Trick? or Treat?

Sara Horowitz is a “genius.” Oh, don’t take my word for it; she was awarded that title, as well as a grant, by the MacArthur Foundation in 1999. She’s received all kinds of awards and been placed on various lists of up and comers since then. And in a couple of recent articles from Slate and Forbes, her accomplishments are laid out very nicely.

So how did she earn such accolade? For starters, in 2003 she formed a non-profit organization for disenfranchised workers who are given a paycheck, but no other job-related benefits.

Her motivation for doing so came when she landed her first job right out of law school, was classified as an independent contractor, and learned that she wasn’t eligible for any employer-sponsored health insurance or retirement plans.

When she realized that a huge percentage of the American workforce – tens of millions of workers – were in the same boat, she decided to become their advocate. And so far her efforts to bring together forlorn souls have been met with wild success – today the Freelancers Union has almost a quarter million members.

Of course, it didn’t take Sara long to understand that, since these folks weren’t receiving health insurance through their employer, then unless they happened to have coverage through their spouse, the majority were simply going without it.

As an aside, this is the subject of a would-be riddle I’ve posed for over ten years:

Q: “What do about 90% of Americans who don’t have health insurance, also have in common?”

A: “They all work.”

Enter Grand Opportunity Number Two for Sara. Capitalizing on this void, Horowitz made a giant leap when she used her Freelancers Union to partner with Blue Cross and create a brand new health insurance provider, the Freelancers Insurance Company (FIC), in 2008.

Initially unprofitable in its first year, the company steadily has grown (and turned some serious coin), ever since. It now insures over 25,000 New Yorkers, is expanding its reach into the national market, and is building a network of “no co-pay” primary care clinics for its members. By the end of 2014, FIC is poised to generate over $100 million in revenue.

Man, something must be working right.

So, what’s the secret to all this success? Is it health insurance innovation? Is it filling a gap for those who can’t get health insurance elsewhere? Is it genius?!?

Nah. It’s just marketing.

It’s the same ol’ same ol’ folderol sold to many other Americans under the guise of “exclusive,” or “better” health insurance coverage. To see how, let’s take a deeper look at what Sara is really offering:

See, since it is wholly owned by the Freelancers Union, FIC is dedicated to improving the lives of the employed who can’t get benefits through their employment; in essence it provides group health insurance rates to those who – aren’t in a traditional group.

And as Sara herself wrote on the Freelancer’s blog in June 2014, the company plans to offer a national “suite of curated, freelancer-focused benefits.” In this Slate article that claims she “created affordable health care benefits for freelancers,” Sara describes her epiphany after she had analyzed data on the costs and benefits, when she discovered “I can make it work better. I can be more efficient. I can do it myself.”

Those lofty words from its ex-labor lawyer turned CEO aside, does the “social-purpose” Freelancers Insurance Company really offer a unique and valuable treat to its members that they can’t get elsewhere? Or is this just another trick?

To answer that question, I used Dr. Wacasey’s Equation and compared Sara’s Freelancers policies I found here, to see how the benefits really stack up:

Now at first glance it is true that the first three Platinum plans have W values that are actually less than the W’s for the bronze, for example. Let me break it down.

Let’s pretend that a two different sets of folks with different Freelancers plans come down with a catastrophic illness.

For a Single Person the W of $10,838 for the Platinum vs  the W of $12,002 for the Bronze, is a savings of $1,164. In other words,

  • but if this person should get hit by train during the coverage they would only save $1,164 off What they might have spent on the Bronze plan.
  • The married couple will spend $1,852 extra to have the Silver plan, but take a guess how much they would potentially save over the Bronze plan in case of a health catastrophe – exactly $1,852!
  • A single parent with two children will spend $4,431 in extra Premiums to go for the Gold, when they might only save $3,269 off What they might have spent on the Bronze plan.
  • And last but not least, a family who opts for the Platinum plan is going to pay $11,217 more in premiums than a family who buys the Bronze plan. But to add insult to injury, compare the W values for these two plans – if they were to get really, really sick the Platinum covered family would shell out another $1,017 more than their Bronzed counterparts!

But don’t be fooled. Compare the difference in the Premiums to the difference in the W value, and you’ll see that say the safest bet is the Bronze plan. In every case.

Let me illustrate:

a safer bet would be a trip to Vegas.

  • A single person will definitely spend $3,936 in extra Premiums to have the Platinum plan, but if this person should get hit by train during the coverage they would only save $1,164 off What they might have spent on the Bronze plan.
  • The married couple will spend $1,852 extra to have the Silver plan, but take a guess how much they would potentially save over the Bronze plan in case of a health catastrophe – exactly $1,852!
  • A single parent with two children will spend $4,431 in extra Premiums to go for the Gold, when they might only save $3,269 off What they might have spent on the Bronze plan.
  • And last but not least, a family who opts for the Platinum plan is going to pay $11,217 more in premiums than a family who buys the Bronze plan. But to add insult to injury, compare the W values for these two plans – if they were to get really, really sick the Platinum covered family would shell out another $1,017 more than their Bronzed counterparts!

As it turns out, there really isn’t much of a difference at all between the health insurance policies offered by the Freelancers Insurance Company, and all the others I’ve put to the test with the Wacasey Equation so far.

Except one – the price. To put it simply, there’s nothing stopping you from getting online and purchasing your own health insurance plan; being self-employed I’ve done it myself for years. Of course, it behooves most people to go through their employer as they can usually get a significant group discount over what they would pay by themselves.

Not so with the Freelancers group. Despite their claim to fame of providing health insurance to those who can’t get benefits through their employment, they sure don’t save their members any money when their plans are compared to health insurance that can easily be bought on the Internet.

Earlier today, I plugged in my personal info (see The Good, The Bad, and The Bronze from 09/12/2014) to the ehealthinsurance.com website, and entered my ZIP as 10020 in Manhattan. In every single comparison, the Freelancers policies cost more – anywhere from $1,471 to $6,393 a year more – than their counterparts listed through state carriers.

 

And so I’d have to agree that Sara Horowitz is a genius, and I give her a big hats off.

Because, just like another new, big-box, franchised, pizza delivery chain, she’s managed to repackage the same old product and sell the heck out of it – even at a higher price! – by claiming it’s something that, if the truth be told, it just ain’t.

Great job, Sara. You go, girl.

Physician. Health Insurance Agent. Author. Health care humorist. Medical satirist. Disruptor. At your service.

My name is Kevin Wacasey, and I’ve been practicing medicine since 1994. When I graduated from medical school, I took an oath to do no harm to my patients. To me, that includes financial harm. But since health insurance took over health care over 40 years ago, health care prices have skyrocketed. And despite what we’re told by the media every day, it isn’t the costs of health care that are outrageous; it’s the charges. So if you’ve ever wondered why we spend so much on health insurance and health care, then come along and join me as I explore the crazy world of Healthcareonomics. Health care doesn’t have to be expensive. Let me show you how. For speaking opportunities and to pass along your questions/comments, please email me at drw@healthcareonomics.com.

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