Join Early Retirement Today
Reply
 
Thread Tools Search this Thread Display Modes
Trend towards high deductible plans, cost-shifting/cost-sharing
Old 12-05-2015, 01:56 PM   #1
Thinks s/he gets paid by the post
 
Join Date: May 2008
Posts: 3,395
Trend towards high deductible plans, cost-shifting/cost-sharing

The ACA is under heat (what else is new) because people are finding that while the premiums are affordable, the high deductibles are causing many households to avoid getting care and ultimately, consider dropping their plans and pay the penalty instead:

http://www.nytimes.com/2015/11/15/us/po ... .html?_r=0

More and more of the plans offered in the ACA exchanges meet the definition of a high deductible plan, which the IRS sets at $1300 for individuals and $2600 for families.

But of course, the increasing use of HDHP was occurring well before the ACA and affects employer-provided coverage as well:

Quote:
The Kaiser Family Foundation reports that average annual out-of-pocket costs per worker rose almost 230 percent between 2006 and 2015, based on its annual survey of employer health benefits coverage. Key findings from this survey were also featured in a Health Affairs Web First release last month.

As employers cut back on health care spending, more small and large employers are offering high deductible health plans (HDHPs) among their benefit options, often paired with a tax-free spending account to pay medical bills that both employers and employees can contribute to. In 2015, 24 percent of all workers were enrolled in a HDHP with a savings option. This is a dramatic rise since 2009, when just 8 percent were covered under such plans. The latest survey also suggests that 46 percent of employees have annual deductibles of over $1,000.

This trend appears to be justified by the results of a widely publicized study this year by the National Bureau of Economic Research (NBER), which indicated that employers who offered high deductible plans did indeed reduce health care costs over three years, compared to those that did not.
Trouble Ahead For High Deductible Health Plans?

Cost-shifting has been advocated as one way to bend the cost curve. But for many households, even those receiving ACA subsidies, the prospect of spending thousands out of pocket before getting the insurance to kick in is daunting.

So many just simply avoid care, resulting in potentially higher costs in the long term:

Quote:
3. There Is Ample Evidence That People Are Forgoing Medical Care Due To Cost.
A Thomson Reuters phone survey of 12,000 households in 2009 found that 20 percent of people cited delaying or postponing care due to cost concerns. Survey data from Families USA published this year suggests similar behavior: 25 percent of people avoided needed care—tests, treatments, follow-up care, and prescription drugs—because they could not afford it. At least equally important is the observation that lower to middle-income individuals appeared more likely to forgo care. This is further confirmed by a RAND study that found lower-income people more likely to defer or avoid care.

These pieces of evidence shine a new spotlight on the perception of health care services as more elastic than they should be. Hence they compete with other household priorities that require out-of-pocket expenses.

4. Not Complying With The Recommendations Of Care Providers Is Problematic.
That not following doctors’ orders is detrimental may be an obvious statement. This notion is worth reiterating in the context of HDHPs, however, especially since noncompliance was neither the driving philosophy of these benefit plans, nor a desired byproduct.

In some plans, including those consumer-directed health plans with a health savings account, out-of-pocket expenses apply to prescription drugs as well, which may result in patients not filling prescribed medications. This phenomenon is especially troubling among the chronically ill, for whom following through with necessary medications and tests is vital for disease maintenance. Indeed, a recent Deloitte white paper suggests that provider-initiated disease management programs and the improvement in quality ratings may suffer, when patient compliance is challenged by high cost-sharing.

The RAND study cited before also articulated a potentially hazardous vicious circle: individuals in poorer health tend to be ordered more medical services that can result in comparatively greater financial burden, leading to noncompliance, which in turn sustains adverse health.

5. Some Studies Suggest A Negative Impact To Utilization In The Long Run Due To Avoidance Of Necessary Care In The Short Run.
A 2013 study published in Med Care by Katy B. Kozhimanill et al. sheds light on how HDHPs can affect emergency room utilization and hospitalizations, based on the behaviors of over 10,000 patients one year before and two years after switching from a traditional health maintenance organization (HMO) plan to HDHPs. The results showed that compared to a control group, female and male patients in the study reduced emergency room (ER) use by 11 percent and 19 percent, respectively.

The reduction in female ER use was mostly in low-severity visits—generally indicative of patients avoiding discretionary care due to high personal costs—while males avoided both low-severity and high-severity utilization. Typically, high-severity visits represent essential care that should not be deemed optional, thus the authors identified the trend among male patients as a cause for concern. Not surprisingly, the authors cited that hospitalizations among males increased by 30 percent in the following year, possibly illustrating the negative consequences of putting off necessary services.

In another study, Paul Fronstin et al. explored medication utilization and adherence in chronically ill patients enrolled in consumer-directed health plans with a health savings account (HSA). When compared to a control group of preferred provider organization (PPO) members, medication adherence fell in the first year of enrollment for patients with hypertension, dyslipidemia, diabetes, and depression.
__________________

__________________
explanade is offline   Reply With Quote
Join the #1 Early Retirement and Financial Independence Forum Today - It's Totally Free!

Are you planning to be financially independent as early as possible so you can live life on your own terms? Discuss successful investing strategies, asset allocation models, tax strategies and other related topics in our online forum community. Our members range from young folks just starting their journey to financial independence, military retirees and even multimillionaires. No matter where you fit in you'll find that Early-Retirement.org is a great community to join. Best of all it's totally FREE!

You are currently viewing our boards as a guest so you have limited access to our community. Please take the time to register and you will gain a lot of great new features including; the ability to participate in discussions, network with our members, see fewer ads, upload photographs, create a retirement blog, send private messages and so much, much more!

Old 12-05-2015, 02:40 PM   #2
Recycles dryer sheets
Greencheese's Avatar
 
Join Date: Oct 2013
Posts: 261
The ACA was never designed to be successful in my opinion, instead it was implemented with the goal of pushing the US towards single payer for better or for worse...
__________________

__________________
Greencheese is offline   Reply With Quote
Old 12-05-2015, 03:26 PM   #3
Moderator
rodi's Avatar
 
Join Date: Apr 2012
Location: San Diego
Posts: 8,796
As the article mentions - HDHP and HSAs predate the ACA and exchanges. My former employer rolled them out early on.

I'm not sure why people are surprised they have to pay a chunk out of pocket... it may not be fun - but it's NOT hidden... the plans state clearly that 100% of the medical expenses will be paid until the deductible is met, and then coinsurance amounts until the max OOP is met.

This year was my first on a HDHP. My sons and I are currently at almost $8k OOP and my husband (on different insurance) is at $1500. We definitely think twice before going to the doctor... but my kids kept breaking bones playing sports... you can't just "wait it out" when a baseball hits the face or you break an elbow playing basketball.

Edited to add what I forgot to say:
I did the math on what a similar non HDHP would have cost me this year - and the extra 10k in premiums makes that a loser. I'll stick with a HDHP for now... but will reconsider each year.

FWIW - our premiums are $1100/month (no premium tax credits), and same insurers with an office copay after a fairly small deductible ($1k) was $2k/month for our family of 4.
__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 7%, rental income 18%
rodi is offline   Reply With Quote
Old 12-05-2015, 03:46 PM   #4
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,387
Quote:
Originally Posted by rodi View Post
As the article mentions - HDHP and HSAs predate the ACA and exchanges. My former employer rolled them out early on.

I'm not sure why people are surprised they have to pay a chunk out of pocket... it may not be fun - but it's NOT hidden... the plans state clearly that 100% of the medical expenses will be paid until the deductible is met, and then coinsurance amounts until the max OOP is met. .....
+1 It shouldn't be a surprise to anyone as IMO these plans are pretty transparent. The fact is... medical care in the US is expensive.

Being relatively healthy a HDHP has worked out well for us.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 12-06-2015, 02:04 PM   #5
Thinks s/he gets paid by the post
photoguy's Avatar
 
Join Date: Jun 2010
Posts: 2,301
I think high deductibles / max OOP are necessary in order to contain costs. Without a high deductible (or some form of co-insurance) there's little incentive for an individual to help reduce healthcare costs. So to a large extent I see this working as intended.

When setting the amount of deductible/OOP max, it needs to be high enough to discourage unnecessary treatments but low enough so as to not discourage critical care. Obviously these are two conflicting criteria and no what matter threshold is chosen, there's always going to be someone who decides health insurance is too expensive and decides to drop coverage and pay the penalty instead.

The question is whether the folks dropping coverage completely (or avoiding necessary treatment) are outliers or part of a bigger trend that may lead to sustainability issues with ACA. I haven't seen any studies that looked at this post ACA and it's probably too early to tell anyway.

Probably the settings for deductibles, OOP Max are not striking an exactly optimal balance. But I don't think they are wildly off either (with the exception of certain threshold effects like at 400% of FPL).
__________________
photoguy is offline   Reply With Quote
Old 12-06-2015, 02:08 PM   #6
Thinks s/he gets paid by the post
 
Join Date: May 2008
Posts: 3,395
I think the HDHP with HSA are popular here, because most people here have the means to spend up to the deductible in a given year if necessary.

But we're talking about people making $50k or less mostly. There are probably a lot of people in that category who don't understand what HDHP are.
__________________
explanade is offline   Reply With Quote
Old 12-06-2015, 02:25 PM   #7
Moderator
MichaelB's Avatar
 
Join Date: Jan 2008
Location: Rocky Inlets
Posts: 24,406
Run the numbers through a spreadsheet (like this one). When taking into consideration all the cost sharing expenses along with premiums, the high deductible plan tends to have a lower total cost compared with the low deductible plans because the insurer takes on less risk. For most of us it's the least cost insurance alternative.

Health care is expensive in the US, so health care insurance is also expensive. The ACA is under heat, not because individual insurance is more expensive, but because nowhere else do we see the real cost of health care insurance in it's unaffordable and painful rawness.
__________________
MichaelB is offline   Reply With Quote
Old 12-06-2015, 02:46 PM   #8
Thinks s/he gets paid by the post
 
Join Date: May 2008
Posts: 3,395
Yeah I could just calculate in my head that the bronze plans were better than silver and higher plans, unless you anticipated going to the doctor regularly, like over one or two dozen times a year.

But the HDHPs are more insurance for your assets than for your health. That is, it's protection against some major illness draining your financial resources as much as it is a "health insurance plan."

Especially for people with a lot of assets, like FIREd folks here.
__________________
explanade is offline   Reply With Quote
Old 12-06-2015, 03:05 PM   #9
Thinks s/he gets paid by the post
 
Join Date: Sep 2012
Location: Seattle
Posts: 2,904
I think there is some penny wise pound foolish danger in getting a bronze plan over a silver plan.

I have noticed that we do not go to the doctor quite as often as we did when we had employer super coverage now that we have a HDHP, even though it is a silver level plan. With a bronze plan I might be tempted to just wait out some things which I shouldn't.

Fictional example:

"Maybe that lump isn't too big yet. It is November and if I wait until January the money for the test will go on that year's deductible since I haven't filled much deductible this year."
__________________
Fermion is offline   Reply With Quote
Old 12-06-2015, 03:14 PM   #10
Thinks s/he gets paid by the post
 
Join Date: May 2008
Posts: 3,395
Well the difference in premiums is at about $200 per month in my area code.

Out of pocket max is about the same.

But in the CoveredCA marketplace, they're only offering HSA-eligible plans on Bronze, not Silver plans.

Maybe $6000 vs $2250 deductible is the difference for HSA eligibility?
__________________
explanade is offline   Reply With Quote
Old 12-06-2015, 05:55 PM   #11
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
audreyh1's Avatar
 
Join Date: Jan 2006
Location: Rio Grande Valley
Posts: 16,446
Well, it matches more what we are looking for - more insurance for the big things. We have enough set aside to meet the max OOP, and we wouldn't expect to hit that most years. But if we did, still OK.

So we pay the initial medical bills out of pocket. But we also need the discounts/mark-downs negotiated by the insurance company for their network. That's really what we are paying for up front, and that's significant, and then coverage for high medical bills if something bad happens health-wise.

I know a lot of people can't afford high deductibles and high max OOPs. I don't know how they do it. Seems like you have to work if you need much lower-cost access to health care.
__________________
Well, I thought I was retired. But it seems that now I'm working as a travel agent instead!
audreyh1 is online now   Reply With Quote
Old 12-06-2015, 08:30 PM   #12
Thinks s/he gets paid by the post
JoeWras's Avatar
 
Join Date: Sep 2012
Posts: 2,513
Quote:
Originally Posted by Fermion View Post

"Maybe that lump isn't too big yet. It is November and if I wait until January the money for the test will go on that year's deductible since I haven't filled much deductible this year."
This does happen. And it is unfortunate. There is some weird psychology going on here. I know people who put off medical care, yet think nothing of spending $800 in maintenance on their car. And odd maintenance, like having water pumps replaced just because a dealer told them it is a good idea.

Meanwhile, they won't get the X-ray because they would "have to pay." I'm a broken record with this example, but it is real in my experience.

What HDHP's have done for me is make me ask questions. Make me ask about generics. Make me work with my doctor and ask if a 3 month follow up is really necessary (after the 4th in a row). Can't we move it to 6 months?

I like the HDHPs, but I also recognize that everyone in our world can't make them work. I don't have the answers. It is too complicated for my brain.
__________________
JoeWras is offline   Reply With Quote
Old 12-06-2015, 09:09 PM   #13
Thinks s/he gets paid by the post
 
Join Date: Jul 2005
Posts: 3,862
Using a spreadsheet it was pretty easy to add premium costs plus OOP maxes and see that ultimately HDHP's and low deductible plans aren't that far off in total cost for the worst case. If fact, HDHP's may be cheaper in that case. I'm unsubsidized, which may make a difference.

It seemed pretty clear that I could "prepay" for my health care by selecting a low deductible plan, but if I didn't use it much that was money down the drain. Or I could pay the minimum premiums of an HDHP and then pay for health care as I needed it. If I didn't require much health care I would save money versus a low deductible plan. If I maxed out the OOP I'd still be close to the total cost of a low deductible plan. Pretty much win-win. Plus I get an HSA as a bonus.

I'll admit it takes me a little conscious effort to commit to paying the full cost of health care while filling in the deductible. But paying it all up front in premiums for a low deductible wouldn't make me feel any better, and doesn't save any money.
__________________
Animorph is offline   Reply With Quote
Old 12-06-2015, 09:42 PM   #14
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,387
Quote:
Originally Posted by Fermion View Post
....Fictional example:

"Maybe that lump isn't too big yet. It is November and if I wait until January the money for the test will go on that year's deductible since I haven't filled much deductible this year."
We haven't exceeded our deductible for many years... only did in a couple years relating to surgeries DW had relating to an accident back many years ago when I had an employer HDHI plan.

For us, whether we go and get it checked in November or January doesn't matter as either way we pay the negotiated rate.

That said, there is a back of the mind reluctance to go in but I keep telling DW that is why we budget for health care in addition to health insurance.

We have health insurance for two principal reasons: 1) to gain access to negotiated rates for medical services and 2) to protect us from the financial implications of an accident or catastrophic illness.

I think part of the problem is that some audiences expect health insurance to pay for all their health care costs other than minor co-pays.... that may have worked 10 years ago but it doesn't work today.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 12-06-2015, 09:49 PM   #15
Thinks s/he gets paid by the post
Katsmeow's Avatar
 
Join Date: Jul 2009
Posts: 3,391
I think the deductibles are too high. Or, rather there are not enough low deductible options.

First, there is the problem in states that didn't expand Medicaid that you if your income is too low you don't even get subsidies.

I know that at some levels if income if you get a silver policy you get cost sharing and that does help. Still for someone making $18,000 it could still be hard.

The group where things are the most difficult though is the one where there is no cost sharing. There may be some subsidy but plenty of people make enough money that they get very little subsidy and no cost sharing but they can't pay a $6000 deductible. Imagine someone making $24,000 a year who hasn't been working for years. At that income they likely don't have $6000 saved up. At that income the subsidy is a whole $6 a month. That person, particularly someone who hasn't been in the workforce very long, is highly unlikely to have a $6000 deductible saved up in case they get sick.

For most of us, yes, that deductible is a fine trade off for lower premiums. But, for many people that deductible means they get much less care unless they have to go to the ER where they have to be treated.
__________________
Katsmeow is offline   Reply With Quote
Old 12-06-2015, 10:01 PM   #16
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
pb4uski's Avatar
 
Join Date: Nov 2010
Location: Vermont & Sarasota, FL
Posts: 16,387
I'll take DS as an example because his income is lower than that. At $24k of income the bronze plan he has would cost $82/month after a $83/month subsidy. That's 4.1% of the $24k of gross income.

If he had a health event, he would be on the hook for $6k. That would be tough and he might have to pay it off over a couple years but at least it wouldn't ruin him. But it is still much better than what he could have got before ACA.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
pb4uski is online now   Reply With Quote
Old 12-06-2015, 10:06 PM   #17
Moderator Emeritus
aja8888's Avatar
 
Join Date: Apr 2011
Location: The Woodlands, TX
Posts: 7,128
Quote:
Originally Posted by Katsmeow View Post

The group where things are the most difficult though is the one where there is no cost sharing. There may be some subsidy but plenty of people make enough money that they get very little subsidy and no cost sharing but they can't pay a $6000 deductible. Imagine someone making $24,000 a year who hasn't been working for years. At that income they likely don't have $6000 saved up. At that income the subsidy is a whole $6 a month. That person, particularly someone who hasn't been in the workforce very long, is highly unlikely to have a $6000 deductible saved up in case they get sick.
Your example is my youngest unmarried daughter to a tee. And this year her premium goes up 20% and she loses her doctor who opted out. Great system. Oh, her BCBS policy will be an HMO too.
__________________
......."Everybody has a plan until they get punched in the face." -- philosopher Mike Tyson.
aja8888 is offline   Reply With Quote
Old 12-06-2015, 11:24 PM   #18
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by MichaelB View Post
The ACA is under heat, not because individual insurance is more expensive, but because nowhere else do we see the real cost of health care insurance in it's unaffordable and painful rawness.
But part of the impact is that, indeed, insurance requirements of health care plans pre-ACA and current "ACA-compliant" policies do have structurally different provisions that create a significant cost difference for a similar deductible and doctor/hospital network. Plus, there are provisions in ACA that cause the employer-provided, gold-plated health insurance plans to be even more costly with surcharges, creating further financial incentive for employers to change to a higher deductible plan, introducing even more people to the HDHP concept.
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 12-06-2015, 11:37 PM   #19
Thinks s/he gets paid by the post
MooreBonds's Avatar
 
Join Date: Aug 2004
Location: St. Louis
Posts: 2,091
Quote:
Originally Posted by Katsmeow View Post
I think the deductibles are too high. Or, rather there are not enough low deductible options.
The challenge is that there are simply too many things in one's body that can go wrong to require expensive healthcare to somehow create an all-encompassing healthcare policy with a low deductible. And even far more things that don't go wrong yet still have tests to find out there isn't anything wrong or to rule some things out.

All insurers have to go off of are prior claims and costs. Looking at those, they have no choice but to charge what they do in order to eek out a small profit. Offering a lower deductible will, on average, involve substantially more costs. There's no mathematical way to higher profitability by taking your given average cost/claims history and creating lower deductible policies to cover people.

ACA limits the profits an insurer makes off of each policy, so it's not like they're lowballing coverage or can monkey around with things to make 10x the profit. If most 30-40 year old groups have average claims of $x per person, you can't magically sell a policy with an artificially low $500 deductible and expect to magically make a profit if your premiums don't cover the average claimant's costs. "consumers of healthcare" (i.e. more sicker people, on average) will sign up in droves if they expect higher medical costs and can get a low deducitble for just a little higher cost. Some healthier people might do this as well, but the scale will disproportionately be tiled towards the sick/consumers of healthcare so much so that profits will evaporate.

Thinking about what I typed above, perhaps it is worth looking into new specialized insurance coverages, where you buy individual "cancer" policies from one insurer, and perhaps "just heart attack coverage" from another, and then 'hospitalization' for general accidents from another? That's about the only way you might be able to offer lower overall deductibles, since it allows insurers to underwrite coverage on more specific risks that might have more defined exposure and incidence history that allows it to fine tune expected covearge costs for a particular age group, compared to a general policy that could cover anything and everything.
__________________
Dryer sheets Schmyer sheets
MooreBonds is offline   Reply With Quote
Old 12-07-2015, 05:13 AM   #20
Give me a museum and I'll fill it. (Picasso)
Give me a forum ...
travelover's Avatar
 
Join Date: Mar 2007
Posts: 9,869
At the risk of pointing out the obvious, the problem in not that insurance schemes are not clever enough. The problem is that health care is too expensive. I believe it is now over $9000 per American per year.
__________________

__________________
Yes, I have achieved work / life balance.
travelover is offline   Reply With Quote
Reply


Currently Active Users Viewing This Thread: 1 (0 members and 1 guests)
 
Thread Tools Search this Thread
Search this Thread:

Advanced Search
Display Modes

Posting Rules
You may not post new threads
You may not post replies
You may not post attachments
You may not edit your posts

BB code is On
Smilies are On
[IMG] code is On
HTML code is Off
Trackbacks are Off
Pingbacks are Off
Refbacks are Off


Similar Threads
Thread Thread Starter Forum Replies Last Post
ACA income estimates and cost sharing with Silver plans jim584672 Health and Early Retirement 2 11-10-2014 10:27 AM
High-Deductible Health Insurance - Am I Missing Anything? GoodSense Health and Early Retirement 24 10-12-2010 09:32 AM
High Deductible Health Insurance -- Golden Rule prubin Health and Early Retirement 38 09-28-2009 03:40 PM
Rethinking High Deductible Policies tangomonster Health and Early Retirement 18 09-03-2008 10:42 AM
High Deductible Health plan Allegany Health and Early Retirement 22 06-12-2008 09:01 AM

 

 
All times are GMT -6. The time now is 06:34 PM.
 
Powered by vBulletin® Version 3.8.8 Beta 1
Copyright ©2000 - 2017, vBulletin Solutions, Inc.