The future of health insurance looks pretty scary these days, especially if, like us, you’ve been buying insurance through the Affordable Care Act.
Like a lot of people, we’re weighing our future options. Should one of us end our semi-retired status and go look for work with benefits? Try to combine a catastrophic plan, a medical discount card and a Health Savings Account? Explore Health Sharing Ministries?
Or keep paying out the wazoo for individual plans?’
But I was reading Staring Into the Early Retirement Health Care Abyss over at Our Next Life and had an idea.
What would it take to be part of a group?
Let’s first go over the basics. The premise of insurance is that most of the time, you are purchasing protection from a large financial loss that you could not cover from your own resources. That infers that most of the time, most people should be paying more for insurance than they collect so that a few people can collect more than they pay.
The first insurance covered shipping. A merchant would pay a bit to make sure that if a ship was lost, their entire fortune wasn’t. Since most ships (and their cargoes) didn’t fall victim to storms or pirates, financiers were willing to make up for the ones that were.
Merchants didn’t really want to use their insurance. They made far more when their cargoes reached their destinations. Still, shipwrecks and pirates happened, and it was better to get back enough to pay for another cargo and try again.
The merchants gambled, pretty much, as did the insurers. And that’s still the case with car insurance or homeowner’s insurance. You don’t expect that you’ll crash your car this year, or that your home will burn down. But you pay for the insurance just in case.
The Problem with Health Insurance
Only now we have health insurance, and health insurance covers so much that people really don’t use it as insurance anymore. People buy health insurance with the full intention of using the benefits, and they don’t just want to use it to cover big stuff, like hospitalization. To make the math work, though, most people still have to use less than they pay.
So how does that work? Well, companies have to guess how much insurance you’ll use, and then try to charge you more than that. If it’s just you, that can get pretty expensive, especially if you have some risk factors. So unless you have very few risk factors, you’re better off if you’re part of a group with varying risk factors, spreading the risk around.
Young and healthy people will overpay most of the time, relative to their benefits. Sick folks, not so much. And since the health insurance company wanted to make money on all their policies, group policies were lower risk and less expensive. The bigger and more diverse the group, the better, because there’s less chance of the pool getting overwhelmed with people who’ll receive more than they pay.
So employers, especially large diverse employers, traditionally got the best rates, and individuals got the worst.
That’s what the healthcare exchanges, fines, etc were supposed to do: put all the folks who bought individual insurance into what were effectively group policies with group rates. Oh, they were doing other things too, like providing subsidies to keep out of pocket costs down. But mostly, the exchanges tried to create bigger groups to spread the risk around.
Now, those group rates we’ve been getting may very well go away. We need to find a new group.
Why We Might Want a Group Health Insurance Plan
There have been some ways for folks who didn’t have employer-sponsored health insurance to get group rates, and mostly they’ve been wrapped around joining professional groups. For instance, when I worked at a bookstore, we discussed several times joining the American Booksellers Association so we could provide health insurance. It never got past the “shoot the sh!$@” phase, but we knew it as an option.
Yeah, not an option anymore.
Other organizations have plans too. So if you’re a member of AARP, you can buy a Medicare supplement plan through them and enjoy a group rate. But they don’t seem to offer much in the way of group health insurance plans for their younger members.
Seems like a real membership growth opportunity for them.
But I also wonder what other options there are for our family and for other folks who don’t have employer-sponsored coverage but don’t qualify for Medicaid or Medicare. Are we out in the cold, or will new options open up for us if the individual market gets compressed?
Or do we need to start making a solution?
So I went poking around for information about being part of a group insurance plan.
It’s pretty hard to find anything about group insurance right now unless you’re looking for employer health insurance. I did see something for Costco, but not in my area. Most other information (at least that I could find in a half hour of search) seems to predate the ACA.
Still, it’s an interesting possibility, and I wonder if someone who knows a bit more about the insurance industry can tell me.
- Are there reasonable group plans for early retirees/semi-retired folks like us? Where would we find them, and how do folks qualify?
- What are the requirements to be an operational group for group health insurance purposes? (Not just something that calls itself a group, but would get underwritten as a group?)
I know finding or creating a group sounds a bit like a pipe dream, and maybe it is. But with insurance moving the way it’s moving, non-employer group health insurance may be the way to keep FIRE dreams alive.
Anyone have a starting point? Research they’ve done themselves? Resources? Random thoughts?