Analysis of Health Insurance

Proposal for HUDS/Local 26

Prepared by Rahul Nayak, Sanjay Kishore, Darshali Vyas,
and Micah Johnson
Harvard Medical School Class of 2019
September 2016

Summary:

Harvards proposed health plan is more expensive for Harvard employees than what would be
available to them on the Massachusetts health care exchange if Harvard did not offer any health
plan.

Even with proposed protections for low-income workers (co-pay reimbursements) the plan is
more expensive than plans available through the exchange and may threaten the financial
security of many families of Harvard employees.
Background:

Harvards proposed plan would cost workers making less than $55,000 a year $233/month for
family coverage ($77 contribution/week for 36 weeks/year).

Additionally, proposed changes would increase co-pays for nearly all health services.

The proposed plan has some protections to limit co-pays for low-income workers through an
after-the-fact reimbursement program. However, these protections require workers to pay the
full co-pay, save receipts, and actively file for reimbursement.
Harvards Health Plan Is Unaffordable According to Government Standards:

The state of Massachusetts ensures that workers who do not have employer-sponsored
insurance have access to affordable health insurance. The premiums, co-pays, and out-ofpocket costs families pay is based on income and family size.

For nearly all dining workers, Harvards proposed health plan is considered unaffordable under
state government guidelines.

Many workers would be eligible for health plans that have lower premiums, cheaper co-pays,
and smaller out-of-pocket maximums (see Appendix for more details). This is even after taking
into account Harvards co-pay reimbursement plan.

If Harvard offered comparably affordable health insurance, the average worker could save
thousands of dollars every year (see Appendix for more details).
Bottom Line:

For nearly all dining workers, Harvards proposed health plan is considered unaffordable under
state government guidelines.

Many dining workers would receive more affordable health insurance under plans on the
Massachusetts exchange. If Harvard offered comparably affordable health insurance, most
workers could save thousands of dollars every year.

More Detailed Analysis

Harvards Health Plan Is Unaffordable Compared to Health Exchange Plans

If Harvard did not offer an insurance plan, many workers would qualify for subsidized health
insurance under the Massachusetts health insurance exchange. The subsidies are based on
families relationship to the federal poverty level, which is a function of income and household
size.

o
o

Lets imagine that you make $30,000/year and you have a family of 3.
Your income and family size would put you at 148% of the federal poverty level.
You would be eligible for Massachusetts Connector Plan 2A, which has no monthly premium
and lower out-of-pocket costs than Harvards plan.
Massachusetts Connector Plan 2A

Harvard Plan

Premiums

$0

$233/month

Co-Pays

Mostly cheaper

Mostly more expensive

Prescription Drug Costs

Similar

Similar

Out-of-Pocket Max

$1500

$2000

If your family was completely healthy the entire year, and never had to use healthcare, here is
what your minimum health care costs would look like:
Best-Case Scenario

Mass. Connector Plan 2A

Harvard Plan

Premiums (annual)

$0

$2800

Out-of-Pocket Spending

$0

$0

Total Spending (% of Income)

$0 (0%)

$2800 (9.4%)

If your family had a severe illness, medical emergency, etc. in a year, here is what your
maximum health care costs would look like:
Worst-Case Scenario

Mass. Connector Plan 2A

Harvard Plan

Premiums (annual)

$0

$2800

Out-of-Pocket Spending

$1500

$2000

Total Spending (% of Income)

$1500 (5%)

$4800 (16%)

From the best case to the worst case, Harvards plan costs this family ~$3000 (~10% of income)
more every year
Premiums

Under the Affordable Care Act (Obamacare), individuals who do not receive insurance from their
employer can apply for coverage on an exchange.

On the exchange, they receive subsidies if premiums are more than a certain percentage of
their household income. In other words, people should not have to pay more than a certain
percentage of their income towards health insurance.

The guidelines for the maximum amount that can be spent on monthly premiums is even more
generous in Massachusetts:1
Household Income % of federal poverty level

Premium (Monthly)

<133%

$0

133-150%

$0

150-200%

$43

200-250%

$82

250-300%

$123

Summary: Harvards health plan has more expensive premiums than what workers can find on
the Massachusetts exchange.

Co-Pays and Out-of-Pocket Maximums

Along with increased co-pays, Harvard is proposing a reimbursement program for low-income
workers that will limit out-of-pocket costs. With this program, the out-of-pocket maximum
(maximum amount of money you will spend on medical care besides premiums) will be capped
at $1025 for individual coverage, or $2000 for family coverage. However, workers will have to
get reimbursed for spending over this amount.

However, many other plans on Massachusetts exchange have even lower out-of-pocket
maximums (Type 2A/2B on table below).

To qualify for the Harvard reimbursement program, workers would need to fully pay all co-pays
throughout the year and save their receipts, potentially jeopardizing their financial security.
Summary: Harvard plans also have more expensive out-of-pocket costs than plans on the
Massachusetts exchange, and the design threatens the financial stability of low-income
workers.

1 The state subsidizes insurance plans such that there is at least one health insurance plan that has the premiums listed in the
table. https://betterhealthconnector.com/wp-content/uploads/ConnectorCare-Placemat-090816.pdf. Other insurance plans may have
more extensive networks, but charge higher premiums. However, all of these plans still have smaller premiums than Harvards
proposed plan for most workers. For example, the Neighborhood Health Plan charges $150 under the 2A plan and is a broad
network plan like Harvards proposed plan (see https://betterhealthconnector.com/wp-content/uploads/ConnectorCare-Placemat090816.pdf).

Health Insurance Comparison

MassHealth, Type 2A/2B, and Type 3A/3B are health insurance plans subsidized by the
government.2

Many workers would qualify for these plans based on their income and family size.
Plan

Mass
Health

Income - % of
federal poverty
level

Type
2A

Type
2B

Type
3A

Type
3B

Harvard

Harvard with
Co-pay
Protection

<138% 138%150%

150%200%

200%250%

250%300%

All
income

<$75,000

Monthly
Premiums

$0

$0

$43

$82

$123

$2333

$233

Out-of-Pocket
Maximum:

$0

$750/
1500

$750/
1500

$1500/
3000

$1500/
3000

$2,000/
6000

$1025/
2000

PCP:

$0

$10

$10

$15

$15

$20

$20

Specialists:

$0

$18

$18

$22

$22

$20

$20

ER:

$0

$50

$50

$100

$100

$100

$100

Outpatient:

$0

$50

$50

$125

$125

$100

$100

Inpatient:

$0

$50

$50

$250

$250

$100

$100

Imaging:

$0

$30

$30

$60

$60

$50

$50

Lab/X-ray:

$0

$0

$0

$0

$0

$0

$0

Generics:

$1

$10

$10

$12.50

$12.50

$7

$7

Preferred:

$3.65

$20

$20

$25

$25

$20

$20

Non-Preferred:

$3.65

$40

$40

$50

$50

$45

$45

Specialty:

$3.65

$40

$40

$50

$50

2 https://betterhealthconnector.com/wp-content/uploads/ConnectorCare-Placemat-090816.pdf
3 This premium is for family plan for workers making under $55,000. For workers
making over $55,000, the premiums are higher.