Health insurance: score one for CDHPs

In my last post I revealed my cost for small group family HMO insurance in New York and the absurd growth rate of that cost. A 13% compounded annual rate of increase defies reason. I have found an attractive workaround in the form of a consumer-directed EPO plan with a competitor. This new insurance comes with a high family deductible of $5,950 a year, but there is no co-insurance, no co-pay, no lifetime limit. Most importantly, the deductible plus premiums is $6,600 less than the 2010 HMO rate. Even in the worst-case scenario where I have to spend the entire deductible every year, I am still spending $550 a month less, for better insurance.

I don't really need more evidence than that (and the previous post) to show my old HMO didn't want my business, but I decided to dig a little into the financials of the parent company, WellPoint. WellPoint insures 35 million people in a 50/50 mix of self-funded and fully insured plans. As the chart below illustrates, not only are small group premiums 1.8x the average, but they're increasing exponentially while the overall growth rate of operating revenues* per member decreases.

Are small group health care expenses really twice as much per member as large groups, or are small groups and individuals subsidizing large groups just like first class mail subsidizes bulk mail? Since small group rates are approved by New York's Department of Insurance, I can only conclude that the state government is part of the problem. Small groups (and individuals) are getting screwed. Consumer-directed plans are part of the solution. I would like to see high deductible plans offered to a single national pool so insurance costs for individuals and employees of small companies are the same as those for large companies. Not single payer; single pool.

*Before 2004, when WellPoint was still known as Anthem, the company used to provide a figure called "self-funded premium equivalents" to facilitate comparisons of revenues to insurers with a different fraction of self-funded customers. Although WellPoint has stopped providing this figure, I think a good estimate of adjusted revenues for WellPoint is 1.43x reported operating revenues.