Let's use atomic physics and marine biology to talk about health plan costs. Here we go…
Atoms and clams
The difference in how the world works at the visible level versus the atomic level has always fascinated me.
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Imagine if you took seventy-nine clams and crushed them together and suddenly ended up with a refrigerator! Things don't work that way macroscopically, but when you get down to the minuscule, that's precisely what you get: an atom of hydrogen is just a single proton, more or less. An atom of gold, on the other hand, is made up of seventy-nine protons. It's a difference in quantity, not of quality, and yet how very dissimilar gold is from hydrogen!
At the macroscopic level, you'd just end up with a bunch of mushy clam parts. At the atomic level, you end up with gold.
You're not a clam. You're an atom.
Believe it or not, participants in a health plan behave a lot more like atoms than like people. It's true! If you have a plan with five participants and a plan with five thousand participants, it's really like the mushed-up clam parts, right? You just lumped a thousand of the first plan together and ended up with the second, right?
Nope.
A small health plan is different in kind from a large one. Administrative costs, logistics, available benefits. It's a completely different animal. It's not that you just need more carriers or administrators or brokers: you need entirely different skillsets. So large health plans probably cost more than small ones, right?
Again, nope.
Large health plans versus small health plans
One area I'd like to highlight that compares the hydrogen of the small plan to the gold of a large plan is in what plan sponsors are actually paying to cover their employees. The results may not be surprising, but the magnitude of scale is sure to shock a few.
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The median premiums paid by large health policies (those covering more than 5,000 lives) ran to more than $15 million. In contrast, a small health policy (those covering fewer than 25 lives) costs, on average, around $70,000. Compared to $15 mil that's chump change: you could get more than 200 small health plans for the price of a large one. It looks at first glance like larger sponsors are paying out the proverbial wazoo to cover their participants. But when we look at these premiums at the participant level, we see just how different the two plan extremes are.
Large health policies paid $330 in premiums to cover a single participant. These are the Exxons and Wal-Marts of the world. Small health policies, the mom and pop shops, paid $5,034!
The bottom line
It costs 15 times as much for a small employer to provide health insurance to a participant than it does for a large employer.
Talk about wealth disparity. Now that's a lot of clams.
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