Stress Test

During the early “easy” miles of the 2007 U.S. Olympic Marathon Trials in Central Park, 28-year-old Ryan Shay collapsed and died.

The autopsy revealed cardiac arrhythmia caused by an enlarged heart.

My late father-in-law, a cardiologist, called me soon after.

“I know you’re perfectly healthy,” he said, “but this guy didn’t know he had a problem until it was too late. Why don’t you get a stress test, just to be sure?”

I was nowhere near an Olympic-level runner, but he worried that the stress of my training could expose something hidden.

So I scheduled an appointment with my local cardiologist. As the consultation wrapped up, the doctor said,

“You’re a healthy thirty-something, so you’ll probably have to pay for this out of pocket.”

“Okay,” I replied. “How much will it cost?”

“I actually don’t know,” he said. “Someone on my staff can get you that information.”

Driving back to work, I couldn’t shake the thought:

When else would I agree to buy something when neither I nor the provider knows the price?

The test results were clear, as expected, but the experience left me thinking about risk and return.

At the time, I was a portfolio manager. My world revolved around markets—how they function, and what happens when they don’t.

Prices are information wrapped in incentives. They help us make rational trade-offs when allocating scarce resources.

Without them, resources are misallocated, costs rise, and value declines.

Doesn’t that perfectly describe our healthcare system?

When I made the leap and no longer depended on employer-provided insurance, that reality hit home.

Our premiums kept rising regardless of our usage.

This year, our family will spend between $30,000 and $40,000 on healthcare—mostly in premiums—and we’re relatively healthy and active.

Those annual increases show no sign of slowing.

That’s why we decided it was time to make a change and switch to CrowdHealth, a for-profit crowd sharing platform.

Healthcare Since Making the Leap

I did not make the decision to switch lightly or without experience.

Since making the leap, I have tried nearly every type of healthcare option available to entrepreneurs.

COBRA

We kept my previous employer’s plan for 18 months and paid the full premium ourselves. It was my first real look at the true cost of healthcare. Most employees never see that cost directly, but they still bear it indirectly through lower wages and smaller raises.

Healthshare

We tried one of the larger health-sharing programs for a few years. It worked well at first, but the company changed internal systems and lost several of our submitted expenses. We ended up having to negotiate directly with hospitals for bills that had already been approved.

Employer Provided

When my first company got up and running, we offered traditional insurance to employees. It was my first experience purchasing coverage as an employer. Each year we faced the same pattern of higher costs, fewer options, and reduced coverage. I see the same thing with my current clients.

ACA Marketplace

After winding down my company and shifting into fractional CFO work, I purchased coverage through the ACA Marketplace. The pattern continued with rising premiums, shrinking networks, and worsening deductibles, particularly over the last few years.

Why I Switched

The economics:

My current traditional insurance plan:

• ACA Bronze

• $20,100 in annual premiums

• $18,400 deductible / max out-of-pocket

The basics for CrowdHealth’s model:

• You pay monthly subscription + share amount instead of a premium
• You pay for the first $500 of any procedure
• Pre-existing conditions are excluded for 2 years but capped after
• They help you negotiate potentially significant cash pay discounts

With CrowdHealth:

• $6,800 in annual subscription and sharing costs

• $8,100 in (projected) out-of-pocket spend

The potential savings is substantial, almost $20,000 per year given my assumptions.

If you want to perform the analysis for yourself:

Subscribers to the Leap find the link to the spreadsheet model I built to understand the tradeoffs by clicking on the image below. You will find the link under Models & Frameworks. The spreadsheet includes a link to a brief walkthrough video.

To be clear, the potential savings are based on my assumptions about the number of new and pre-existing events my family will incur in a typical year.

Like almost everything in life, it boils down to a risk-return decision.

The Tradeoffs

The decision to switch to CrowdHealth came down to one fundamental tradeoff—the premium savings versus the potential out-of-pocket cost.

The premiums saving side is a known quantity. My family will save $13,000 next year by switching to CrowdHealth.

That cushion provides a lot of room for error when predicting out-of-pocket costs.

Three Key Factors About Out-of-Pocket costs:

Number of New or Shareable Events

This is the least of the risk factors. You must cover the first $500 of every health event before it is eligible for sharing.

Even if you had dozens of these types of events, it compares to what you would have to pay with your deductible in a traditional plan.

Number of Pre-Existing Events

Pre-existing events is where you are most at risk. They will not be eligible for sharing for the first two years and the maximum amount allowed after two years is $25,000.

That is where the model I built provided perspective. Even assuming a dozen specialist visits and as much testing I found we would come out ahead.

Obviously, rare or chronic pre-existing illnesses break the model but even here CrowdHealth offers potential mitigation - negotiating on your behalf.

CrowdHealth Negotiates for You

My opening story about no one knowing the cost of medical care is true in more ways than one.

The prices people are charged are often contracted insurance prices from the insurance companies NOT the actual price the hospital or medical provider would accept.

That’s why you hear stories about hospitals charging $10 for a single aspirin.

I’ve been following CrowdHealth for a few years and one of the most impressive things is their ability to negotiate on your behalf.

The example below with 98% savings is extreme but they and their members often post examples of 50% or more discounts.

For my analysis I estimated a conservative 30% which is close to what many medical providers offer for cash pay discounts.

The Next Step

This decision ultimately came down to numbers but I also align value-wise with the founder and mission of CrowdHealth.

They believe a critical ingredient in reducing healthcare costs and improving accessibility and quality is price transparency combined with dis-intermediating the insurance companies.

I couldn’t agree more!

My goal with The Leap is to provide you each Saturday with the knowledge, tools and lessons learned to help you get started and keep going toward building your future. 

Whether you are making the leap to startups, solo-entrepreneurship, freelancing, side hustles or other creative ventures, the tools and strategies to succeed in each are similar.