Opt-out of employer healthcare?

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Re: Opt-out of employer healthcare?

Postby steadyeddy » Wed May 02, 2012 12:35 pm

tdogz wrote:
johnanglemen wrote:There are two different tax benefits. The initial contribution to the HSA is tax-deductible, and that outweighs the cost of the premiums. Separately, the growth within the HSA is tax-deferred (if used for non-medical expenses) or tax-free (if used for medical expenses).

This rule also applies to your contributions, not only the growth. So if you reach age 65, any money you take out for non-medical expenses won't be subject to the 20% penalty, but is taxed as regular income. If your medical expenses are small in retirement, and you withdrawal from your HSA to cover other costs, you could easily end up paying almost as much (or more) in taxes during retirement than the $300/yr you would be saving now.


The numbers below assume that you are in the 15% bracket in retirement (generous) and that you are withdrawing for non-medical expenses (not generous).

No HSA
$3000 income
$1000 taxes
$2000 in taxable investments/for spending in retirement

HSA
$3000 income
$700 HDHP premiums
$2300 in tax deferred account
$345 taxes on withdrawal
$1955 for spending in retirement

If your tax rate remains the same in retirement, rather than dropping to 15%, these numbers look far worse. If you use the money for medical expenses you are ahead by small amount. In either case you sacrifice the value of your current health benefits in the process. This might even seem like more of an unknowable question if you were paying for your current PPO plan, but since you're not, any premium you pay for an HDHP plan is essentially an annual fee for contributing to the HSA. How can you overcome such a high fee?
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Re: Opt-out of employer healthcare?

Postby yehudimenuhin » Wed May 02, 2012 12:43 pm

G-Money wrote:
awval999 wrote:
clevername wrote:There was a thread a week ago about how to avoid medical bankruptcy. The OP mentioned that his neighbor had a good job that provided his health care. The neighbor then contracted cancer, began treatment, and got fired/replaced a few months later because he couldn't work and lost his health care. Sad, but not an unreasonable move on his employer's part.

Personally, I like my individual HDHP policy. I'm an otherwise healthy 20 something though and my premiums are about $800/yr. If I do actually use my insurance it means there is an excellent chance I would be fired imminently anyway (I probably can't work with cancer, or after getting hit by a bus, or whatever). Going with the employer plan might save a few bucks, but the peace of mind knowing I have emergency health care coverage independent from my employment is worth a lot. As always, your mileage may vary.


I'm sorry. I call have to call bullshit on this. This just doesn't happen in America.
http://www.dol.gov/dol/topic/health-plans/cobra.htm
http://www.dol.gov/whd/fmla/

An employer just doesn't fire employees with cancer. The job is protected by FMLA, even then, if the person cannot return to work after FMLA, COBRA allows the the person to continue paying the premiums for a year or so. Most companies won't risk the media storm by firing someone with cancer. Anyway, I know you were just being proactive, but we do have a safety net for these types of things. Obviously, long-term disability insurance, a large emergency fund, life-insurance, is all necessary but we don't live in a country where we fire employees with cancer and cut off their health insurance.

Except FMLA generally only applies to employers with 50+ employees. And COBRA will only be available for a year or two after termination. And not every termination, even for cancer, creates a media firestorm.


Just one more quote on the risk factor. FMLA may help if you're a desk jockey, but some jobs (like my own) carry an expectation of significant travel, long hours, and in-person interaction with clients, peers, managers etc.. The manager in the earlier story wasn't fired for getting cancer, but he was relieved for non-performance (as a result of extensive cancer treatment) in an senior position that required over 80% travel and extensive client interaction.
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Re: Opt-out of employer healthcare?

Postby TheGreyingDuke » Wed May 02, 2012 1:02 pm

One factor that has not been mentioned is:

Have you checked with your employer whether or not you CAN opt out of the health plan? I know my last two employers would only let me opt out if I could show that I was covered by another employer-sponsored plan, i.e. my wife's. Their contract with the insurer required that all employees sign up otherwise. This is to avoid the adverse selection problem.
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Re: Opt-out of employer healthcare?

Postby madbrain » Wed May 02, 2012 6:59 pm

awval999 wrote:I'm sorry. I call have to call bullshit on this. This just doesn't happen in America.
http://www.dol.gov/dol/topic/health-plans/cobra.htm
http://www.dol.gov/whd/fmla/

An employer just doesn't fire employees with cancer. The job is protected by FMLA, even then, if the person cannot return to work after FMLA, COBRA allows the the person to continue paying the premiums for a year or so.


Unfortunately, it does happen in America. FMLA has restrictions. I got sick (HIV diagnosis) on my second day on the job six years ago. I was depressed and unable to work after that. The job was not protected by FMLA as you need to have 12 months of prior service. I went on short term disability. I was terminated while on short-term disability.
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Re: Opt-out of employer healthcare?

Postby awval999 » Wed May 02, 2012 7:11 pm

madbrain wrote:
awval999 wrote:I'm sorry. I call have to call bullshit on this. This just doesn't happen in America.
http://www.dol.gov/dol/topic/health-plans/cobra.htm
http://www.dol.gov/whd/fmla/

An employer just doesn't fire employees with cancer. The job is protected by FMLA, even then, if the person cannot return to work after FMLA, COBRA allows the the person to continue paying the premiums for a year or so.


Unfortunately, it does happen in America. FMLA has restrictions. I got sick (HIV diagnosis) on my second day on the job six years ago. I was depressed and unable to work after that. The job was not protected by FMLA as you need to have 12 months of prior service. I went on short term disability. I was terminated while on short-term disability.


I am very sorry to hear that.

You are correct that there are limitations to FMLA. I do believe you would have been able to qualify for COBRA health care coverage after termination though if you were covered by the health plan on day 1. Nevertheless I do realize that COBRA premiums are expensive and many just cannot make the premium payments.
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Re: Opt-out of employer healthcare?

Postby grabiner » Wed May 02, 2012 9:14 pm

tdogz wrote:
johnanglemen wrote:There are two different tax benefits. The initial contribution to the HSA is tax-deductible, and that outweighs the cost of the premiums. Separately, the growth within the HSA is tax-deferred (if used for non-medical expenses) or tax-free (if used for medical expenses).

This rule also applies to your contributions, not only the growth. So if you reach age 65, any money you take out for non-medical expenses won't be subject to the 20% penalty, but is taxed as regular income. If your medical expenses are small in retirement, and you withdrawal from your HSA to cover other costs, you could easily end up paying almost as much (or more) in taxes during retirement than the $300/yr you would be saving now.


If you do pay taxes, the HSA is still just as good as a traditional IRA; you got a deduction on the contributions, and paid tax on the withdrawals.

In addition, the risk works in the right direction. If you wind up paying taxes on your HSA, this means that you were unusually healthy in retirement, and thus have more money to spend.
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Re: Opt-out of employer healthcare?

Postby BruDude » Thu May 03, 2012 5:38 am

I believe you have to be covered by a group health plan for at least 30 days to qualify for COBRA and not have been terminated for cause, but I could be wrong.
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Re: Opt-out of employer healthcare?

Postby madbrain » Thu May 03, 2012 5:59 am

awval999 wrote:You are correct that there are limitations to FMLA. I do believe you would have been able to qualify for COBRA health care coverage after termination though if you were covered by the health plan on day 1. Nevertheless I do realize that COBRA premiums are expensive and many just cannot make the premium payments.


Yes, I was covered by my new employer from day 1, and was able to qualify for COBRA after termination.
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Re: Opt-out of employer healthcare?

Postby awval999 » Thu May 03, 2012 9:01 am

BruDude wrote:I believe you have to be covered by a group health plan for at least 30 days to qualify for COBRA and not have been terminated for cause, but I could be wrong.


Q3: Who is entitled to benefits under COBRA?

There are three elements to qualifying for COBRA benefits. COBRA establishes specific criteria for plans, qualified beneficiaries, and qualifying events:

Plan Coverage - Group health plans for employers with 20 or more employees on more than 50 percent of its typical business days in the previous calendar year are subject to COBRA. Both full and part-time employees are counted to determine whether a plan is subject to COBRA. Each part-time employee counts as a fraction of an employee, with the fraction equal to the number of hours that the part-time employee worked divided by the hours an employee must work to be considered full time.

Qualified Beneficiaries - A qualified beneficiary generally is an individual covered by a group health plan on the day before a qualifying event who is either an employee, the employee's spouse, or an employee's dependent child. In certain cases, a retired employee, the retired employee's spouse, and the retired employee's dependent children may be qualified beneficiaries. In addition, any child born to or placed for adoption with a covered employee during the period of COBRA coverage is considered a qualified beneficiary. Agents, independent contractors, and directors who participate in the group health plan may also be qualified beneficiaries.

Qualifying Events - Qualifying events are certain events that would cause an individual to lose health coverage. The type of qualifying event will determine who the qualified beneficiaries are and the amount of time that a plan must offer the health coverage to them under COBRA. A plan, at its discretion, may provide longer periods of continuation coverage.

Qualifying Events for Employees:
Voluntary or involuntary termination of employment for reasons other than gross misconduct
Reduction in the number of hours of employment


An employee covered from Day 1 of health care coverage is eligbile at Day 2 of employment it seems.
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Re: Opt-out of employer healthcare?

Postby BruDude » Thu May 03, 2012 11:23 am

awval999 wrote:An employee covered from Day 1 of health care coverage is eligbile at Day 2 of employment it seems.


I'm sure that's correct. I think my statement applies to people for state continuation of coverage in my state, not federal COBRA.
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Re: Opt-out of employer healthcare?

Postby stlutz » Thu May 03, 2012 9:36 pm

You're forgetting that when you have a medical expenses, your large group plan proably has discounts with the provider. So the few bucks you're saving in a HSA will be nothing compared to one event--. Go and price out any medical procedure, it is a lot more than you might guess, or save in taxes.


Just jumping in to make sure this point gets repeated. The price differences between different insurers is huge. There are conceivable cases where having your own policy makes sense (and they've mostly been brought up here).

OP-- if you are going to do something unusual, you need to sit down and really compare not just the cost of premiums but the benefits being provided (you haven't really provided any comparison of what the plans cover), as well as get a sense of what xyz care would cost on plan A vs. plan B. A couple hundred bucks on taxes is chump change in the overall comparison. Don't pick up pennies in front of steamrollers.

Who plans to have a major medical issue? Most people who do considered themselves to be healthy beforehand.
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Re: Opt-out of employer healthcare?

Postby kramer » Thu May 03, 2012 11:57 pm

stlutz wrote:
You're forgetting that when you have a medical expenses, your large group plan proably has discounts with the provider. So the few bucks you're saving in a HSA will be nothing compared to one event--. Go and price out any medical procedure, it is a lot more than you might guess, or save in taxes.


Just jumping in to make sure this point gets repeated. The price differences between different insurers is huge. There are conceivable cases where having your own policy makes sense (and they've mostly been brought up here).

OP-- if you are going to do something unusual, you need to sit down and really compare not just the cost of premiums but the benefits being provided (you haven't really provided any comparison of what the plans cover), as well as get a sense of what xyz care would cost on plan A vs. plan B. A couple hundred bucks on taxes is chump change in the overall comparison. Don't pick up pennies in front of steamrollers.

Who plans to have a major medical issue? Most people who do considered themselves to be healthy beforehand.
I have an individual HSA insurance plan (with Aetna) and I get the same discounts anyone with a group plan gets. When I go to the doctor, I don't pay them directly. They submit the bill to the insurance company and then I get a bill later with the negotiated discount.

The big benefit of having an individual plan is that you have health insurance not tied to your employer. If you are retiring soon or want to start your own business, this is a big advantage. COBRA is just temporary health insurance in those situations. And in states and situations where COBRA is later convertible into renewable health insurance (say after 18 months), the policy tends to be very expensive. However, for most people the benefits I have laid out in this paragraph are not really that important.
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Re: Opt-out of employer healthcare?

Postby madbrain » Fri May 04, 2012 2:19 am

kramer wrote:I have an individual HSA insurance plan (with Aetna) and I get the same discounts anyone with a group plan gets.


How would you know ? And what discount would that be ? There is a a huge difference in benefits and copays between group plans depending on the size of your employer. Those plans likely negotiate different prices with the providers, too, due to their size. My employer has 120,000 employees so it has a lot more clout than most.

When I go to the doctor, I don't pay them directly. They submit the bill to the insurance company and then I get a bill later with the negotiated discount.


When I go to the doctor, I pay a minimal $10 copay. When I go to the lab, I can have as many tubes of blood drawn as I want - I have had as many as 12 tests done at once, but usually it's at least 6. I never have to pay a dime.

I take 3 brand-name prescriptions for which no generics exist. One costs $38 per day, another $42 per day, another $21 per day. All for chronic conditions that I have to take for the rest of my life. I'm 35 and I have been taking them for many years already. I pay $10 for a 100 day supply for each, or $108 per year, for $36,865 worth of drugs.

Do you still think you get the same discounts as everyone else with a group plan ?

If I had an individual plan, how much do you think my premium would rise to ? The insurer would do everything in their power to get me off their insured.
The drug benefit alone is many price the premium, including both my share and the employer subsidy. And despite the employer size, this is not a self-insured plan.

The big benefit of having an individual plan is that you have health insurance not tied to your employer. If you are retiring soon or want to start your own business, this is a big advantage.


That is not an advantage at all, since the individual plan premiums will likely rise astronomically if you have serious conditions.

COBRA is just temporary health insurance in those situations. And in states and situations where COBRA is later convertible into renewable health insurance (say after 18 months), the policy tends to be very expensive. However, for most people the benefits I have laid out in this paragraph are not really that important.


Think again. COBRA leads to HIPAA eligibility in every state. HIPAA plans are group plans, rated only by age, not by individual health. They are available in every state. HIPAA is a federal law.
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Re: Opt-out of employer healthcare?

Postby kramer » Fri May 04, 2012 4:40 am

madbrain wrote:
kramer wrote:I have an individual HSA insurance plan (with Aetna) and I get the same discounts anyone with a group plan gets.

How would you know ? And what discount would that be ? There is a a huge difference in benefits and copays between group plans depending on the size of your employer. Those plans likely negotiate different prices with the providers, too, due to their size. My employer has 120,000 employees so it has a lot more clout than most.

I don't know exactly the level of discounts I am getting (since that is insurance company proprietary) although the discounts seem to be large. Aetna is one of the largest insurers in my state. I assume at least tens of thousands of people are enrolled in my same insurance plan. My main concern with the insurance was not the level of discount but the fact that I have 100% coverage once I go over $5000 in health costs per year.


When I go to the doctor, I don't pay them directly. They submit the bill to the insurance company and then I get a bill later with the negotiated discount.

When I go to the doctor, I pay a minimal $10 copay. When I go to the lab, I can have as many tubes of blood drawn as I want - I have had as many as 12 tests done at once, but usually it's at least 6. I never have to pay a dime.

I take 3 brand-name prescriptions for which no generics exist. One costs $38 per day, another $42 per day, another $21 per day. All for chronic conditions that I have to take for the rest of my life. I'm 35 and I have been taking them for many years already. I pay $10 for a 100 day supply for each, or $108 per year, for $36,865 worth of drugs.

Do you still think you get the same discounts as everyone else with a group plan ?
Yes, I do. My insurance has $5000 max per year out of pocket and includes all drug costs. I pay 100% up to $5000 (except for a free physical) and $0 after that and there is no concept of co-pay. I prefer the high deductible in exchange for much lower insurance premiums. You seem to have a problem with this?

If I had an individual plan, how much do you think my premium would rise to ? The insurer would do everything in their power to get me off their insured.


It is against the law in all 50 states to raise premiums on renewable health insurance policies based on your health history. No insurance companies do this. This seems to be a fundamental misunderstanding of many people about health insurance.

However, there have been issues with recission (people who lied or forgot something on their application which are checked carefully only much later by the insurance company when they have high health costs). Normally, there is a statute of limitations for non-fraudulent recission cases (people that did not intentionally lie) but this varies by state. I agree that recission is a major problem.

The drug benefit alone is many price the premium, including both my share and the employer subsidy. And despite the employer size, this is not a self-insured plan.
Yes, most HSA plans (but not all) that I have seen have such a drug benefit. I know I screened my plan carefully for this. I am not sure why you think an individual plan is different with regards to drug benefits?

The big benefit of having an individual plan is that you have health insurance not tied to your employer. If you are retiring soon or want to start your own business, this is a big advantage.

That is not an advantage at all, since the individual plan premiums will likely rise astronomically if you have serious conditions.
Again, this is against the law in all 50 states. The premium must go up for the entire pool, not an individual.

COBRA is just temporary health insurance in those situations. And in states and situations where COBRA is later convertible into renewable health insurance (say after 18 months), the policy tends to be very expensive. However, for most people the benefits I have laid out in this paragraph are not really that important.

Think again. COBRA leads to HIPAA eligibility in every state. HIPAA plans are group plans, rated only by age, not by individual health. They are available in every state. HIPAA is a federal law.
Yes, because they are not underwritten, the policies are very expensive, much more expensive than an individual underwritten plan. IMO, the only person who should consider such a convertible policy is someone who can't pass underwriting for an individual plan and indeed this is what happens in practice which is why the convertible policies are so expensive (average higher payouts).
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Re: Opt-out of employer healthcare?

Postby madbrain » Fri May 04, 2012 6:18 am

kramer,

kramer wrote:I don't know exactly the level of discounts I am getting (since that is insurance company proprietary) although the discounts seem to be large. Aetna is one of the largest insurers in my state. I assume at least tens of thousands of people are enrolled in my same insurance plan. My main concern with the insurance was not the level of discount but the fact that I have 100% coverage once I go over $5000 in health costs per year.


All I am saying is that the discounts vary per insurer and specific group plan, I don't think everyone gets the same discount. Small plans have less negotiating leverage.

Yes, I do. My insurance has $5000 max per year out of pocket and includes all drug costs. I pay 100% up to $5000 (except for a free physical) and $0 after that and there is no concept of co-pay. I prefer the high deductible in exchange for much lower insurance premiums. You seem to have a problem with this?


I don't have a problem with it, but I do wonder how the insurer could pay the claims for chronically ill people if everybody had a high deductible plan.

It is against the law in all 50 states to raise premiums on renewable health insurance policies based on your health history. No insurance companies do this. This seems to be a fundamental misunderstanding of many people about health insurance.


There have certainly been huge raises in the news for health insurance premiums for individual plans. Far higher increases than for employer group plans. If they weren't based on individual health history, what were they based on ?
And the premiums don't appear to be regulated. In California there seems to be nothing the state can do to stop the rate increases.

http://articles.latimes.com/2010/feb/12 ... -2010feb12

It doesn't do any good if everybody's individual premiums get a huge rise, either. Some insurers have had increases in the 30% to 60% in one year.

However, there have been issues with recission (people who lied or forgot something on their application which are checked carefully only much later by the insurance company when they have high health costs). Normally, there is a statute of limitations for non-fraudulent recission cases (people that did not intentionally lie) but this varies by state. I agree that recission is a major problem.


Yeah, and sometimes it's just the health insurers that lie and falsify their records, to get out of paying claims and conspire to kill their patients.
Like this case :
http://www.reuters.com/article/2010/03/ ... DO20100317

Again, this is against the law in all 50 states. The premium must go up for the entire pool, not an individual.[/b]


Which pool would that be for an individual plan ?

Think again. COBRA leads to HIPAA eligibility in every state. HIPAA plans are group plans, rated only by age, not by individual health. They are available in every state. HIPAA is a federal law.
Yes, because they are not underwritten, the policies are very expensive, much more expensive than an individual underwritten plan. IMO, the only person who should consider such a convertible policy is someone who can't pass underwriting for an individual plan and indeed this is what happens in practice which is why the convertible policies are so expensive (average higher payouts).[/quote][/quote]

Given the list of "pre-existing conditions" that cause one to fail underwriting, or be later rescinded, I really do wonder how many people can really pass underwriting. Even long before the HIV I have had other conditions that would have prevented me from ever passing any kind of individual health insurance underwriting. I am in the minority, but I am far from alone.
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Re: Opt-out of employer healthcare?

Postby kramer » Fri May 04, 2012 7:03 am

I have to run right now but just to quickly answer your most important items.

The pool I am referring to for an individual plan is all the other individuals (presumably thousands) in the same age group in that health insurance plan. The rates are based on the performance of the whole group by law and by contract. A normal health insurance policy is guaranteed renewable as long as the pool continues to exist, by law and by contract. These are the two primary protections one has and without them insurance is not really worth that much.

Many pre-existing conditions don't necessarily disqualify someone from a plan or make them more likely to get recission later on. However, they *do* normally cause the initial premium higher, in many cases much higher. In many of those cases, group insurance will be lower.

One reason that many people personally see individual premiums go up faster is because they are also seeing the effects of age, unlike those in a group plan. Since health care usage for a given individual very roughly doubles every decade, something like 5% of health care inflation for a particular individual is due to the fact that he is getting older. Someone in a non-age-rated group plan will not see this inflation.
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Re: Opt-out of employer healthcare?

Postby highcap » Fri May 04, 2012 10:12 am

New poster here!

I think Kramer has it mostly right, and many other posts on risks are correct also. The main benefit for High-deductible plans and HSA accounts for me is the fact that this is your only real option if you plan on retiring early - before you can "keep" your employer-sponsored plan - typically 55 or 60 years of age in most companies.

I hope to retire before 50, and so I have opted out of my employer plan (at 40) and signed up for my own individual plan. The reason I did this so early is (per Kramer's point) so I could get into the plan/pool while I and my family are healthy. If any of us were to be diagnosed with a serious ailment, we would no longer be eligible for the lowest rate plans. Now that we are in I could theoretically contract any disease and we are (by law) protected and would remain in the pool and pay the same rate as anyone else in the pool. The main drawback is that I would be liable for up to $8k per year in deductibles. That risk is low for me now too, because I already have $30k in my HSA and am contributing ~$6k each year plus growing my principle as it is invested int he market...

My insurance cost (including out-of-pocket expenses/deductible) minus the tax savings is break-even with what I was paying in my employer plan. They have been increasing deductibles and co-pays every few years, so even though my individual plan rates go up slightly faster than my employer plan, I am still breaking even. The negotiated rates with doctors are the same as with my employer plan, and I don't get prescriptions beyond antibiotics or other short-term drugs.

The math may not pencil out if you plan to retire at 55+ and have a great employer-sponsored plan, but it is really the only economical option if you plan to retire early and don't want to risk being "uninsurable" due to a pre-existing condition when you retire.
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Re: Opt-out of employer healthcare?

Postby Epsilon Delta » Fri May 04, 2012 10:21 am

kramer wrote:One reason that many people personally see individual premiums go up faster is because they are also seeing the effects of age, unlike those in a group plan. Since health care usage for a given individual very roughly doubles every decade, something like 5% of health care inflation for a particular individual is due to the fact that he is getting older. Someone in a non-age-rated group plan will not see this inflation.


Another reason prices go up is the "Insurance Death Spiral". At the start the pool consists of only health individuals and has a low rate. After a time some of those health individual become unhealthy, this raises the rates for the everybody in the pool. However, much of the pool is still healthy (at least healthier than the average for the pool) and can qualify for a new policy at a lower rate, so they leave. This reduces the average health of the pool, drives up rates and more people leave. In the end the pool consists of only very sick people. The result is that the cost of the insurance does not increase at the average rate for people aging and getting sick but at something closer to the rate of the worst case individual getting sick.
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Re: Opt-out of employer healthcare?

Postby xerty24 » Tue May 08, 2012 5:51 am

madbrain wrote:
However, there have been issues with recission (people who lied or forgot something on their application which are checked carefully only much later by the insurance company when they have high health costs). Normally, there is a statute of limitations for non-fraudulent recission cases (people that did not intentionally lie) but this varies by state. I agree that recission is a major problem.[/b]


Yeah, and sometimes it's just the health insurers that lie and falsify their records, to get out of paying claims and conspire to kill their patients.
Like this case :
http://www.reuters.com/article/2010/03/ ... DO20100317

Ouch! Talk about cost-cutting run amok. $10M and no criminal charges? They got off easy.
No excuses, no regrets.
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