A Cautious Blessing in Disguise: Skinny Health Plans & A Transparent Free Market

BY Adi Y. Segal & Nathan Carroll

Due to recent developments we took a deep dive into a type of health insurance plan called minimal essential coverage (aka catastrophic coverage), also colorfully referred to as “Skinny Plans.” Recently, they’ve been given new life as a cheaper alternative to more comprehensive plans. Before going down this potentially dangerous road, we’d be remiss not state a few caveats regarding our stance on health insurance:

1. In an ideal world we would have a single payor system; and
2. Given our country’s fierce embrace of individualism, capitalism, and political acrimony, getting to a national healthcare system is an uphill battle and unlikely a near term reality;
3. To make a single payor system work, it needs to be a unified government initiative (see #2).

That said, let’s dig into the frequently reviled, but poorly understood, ‘Skinny Plans’ and examine them from a free market and consumer empowerment perspective.

What are Minimal Essential Coverage (MEC) plans? MEC’s adhere to two essential coverage standards. First, the plan needs to provide ten key benefits. Second, a minimum of 60% of the costs of those ten benefits need to be covered by the plan. Note that the plan probably won’t fully cover the expenses associated with those ten benefits. In return for reduced coverage, the plans tend to be much more affordable.

So, who would benefit from a MEC? Short answer: they may be a good fit for young, healthy people. Long answer: potentially, everyone could benefit. To unpack this, we need to talk a little about how insurance and free market economics work.

If you need a colonoscopy or a sebaceous cyst removal or a flu shot, what determines the price? In a free market, supply, demand, and competition would determine it. In the system we have today, prices are opaque and determined by closed-door dealings between providers and insurance companies. However, driven by increasing consumer desire and championed by organizations such as the Benjamin Rush Institute and leaders like Dr. Beth Haynes, price transparency and free markets are starting to return to healthcare.

When a consumer has regained the power to shop for value, minimal essential coverage becomes a much more appealing option. The average individual’s deductible in 2017 was $4,328. For the average 27 year old in 2018 (the age you can no longer be on your parent’s insurance) the average yearly salary was $38,112! For that same 27 year old, depending on the region, even a bronze level plan will probably cost hundreds of dollars each month. For them and many others, a skinny plan costing $50 a month may make financial sense.

In the end, barring the statistically rare unforeseen injury, you have to ask yourself, who you trust more with your money. Do you trust yourself to keep prices low? Or do you trust a health insurance company that wants to charge you a high premium, give you an exorbitant deductible, and set healthcare prices behind closed doors? Minimal essential coverage is not the answer, but it is a step towards returning control back to the consumer where it belongs.

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Adi Y. Segal is the CoFounder and CEO of SeeThru.

Nathan Carroll is a medical student and MBA candidate at Rowan University. When not buried in the books, he is usually training in martial arts or playing with his dog. He can be reached at nate@seethru.healthcare.