-run health services provide any evidence about how a nationalized system might really turn out."

I don't understand - what's the problem with insurers colluding to reduce costs? If they successfully create a downward price pressure, isn't that a good thing?

The side effect of their collusion coupled with their commanding share of the market is the destruction of the private market for health care, presumably because the administrative overhead of servicing that market and ensuring that it is transparent and inefficient dominates the returns they'd expect from it.

This isn't complicated: the price list for medical procedures bears no relationship either to the cost of those services or the money changing hands between providers and insurers.

Why do you believe the private market was destroyed by collusion between insurance companies, rather than the massive government subsidies (20-30%, I think) provided to the employer-supplied insurance market?

You're trying to pin down a value judgement I'm not making. Stipulate that the government played a major role in creating this problem. Now what? I'm pretty sure my point still stands: there's no free market for private health care to fall back on, no matter how efficiently you consume health services.

I'm not disputing your main point that the market in medical services is very far from free, or attempting to pin down a value judgement.

I'm only questioning your claim that collusion among insurance companies does much of anything besides push us closer to monopsony pricing.

Collusion between providers and insurers has, as an externality to the actual transaction taking place, severely distorted the market for medical services in the US. I'm not questioning whether insurers should be able to negotiate prices with providers.

If employer-sponsored health insurance wasn't the primary vehicle for medical expenses in the US, maybe you could get an actual price list for hospital services even in the face of aggressive negotiation. But it is, and so you can't, and any conversation about health expenses that tries to dodge that point is disingenuous. That's my point.

>"what's the problem with insurers colluding to reduce costs?"

Collusion is problematic because, the insurance companies [legal] duty is to increase their profits. Their interest in reducing costs is to reduce their cost of doing business not the patient's cost for services.

Your claim seems to be that insurance companies are colluding to reduce costs out of self interest rather than altruism. What is problematic about this?

This branch of the discussion is a red herring.

That is my observation and from a business standpoint that's all well and good.

However when the insurance companies collude to deny coverage for tuberculosis, it is problematic from the standpoint of my self interest because your untreated tuberculosis will kill me. There is a difference between healthcare and insurance.

> We don't have a free market to fall back on.

Indeed. Vets can do operations for less than a tenth the price doctors can, so prices could presumably go a long way down given the right market incentives.

But getting the right incentives in place is the hard thing. I don't think there is a really good way to run health care, all the obvious solutins have big holes, e.g.:

- buyer paying for health care as they need it doesn't work because someone might not have any health problems for years then they are suddenly hit by a crippling bill

- insurance doesn't work because once people have a pre-existing condition, they can't buy insurance any more.

- big state-run bureaucracies have all the problems you'd expect with big state-run bureaucracies.

The crux of his prescription is to reserve insurance for the catastrophic, low-probability events like getting cancer or hit by a bus, but high-deductible catastrophic plans seem carefully calibrated to make you go bankrupt anyway. Given any other choices at all, I wouldn't trust my heath to one.

I reviewed plans with a health insurance broker in Washington state in September, who openly mocked some Regence (Blue Shield) coverage with a fifteen hundred dollar annual limit on "complex imaging", which means MRIs, CAT scans, PET scans, mammography, etc. He said, "Do you have any idea how many scans you'd get if you had cancer?", and that $1500 might cover most of the first one. If you missed that detail and got sick, you might as well not have insurance.

P(cancer) >> P(hit by a bus)

I know a woman under 40 who had cancer, and a woman under 30 who had cancer. And I may know more, for all I know. Plus plenty of over-50s who've had cancer. And my social sphere is not all that large.

I'd have to say cancer is not really a low-probability event.

I reviewed plans with a health insurance broker in Washington state in September, who openly mocked some Regence (Blue Shield) coverage with a fifteen hundred dollar annual limit

That's not high-deductible, it's low-benefit. A high deductible plan would have you pay out of pocket up to $5k or $10k, and then cover everything above that. I agree that a plan that caps benefits (at something less than $1 million or so) is practically worthless, because the sort of events you actually want to insure against get expensive really fast.

That's not high-deductible, it's low-benefit.

I have less experience shopping for group plans, but in the individual market you will die of natural causes before you find a high-deductible, high-benefit plan, let alone one without fatal loopholes.

>"The second dimension is becoming savvier healthcare consumers."

Once you conflate patients with consumers, you have fundamentally moved away from a public health model towards a model where costs are based on what the market will bear rather than the costs associated with providing the service.

Question to people who have small (e.g. <5 people) startups: what system do you use for employee heath care?

We use a 'PEO' (ambrosegroup.com). Essentially, they are the 'employer' for all the employees, and provide payroll, medical, dental, 401k, travel accounts, etc - and bill us for the total (plus something for them) every two weeks.

For a small startup, it makes a lot of sense - no time is taken up with 'HR' issues. And (from my initial research) the group medical rates that they can get more than make up for their administration cost. Making the payroll, etc, all a free bonus...

This is a question I would love more clarity on. Especially pre-employee - what do bootstrapped founders typically do for their own healthcare? Do most roll the dice and go without? If so, do you stop going to regular dentist check-ups, etc.?

If you live in MA, you can purchase health insurance using the state exchange over the web. Minimal prices for a family of two are about $550/month (or were last I checked). Prices/availability can only vary based on age/gender/location so you don't have to worry about being denied coverage for a preexisting condition. You can cancel with one-month's notice.

https://www.mahealthconnector.org/portal/site/connector/

The ever popular, spouse whose employer provides healthcare.

However, three years ago we had private family coverage through BC/BS Alabama. Because BC/BS has ~90% of the private insurance market in the State [Alabama essentially has a single payer system] our premiums were very low compared to much of the rest of the country. They were even lower than the similar coverage offered through the BC/BS plan at my former employer.

Relocate to the UK.

I can't believe people aren't tearing this asshole to threads. Between all the bullshit in his article, what he's really saying is this: let's pay less for health insurance by transferring more costs to the individual. I suppose you might support this if you're so deluded as to think lots of people are going to the doctors office because they're bored and have nothing better to do than have time consuming, often humiliating, uncomfortable to painful procedures and tests performed on them on a schedule that's extremely inconvenient. OTOH, those of us whose heads aren't firmly buried up our assholes think that people mostly try hard not to go to the doctor or hospital because the experience sucks, and so the way this Dave asshole is trying to save money is by discouraging you from getting health care you need by making it cost more.

ps -- people who don't straightforwardly acknowledge that health insurance isn't insurance, it's group cost pooling, are idiots who should be ignored in the health care debate. It's not insurance and shouldn't be because we can tell that in certain cases people will cost a lot of money to treat. Insurance would leave them out in the cold. Societies with integrity or conscience treat people anyway. Compare to insurance -- if you build a house in a flood zone on the florida cost, you should probably be told hell no -- no company will sell you insurance. If all the women in your family get breast cancer, we should still give you health insurance for when you get breast cancer.

This has been proven experimentally (by a randomized trial) to be true. When people pay more out of pocket for medicine (95% copay vs 5%), they consume 30% less medicine, but have statistically identical health outcomes.

http://www.rand.org/health/projects/hie/

The reason people consume unnecessary medicine is unknown, but the fact that they do so is not in doubt.

(I'm not even going to address your claim that "anyone who disagrees with me on the purpose of insurance are idiots".)

The glibertarians' favorite experiment -- which is (btw) 30 years old and unreplicated despite attempts, and has methodological flaws. To name just one: a number of people dropped out of the study. The authors have dismissed this as a concern, but you don't have to think to hard to figure out why it is a real problem. Second, as the author admits: "For most people enrolled in the RAND experiment, who were typical of Americans covered by employment-based insurance, the variation in use across the plans appeared to have minimal to no effects on health status. By contrast, for those who were both poor and sick -- people who might be found among those covered by Medicaid or lacking insurance -- the reduction in use was harmful, on average"

Good system.

This unproductive argument is exactly what's wrong with your Pickett's Charge case against the ethics of insurance as oppposed to "cost pooling". People who disagree with your slippery slope argument will just put you on their own slippery slope; pretty soon you'll be arguing that yes, it's only fair for us to be buying everyone's kids X360's.

There are plenty of pragmatic problems in the current system to address arguments to. The solutions to those problems will improve people's lives without requiring anyone to adopt new political ideologies.

I'll ignore you ad-hominem attack on people you disagree with.

Please name a single attempt to replicate the RAND experiment (i.e., a randomized trial). Really, I'm waiting. I ask because I'd really love to see something more current. It would be amazingly useful.

Incidentally, you are eliding some other interesting facts the RAND experiment turned up. For the healthiest 80% of the poor, being in the 5% copay group made them less healthy. In all cases, the variation was very small. This is roughly what you'd expect in a study statistically measuring many null results - a few measures turn up non-zero purely by chance.

Similarly, if you study the affect of prayer on 30 or 40 different medical problems, you are likely to come up with 1 or 2 positives.

The link provides access to documents discussing attrition bias in the original Rand survey. In summary, statistical analysis indicates that patients in the high co-pay groups dropped out at a greater rate when they required hospitalization.

http://www.rand.org/health/projects/hie/documents/b_newhouse...

Newhouse also writes: "All the Experimental cost-sharing plans had a stop-loss feature that was at most $1,000 for medical spending for the entire family for a year and less for lower income families. (The $1,000 is in late 1970s dollars, which is about $3,400 in 2007 dollars if one inflates by the all-items Consumer Price Index.)"

In other words,the cap on out of pocket expenses was roughly equivalent to three or four months worth of family health insurance premiums in today's market.

this Dave asshole is trying to save money is by discouraging you from getting health care you need by making it cost more

Yeah. Also, he's trying to make you drive an unsafe car by not paying for your Volvo. There's no reason why your employer should be involved with your health insurance. Our current system eliminates pricing signals, discourages entrepreneurship, doubly screws you if you lose your job, and means that you get to disclose personal health information to HR.

health insurance isn't insurance

Yes, and this is the source of much confusion in these discussions. Most of us would be better off with real insurance, where we pay for minor and routine services directly, and are still protected from large unexpected expenses. It's true that some people can't get real insurance because of preexisting conditions, and we should help them directly.

If you're in NYC and an early start-up freelancers union can be useful.

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