Bills pull family into spiral of debt Dad's dream job pays well, but provides no health coverage

Amanda J. Crawford The Arizona Republic Jan. 15, 2006 12:00 AM

It seemed like a dream come true for Aaron and Stacee Porter.

Aaron was offered an $80,000-a-year job with an Internet start-up company in Scottsdale. Along with doubling his salary as a Web developer, the new job allowed him to work outside the office, which meant they could live anywhere in the country.

The one catch: no health benefits. The company was just getting off the ground and hoped to offer benefits later.

Aaron and Stacee reasoned that because their family was young and healthy they could take the risk. Besides, this was their chance to leave Seattle and move to southern Utah. Part of a large Mormon family, they would be halfway between relatives in central Utah and the East Valley.

The Porters would soon learn how big a risk they had taken. Like millions of Americans, they would find themselves paying more for less health care. The pattern would get worse year after year. Even with a good salary, they would discover how hard it is to obtain insurance when no plan is offered at work. Their story is one glimpse of how the decline of job-based insurance is fundamentally changing life for people at all levels of American society.

Aaron took the job, and in August 1999, the Porters moved to Utah. A few weeks later, they drove down to Chandler to visit Stacee's sister. Stacee began to feel sick on the drive. When they reached her sister's house, Stacee jumped out of the car and vomited in the gutter. She figured it was something they had eaten, but no one else got sick. Aaron said they should go to the emergency room.

"I don't want to go," Stacee told him. "We don't have insurance, and we're on vacation. I'll get better."

But she didn't. Aaron took her to the Chandler Regional Hospital emergency room where tests indicated Stacee had gallstones. She was sent home on a restricted diet, but got worse. She returned to the hospital the next day and doctors removed her gallbladder. But there were complications, and Stacee had to have a second operation by a specialist.

Over the four days Stacee spent in the hospital, no one ever discussed the cost with them.

Several weeks later, they received a $3,000 bill for the first emergency-room visit.

Aaron and Stacee were stunned. But this was just the first in a series of bills.

An ultrasound test ran a couple of hundred dollars. The anesthesiologist bill ran several hundred. The two surgeons charged about $1,000 each. Then came the bill for the overall hospital stay: $36,000. The day it arrived, Stacee wept for hours.

Stacee called the hospital and said there must be some kind of mistake. After reviewing the bill, the hospital agreed: She was in a semiprivate, not a private, room. The bill was knocked down to $32,000.

Aaron and Stacee had used their savings to make a down payment on their new house. They had no money to pay the bills.

All Stacee could think about was how they were going to lose their home and end up bankrupt.

She gathered up all the bills and put them out of sight in a drawer. Whenever a new bill arrived, she slipped it unopened into the drawer.

Months passed. Collection agencies began calling. A year after her surgery, pregnant with their fifth child, Stacee opened the drawer, took out the bills and decided she had to do something.

She began to call the health care providers to explain her situation and plead with them to reduce their charges. To her surprise, some did. The specialist, for example, cut his $900 fee to $300. Almost everyone she called adjusted the fees except the first surgeon. On the $32,000 hospital bill, Chandler Regional Hospital's billing office suggested she make one small payment, then come talk about the bills in person.

That Christmas, they returned to spend the holiday with Stacee's sister. They went to the hospital to plead their case. The hospital offered a deal. The bill would be cut to $5,000 if the Porters could pay in a week. If the Porters did not pay in a week, the hospital would reduce the bill only to $24,000.

With a high-interest loan offer they received in the mail, Aaron and Stacee borrowed $6,000 against their van, which enabled them to pay the hospital and some other bills.

Medical bills pile up

Over the next couple of years, while they continued to hope Aaron's employer would provide insurance, they suffered no other major medical emergencies. Nonetheless, their medical debts steadily grew. The birth of their fifth child, Brett, in October 2000, set them back $6,500. To save money, they explored alternative therapies and homeopathic remedies.

When son Rayden fell off a trampoline and appeared to have a broken arm, they decided not to take him to the hospital or even to see a doctor.

Instead, they consulted a friend from church who was a physical therapist. He checked out the boy and told them that although he thought the arm was broken, it was minor. He said a doctor would probably just put the arm in a sling.

Aaron and Stacee decided to follow his advice.

Pitfalls of contract work

In the spring of 2001, the stock market's Internet bubble burst. By the end of that year, Aaron's company began to struggle. Sometimes, he would not be paid. In one four-month period, he received just $500. The family lived off credit cards. Aaron began looking for another job and took any outside computer-programming work he could find.

But work was scarce in St. George, Utah. And as a contract worker for an out-of-state company, Aaron didn't qualify for Utah unemployment.

In early 2002, Stacee discovered she was pregnant with their sixth child. Because their income had plummeted, Stacee and the kids qualified for Utah's Medicaid program. Soon, bill collectors began calling again. The family was $30,000 in debt, about half from medical expenses.

Now, the Porters faced foreclosure on their home. They eventually sold it for less than it was worth and moved in with Stacee's parents in central Utah.

Soon after, Aaron got a call from an old friend about a computer-programming job in Tempe with Philips Semi-Conductors. The position paid $80,000, the same as the job he had just lost, but he would be employed as a temporary worker through an agency.

Aaron took the job in June 2003, and the family moved to Gilbert. The temporary agency did offer health coverage, but at a cost of nearly $1,000 per month it was more than Aaron and Stacee could afford.

Searching for insurance

That fall, after Aaron and Stacee had gotten their finances in better order, they decided to look for a private insurance plan.

Stacee called a couple of large insurance companies. Comprehensive coverage, including doctor visits and prescriptions, would cost more than $1,500 a month because they had such a large family and a child with asthma.

They decided on a basic plan at $350 a month that would cover most of the cost for emergency-room visits and some prescriptions. When the premium went up the next fall, Stacee decided to change plans. She chose a plan for $150 a month that she thought would provide the same level of coverage.

Later, she discovered it did not. The new plan was a catastrophic plan, which paid for only 75 percent of emergency care after a deductible of $2,500 a person or $7,500 per family.

About the same time, Aaron began looking for another job. He wanted a job in Web development again and was hoping to find one with health benefits.

He got several job offers, all as a contract worker and none with benefits. He took another contract position with Eufora, a prepaid credit-card company in Scottsdale, at a higher salary of $110,000.

In the spring of 2005, their youngest son, Logan, then 2, complained about sharp stomach pain. When the pain got worse, Stacee and Aaron rushed him to the emergency room. It turned out the boy only had gas, but the visit cost $1,400.

Their insurance plan earned them a discounted hospital rate but didn't pick up any of the bill. Since then, the monthly premium has gone up to $194 a month.

Still coping with debt

On a recent morning in the large Gilbert home the family rents, Stacee and the kids were in the kitchen stirring electrolyte-replacement powder into glasses of water, one of Stacee's home remedies that she believes helps keep her kids healthy.

They still owe at least $10,000 in medical debt. No creditors have called recently. She hopes they have forgotten them.

But sitting in front of the house is a constant reminder of their six years of troubles: the van they borrowed against to pay for Stacee's gallbladder surgery. It has been there for months, broken down. And the Porters still owe about $4,000.

Health care's foundation crumbling

Amanda J. Crawford The Arizona Republic Dec. 23, 2005 12:00 AM

For decades, most Americans have counted on their employers for health insurance.

Job-based insurance took hold during World War II as companies offered health benefits to attract scarce workers. Encouraged by federal tax breaks, job-based benefits soon became the financial foundation of the U.S. health care system, eventually covering more than two-thirds of the population.

But that foundation is crumbling, strained by rapidly rising health care costs and the competitive pressures of the world economy. Now, slightly more than half of Americans have insurance through a job, a number that has been declining steadily since 2000. More people than ever are uninsured or enrolled in state Medicaid programs that cost taxpayers billions.

The decline in job-based insurance is having profound ripple effects on American lives and the overall health care system. Workers who once enjoyed generous insurance plans now pay much more for less coverage. Many people skip or cannot obtain needed care. Others face financial ruin when health problems become serious. And retirees across the country have seen promised health benefits reduced or eliminated.

In Arizona, the situation is even worse than in the nation as a whole.

Fewer than half of the state's residents are insured through an employer's plan, one of the lowest levels in the country and a rate that is declining faster than the national average.

The percentage of residents with job-based insurance fell from 55 percent in 2000 to 48 percent in 2004, according to an analysis this fall by the Kaiser Family Foundation.

Almost 1 million Arizonans were without insurance in 2004: about 20 percent of the population under age 65, one of the highest levels in the country. And more than 1 million residents get their insurance through the state's Medicaid program, costing state and federal taxpayers more than $5 billion per year.

"We have a real serious problem in this state," said Bradford Kirkman-Liff, a professor of health policy at Arizona State University. "I think the job-based system is clearly no longer viable."

The federal government predicts health care costs will nearly double again in the next decade. Corporate executives, union officials, economists and political leaders are warning that the job-based insurance system is no longer sustainable. Many Americans cannot qualify for or afford private insurance on their own.

Without drastic changes, many experts predict that a major crisis affecting the majority of Americans is not far off. More middle-class families without insurance. Unprecedented strain on hospitals and other health care providers. The fiscal collapse of public health care programs.

"There is a huge collision on the horizon between the forces that are driving medical costs up . . . and the ability to pay for health insurance," said Paul B. Ginsburg, president of the Center for Studying Health System Change, a nonpartisan policy research group in Washington, D.C.

Increasingly the discussion about our health care crisis is on how to replace the financial foundation that job-based coverage once provided.

Soaring costs pushing insurance out of reach When America's job-based insurance system took hold in the 1940s, most European nations had already created national health systems. In the United States, several attempts to do the same failed, attacked by doctors who feared government intervention in their practices and others who said it smacked of socialism. So the government promoted job-based benefits through tax incentives. (Employer contributions to health insurance premiums are tax deductible for employers and tax-exempt for employees.) Today, the United States is the only industrialized nation in the world that depends on employers to finance the medical needs of most of its population.

By its very nature, the U.S. job-based insurance system has always been subject to fluctuations in the economy and has never been able to provide coverage for everyone. Historically, job-based health coverage expanded in good economic times and declined during recessions. What is alarming now is that even with recent economic expansions, job-based coverage since 2000 has steadily declined.

Skyrocketing health care costs and growing global economic competition have pushed more and more employers to scale back insurance programs. At the same time, the loss of well-paid manufacturing jobs with generous benefits and the increase in service-sector, temporary and other jobs that often have limited benefits mean that more and more Americans work with little or no health insurance.

When job-based health coverage is available, soaring health care costs are driving up premiums. Over the past five years, premiums for job-based health insurance have grown 73 percent, four times faster than inflation or wages, according to an annual employers survey conducted by Kaiser and the Health Research and Educational Trust. Today, the average job-based insurance premium for a family of four is nearly $11,000 a year.

Employers say that rising costs have left them with no choice but to scale back their insurance plans.

"No company, even a large company, can sustain that level of increase in a basic operating cost," said Andrew Webber, president and chief executive of the National Business Coalition on Health. "Something has got to give."

In Arizona, according to the federal government's most recent Medical Expenditure Panel Survey, about half of all Arizona businesses offered health insurance to workers in 2003, down about 11 percent since 2000.

Much of that decline was among small businesses, which pay higher premiums and are much less likely to offer coverage. In Arizona, small businesses with fewer than 50 workers represent nearly three-quarters of all companies and employ about a quarter of Arizona workers. In 2003, only 39 percent of those companies offered insurance.

But even at large companies, benefits are thinning in the face of soaring costs and stiff global competition. Health plans have become more restrictive, waiting periods to qualify for coverage are longer and it has become more difficult for workers to obtain coverage for their families. According to federal statistics, less than half of the employees at medium and large companies had to pay for health coverage in 1980. In 2004, 89 percent of workers paid. Employees are also paying much more in out-of-pocket costs, such as co-pays, deductibles and costs for drugs and hospital stays.

Over the past four years in Arizona, medium and large employers (50 workers or more) saw their per-employee costs for health insurance rise by about 51 percent. During the same period, the average employee's costs for premiums and out-of-pocket expenses jumped by 63 percent, to $3,564, according to an analysis conducted by Mercer Human Resource Consulting for St. Luke's Health Initiatives, a Phoenix-based health policy foundation.

All these changes have pushed insurance out of reach for some workers and left others, especially those with chronic illnesses, saddled with thousands of dollars in out-of-pocket costs not covered by their plans.

Half a century after job-based insurance was used to attract and retain workers, it has now become a business liability and, for workers, much harder to find or afford.

Businesses struggle with health benefits In today's world economy, health care costs are a drain on many businesses as they struggle to compete with overseas companies that pay workers far less and provide few benefits.

Even unions that have fought to maintain generous health insurance for workers are beginning to make concessions.

Last fall, the United Auto Workers agreed to health insurance cuts at General Motors in hopes that the $1 billion in annual savings would help revive the company. Workers and retirees will pay more in the deal, which will reduce the health care liability that GM has said adds $1,500 to the price of every car it sells. Ford recently struck a similar deal and Chrysler also wants concessions from the union.

Given that GM and the UAW were pioneers in establishing job-based insurance, the agreement was a strong signal of just how troubled America's system is.

In Arizona, the economy is dominated by construction, tourism, retail and service industries, jobs that typically offer limited or no health care coverage.

Wal-Mart, the discount retail giant, is the largest employer in Arizona and in the United States. About 29,000 Arizonans work at Wal-Mart. The company offers health insurance, but waiting periods are long, deductibles and other costs are high and part-timers cannot insure their families.

Less than half of Wal-Mart's employees nationwide are enrolled in the company's health plans. Many others are enrolled in state Medicaid programs, including about 10 percent of its Arizona workforce at an estimated cost to taxpayers of $15 million per year.

Health care costs have made it attractive for employers to hire workers not eligible for typical employee benefits, including those who work through outside agencies or who are self-employed independent contractors. A recent report by the Iowa Policy Project, a nonpartisan research organization, found that one in four workers, or 34 million Americans in 2001, worked in temporary, part-time and contract positions. The report noted that our economy's shift to these kinds of jobs is "threatening to unravel the employment-based health insurance system in the United States and swell the ranks of the uninsured and underinsured."

In the face of rising costs, some business leaders are openly calling for an end to the job-based health insurance system.

One is Robert S. Miller, chairman of Delphi, an auto-parts supplier and former GM subsidiary that recently went into bankruptcy.

"Back in the days, when you worked for one employer till age 65 and then died at age 70, and when health care was unsophisticated and inexpensive, the social contract inherent in defined-benefit programs perhaps made some economic sense," he told the Wall Street Journal in October about his efforts to turn Delphi around. "Today, defined-benefit programs are an anachronism"

Few corporate executives in Arizona have been as outspoken. But in private conversations, health care costs are on many minds, and many discussions focus on how to replace the job-based system.

"You have more business leaders willing to enter into that conversation, mostly for self-serving reasons, quite frankly," said Roger Hughes, executive director of St. Luke's Health Initiatives. "This is a huge burden on their bottom line. It has become pretty clear that this system is not sustainable, and business leaders are finally coming to this conclusion."

As plans inch forward, a health crisis looms While some discuss how to replace the job-based insurance system, others are trying different ways to shore it up.

There are proposals in Washington to make it easier for people to buy insurance on their own. Congress has appointed a citizens task force to hold town meetings around the country on the future of America's health care system. National initiatives are pushing the health care industry to expand its use of information technology, such as computerized medical records, in hopes of reducing costs.

Employers are offering wellness programs, discouraging unhealthful behavior like smoking and banding together to rate the quality of health care providers in hopes competition will ultimately lower their insurance rates.

There are also new "consumer driven" health plans that pair high-deductible health insurance with tax-free medical-savings accounts. Many economists predict that these plans, only beginning to be offered by employers, are the wave of the future.

Supporters say such plans will save employers money, allow more people to obtain coverage, turn Americans into more prudent consumers of health care and improve the overall health care system by giving patients greater flexibility to shop for their own care. But critics say the higher deductibles and out-of-pocket expenses will cause some people to skimp on care and drain people with chronic conditions.

"I am convinced that consumer-driven health plans will save money," Dr. A. Mark Fendrick, a professor of internal medicine and health management and policy at the University of Michigan, told employers gathered in Scottsdale in November at a National Business Coalition on Health conference. "But as you cost-shift, people will get sick and die."

Still, even the most optimistic experts say that these and other ideas will not be able to avert the crisis in health coverage that many predict in the next decade.

America's aging population combined with the expense of new medical technology and treatments are likely to continue to drive care costs up. And, as costs rise, the job-based insurance system will continue to unravel, overwhelming hospitals and public-assistance programs.

Tommy Thompson, secretary of the U.S. Department of Health and Human Services from 2001 until January 2005, supports many of the new cost-cutting initiatives. But he believes they will not be enough to avert a crisis. He said more drastic measures are necessary, including major reforms of Medicaid and Medicare, government assistance to help employers provide insurance and programs to cover the nation's 46 million uninsured.

"We have eight years to make some dramatic shifts in the transformation of health care," Thompson predicted. Without significant changes, spending on health care in the United States is projected to climb from $1.9 trillion this year to $3.4 trillion in 2013. "I don't think the system can afford that."

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