Tag Archives: Stuart Rachlin

Young uninsureds ask, “Do I feel lucky?”

Last month the New York Times used Milliman research to illustrate the choice facing young people who are currently uninsured: Do I buy a policy on the Patient Protection and Affordable Care Act (ACA) state exchange or pay the penalty for going uninsured and take my chances? An article in Newsweek picked up on this question by using Milliman data to assess the probability that an individual exceeds certain thresholds in medical costs.

• $0: There’s a 7% chance an average adult incurs no health expenses in a year.
• $10,000: There’s a 24% chance an average adult incurs $10,000 in health expenses in a year.
• $30,000: There’s a 10% chance an average adult incurs $30,000 in health expenses in a year (sourced from the Times article).
• $100,000: There’s a 2% chance an average adult incurs $100,000 in health expenses in a year.

These numbers help to further put the insurance purchasing decision in context. Newsweek ties the $10,000 number to the Kaiser Family Foundation’s estimate that individual premiums cost $9,068 and uses this to suggest “health insurance is a crummy deal most of the time.” While the chances of exceeding $10,000 in costs are “only” one in four, the risk of costs climbing above that are not insignificant. To quote Stu Rachlin from the Times piece:

“Getting struck by lightning is an insignificant risk,” said Stuart D. Rachlin, a principal and consulting actuary at Milliman, who calculated that the average American under the age of 65 had a 10 percent chance of incurring more than $30,000 in medical charges, including drugs, in a year. “To me, a 10 percent risk is a meaningful possibility.”

Many young people will go ahead and take their chances. And you can’t blame them based on their typical usage patterns. Earlier this month Fox, also using Milliman numbers, reported on average physician usage by young people:

For those who are insured, the New York health care consultant company Milliman says men 19-34 years old will see a doctor 1.8 times a year compared with women, who will on average see a doctor 3.6 times. The two data points suggest many young people may not see health insurance as necessary.

Of course there’s potential that anyone could see far more extensive medical costs in a given year. A second New York Times piece sizes up this risk:

The obvious problem is that you can’t know in advance if your costs for the year will be typical. If you are unfortunate enough to have a costly medical problem, you could end up with far higher bills. Milliman calculated that 5 percent of the population will incur bills, absent insurance, exceeding $47,300… Of course, Milliman doesn’t know whether you are likely to become sick and to be among the top 5 percent or even the top 20 percent (who are billed more than $13,300). When choosing insurance, consumers need to consider their personal situations — and their stomach for risk.

With the first round of open enrollment for ACA policies now complete, some people who were previously uninsured have now made their decisions for 2014, with latter open enrollment periods still to come. Time—and individual circumstance—will determine whether people are happy with their decision.

The choice facing many young people: Buy insurance or pay the fee?

The New York Times today analyzes the decision facing many young people as the Patient Protection and Affordable Care Act (ACA) comes online: Is it in my economic best interest to buy insurance through the exchange, or should I go without insurance and pay the penalty? The Times worked with Milliman to examine this question given a range of possible scenarios. This infographic summarizes our findings:

Comparing_ cost_of_3_conditions

This excerpt helps explain the analysis:

Consider a young uninsured man living in New York City who earns $50,000, which means his income is slightly too high for subsidized coverage. If he received treatment for his back, he would, on average, be billed about $4,890 in 2014, according to an analysis conducted by Milliman, a consulting and actuarial firm, using data from the latest Medical Expenditure Panel Survey. That includes the cost of treating his back, as well as other typical medical and prescription expenses during the year. Add in the $400 penalty, and his total outlay for the year reaches about $5,290.

But if he bought the silver plan with the cheapest premiums on the New York health insurance exchange, his overall costs would be slightly less, or $5,133, according to Milliman’s analysis. That includes about $4,311 in annual premiums and $821 in out-of-pocket costs. (Again, a young person may pay even lower premiums in other places).

A catastrophic plan, which has high deductibles and low premiums, purchased on the New York exchange would cost the young man with a compromised back $4,940, still less than remaining uninsured (about $2,200 in annual premiums and nearly $2,740 in out-of-pocket costs). Catastrophic plans, which are available to people under 30 or those suffering a hardship, generally require that you shoulder all of your medical costs until you meet the hefty annual deductible.

But there are instances where the uninsured young person — even one with a medical ailment — could potentially pay less. Milliman estimates that a young person with asthma would incur medical charges of $2,200 a year, or less than half the cost of buying the cheapest silver plan in New York.

Of course, landing in the hospital even for just a few days — about $11,600 a night for a medical or surgical stay, Milliman estimates — could push any person, young or old, to the financial brink, though a consumer could potentially negotiate those rates down…

There are still millions of people who are expected to pay the penalty and take their chances. “Getting struck by lightning is an insignificant risk,” said Stuart D. Rachlin, a principal and consulting actuary at Milliman, who calculated that the average American under the age of 65 had a 10 percent chance of incurring more than $30,000 in medical charges, including drugs, in a year. “To me, a 10 percent risk is a meaningful possibility.”

Aiming at accountability

With the proposed accountable care organization (ACO) regulations issued yesterday, it’s all eyes on ACOs. This video captures the cost challenge and explores how ACOs may offer a solution.


We have a large library of ACO materials–you’ll find them here. Highlights include papers and posts about:

Check back soon for more on ACOs and the new regulations.