Tag Archive: high deductibles

Complaints over high deductibles call into question future of individual medical insurance

President Donald Trump’s complaint that high deductible medical insurance plans are a bad deal because people can’t use them to cover medical expenses subject to the deductible reflects a fundamental conceptual conflict over medical insurance. Here is what Trump had to say in a Sunday interview with the CBS News program Face the Nation:

We’re going to drive down deductibles because right now, deductibles are so high, you never — unless you’re going to die a long, hard death, you never can get to use your health care–because the deductibles are so high.

Insurance is a mechanism to transfer and share risk. In the case of high deductible medical insurance plans, the risk is high medical bills exceeding the deductible amount is transferred to the plan issuer. The idea of the deductible is that the insured assumes some level of risk. It’s not intended to be “used” or otherwise consumed in exchange for paying a premium. In fact, this mindset can even drive up utilization since people will be motivated to burn through the deductible in order to get their plan to begin paying their medical bills.

Underlying this perception is the transition in the 1970s and 1980s from “major medical” coverage – a true insurance offering designed to cover catastrophic medical costs – to prepaid managed care plans. These are not pure insurance products but are hybrids. The plan assumes a degree of risk of catastrophic care needs such as a major injury or illness. But it also is designed to cover everyday primary care needs. The proliferation of managed care plans and particularly integrated plans where the plan’s own staff providers provide medical care naturally have led people to expect not to have to pay much if anything out of pocket for relatively lower cost care. To them, that’s consuming the coverage they paid for, particularly since the plans they purchased include primary care as they must under the Patient Protection and Affordable Care Act.

When their individual medical plan doesn’t permit that until they’ve racked up several thousand dollars of medical expenses, from their perspective their premium dollars have been wasted even though those premiums insulate them against the risk of large medical bills. However “large” is relative. In a period of declining widespread economic prosperity, medical bills of several thousand dollars that aren’t covered because they fall within the deductible limit are indeed seen as forbiddingly large. Ironically, they even lead to personal bankruptcy – something insurance is specifically intended to prevent.

Ultimately, public policymakers are faced with a question far larger than repairing or replacing the Affordable Care Act. The question is whether financing medical care with an individual or non-group insurance plan makes sense both from an actuarial and public perception standpoint. Or whether it should be a publicly financed mechanism paid though self-employment and income taxes.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Many Say High Deductibles Make Their Health Law Insurance All but Useless – NYTimes.com

But in interviews, a number of consumers made it clear that premiums were only one side of the affordability equation.“Our deductible is so high, we practically pay for all of our medical expenses out of pocket,” said Wendy Kaplan, 50, of Evanston, Ill. “So our policy is really there for emergencies only, and basic wellness appointments.”Her family of four pays premiums of $1,200 a month for coverage with an annual deductible of $12,700.

Source: Many Say High Deductibles Make Their Health Law Insurance All but Useless – NYTimes.com

Americans are having a difficult time adjusting to the new, old “major medical” health coverage of the 1950s and 1960s characterized by high deductible health plans that are rapidly increasing among individual and employer-paid health coverage. For decades starting in the 1970s, “health insurance” was managed care HMO plans that functioned as pre-paid medical care for lower cost care as well as insurance in the traditional sense of the word cover unexpected, high cost events such as accidents and heart attacks requiring surgery and hospital stays. (The California HealthCare Foundation recently issued an updated interactive chart showing the shift from cash to private insurance paid physician and clinical services from 1960 through 2013.)

Now it’s more just plain insurance as it was in the pre-HMO days. Americans are once again paying directly out of pocket for routine and minor care. And they’re not happy about it as this story illustrates. It doesn’t jibe with their expectations relative to the fourth word of the Patient Protection and Affordable Care Act: affordable.

Aside from the difficulties associated with going “back to the future” with major medical plans, people are likely to have a difficult time grasping the value of paying a high premium for catastrophic coverage. They are naturally going to figure if they’re covering what’s known in health insurance as “first dollar” care costs until the deductible limit kicks in, then the premium should be quite low since that is where most of the utilization occurs. It shouldn’t approximate the amount of a monthly housing payment as in the example above. What’s telling here is Ms. Kaplan’s age. The Affordable Care Act allows the use of age as a factor in setting premiums. Once people reach age 50, premium rate-wise the individual health insurance market can be nearly as unfriendly to over 50s as it was before the Affordable Care Act market reforms took effect in 2014.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Are high deductibles truly a barrier to necessary medical care?

One of the goals of opening the government exchanges was to enable more Americans to get health insurance to help cover the costs of needed medical treatments. While many Americans have gained insurance, there has been no downturn in the percentage who say they have had to put off needed medical treatment because of cost. This may reflect high deductibles or copays that are part of the newly insured’s plans, although separate research has shown that most of the newly insured in 2014 are satisfied with their health coverage. (Emphasis added)

Variation in the pricing for medical treatments, not to mention differences in how much insurance plans cover, could be confusing Americans or making them fear a needed treatment is too expensive. And while the costs of medical procedures aren’t rising as rapidly as they once were, it is still too early to tell if that is an effect of the Affordable Care Act and how prices may change in the future

via Cost Still a Barrier Between Americans and Medical Care.

 

This excerpt is from a Gallup poll released last week. Being that this is a public opinion poll, a more nuanced view of the results is called for.

First, it is important to distinguish between individual health plans sold on state health benefit exchanges and employer-sponsored plans. Many of the latter category are increasingly coming with high deductibles. The distinction is important because employer-sponsored plans do not come with premium and out of pocket cost sharing subsidies for low and moderate income households like those sold in the exchange marketplace.

Second, according to the poll, 22 percent of Americans say they have put off medical treatment for a “very” or “somewhat serious” condition in 2014, the percentage having increased slightly since 2013. This is based on a subjective but undefined “serious condition,” so it’s not clear as to the nature of the underlying “serious” condition. If a serious condition was defined in terms of having a serious adverse affect on daily life functioning, it’s unlikely care for the condition would be deferred due to out of pocket costs so this is probably a highly subjective measure.

High deductible plans are being cited by the U.S. Health and Human Services Department’s Centers for Medicare & Medicaid Services (CMS) as a contributing factor to slowing spending on health care in 2013. (Click here for news release). This is based on the conventional wisdom that health care is like other consumer goods and services is subject to the economic principle of price elasticity: demand falls as cost increases and vice versa. But is it really? Do people reason, “Oh, I’ve got a low deductible plan. I think I’ll schedule a few medical appointments?” Highly doubtful since going to the doctor isn’t as an attractive form of spending as, say, going shopping at a retailer to take advantage of a sale providing an inducement to shop. 

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

The New Normal In Health Insurance: High Deductibles – Kaiser Health News

The burden for patients in high-deductible plans is hard to measure. Out-of-pocket costs as a portion of national health spending have been declining since the 1960s, but the latest government data are from 2010. As consumer-driven insurance gains popularity among employers, however, analysts say they wouldn’t be surprised to see that five-decade trend reverse itself. In the Kaiser Family Foundation’s 2011 employer survey, 17 percent of the covered workers were enrolled in a high-deductible plan, up from 4 percent in 2006.

via The New Normal In Health Insurance: High Deductibles – Kaiser Health News.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

Broad adoption of consumer directed heath plans could save $57 billion annually, study concludes

The discussion of how Americans and their employers pay for increasingly costly health care coverage will likely be stoked by this recent study appearing in the journal Health Affairs that concludes consumer directed health plans — high deductible, catastrophic coverage combined with Health Savings Accounts (HSAs) — could achieve $57.1 billion savings annually if half of non-elderly U.S. population had them.  That’s because they operate as true insurance plans, covering medical costs for unexpected, catastrophic events with people paying out of their own pocket for routine care and prescriptions.  The study predicts the potential savings of such together with additional incentives in the Patient Protection and Affordable Care Act will encourage their growth.

Widespread adoption of this scheme would return the nation to something akin to the “major medical” coverage model of health insurance that existed in the post World War II period until pre-paid plans such as health maintenance organizations (HMOs) became prevalent starting in the 1970s and 1980s.  Their growth created an expectation of no or minimal out of pocket costs for routine care and preventative screenings, leading the study’s authors to caution those in consumer directed health plans may forgo them, potentially leading to higher health care costs over the long term.

The authors also suggest that wider adoption of consumer directed health plans could be disruptive to the traditional health insurance and HMO markets and promote adverse selection in these product lines since healthier people may opt for consumer directed plans since their premiums tend to be lower.  A major challenge facing health insurers and plans, however, is setting premiums for consumer directed plans low enough to jibe with consumer expectations of lower, more affordable premiums in exchange for taking on first dollar exposure up to a high deductible limit.  Older albeit generally healthy people in the individual market have experienced sticker shock at rates for high deductible plans, deterring them from buying the coverage even though the premium rate reflects the actuarial risk of a catastrophic medical event.

 


Need a speaker or webinar presenter on the Affordable Care Act and the outlook for health care reform? Contact Pilot Healthcare Strategies Principal Fred Pilot by email fpilot@pilothealthstrategies.com or call 530-295-1473. 

%d bloggers like this: