High-deductible health plans benefit employers, burden others
Employers struggling to pay for workers’ health coverage can slow annual spending about 5 percent by switching to high-deductible health plans, but the burden likely will fall on patients and health care professionals who will be expected to pick up the slack.
The costs might drive patients to delay care or struggle to come up with a $5,000 deductible, while hospitals ultimately might have to write off any balance due. One western Pennsylvania hospital has even begun requiring patients having elective surgery to meet first with a finance counselor.
High-deductible plans represent one of the biggest changes in a shifting health care landscape, growing ever more popular based on the belief that patients who bear more responsibility for the final bill will be more responsible about their treatment choices.
A PricewaterhouseCoopers study last year found enrollment in high-deductible plans nationally had tripled since 2009.
The appeal for employers is bottom-line direct: It can throttle runaway health care costs, at least at first and particularly if it is paired with a health savings account in which employees can accrue money for when they need medical care.
A recent study by a team headed by Carnegie Mellon University professor Amelia Haviland looked at data on 13 million people working at 54 large U.S. firms offering high deductible, or consumer-directed, plans and found the costs went down each of the first three years, most notably for outpatient care and pharmaceuticals. The effect was most noticeable the first year, and seemed only slightly less so by the third year.
The researchers were looking for evidence of a spike in costs, Haviland said, which might indicate people were deferring care for financial reasons and then developing more serious illnesses that are more expensive to treat.
While that does not appear to be the case three years out, Haviland acknowledged they still don’t know the answer to a key question: “How long does it take for something like that to happen?”
Employers are starting to ask that, too, said Jessica Brooks, CEO and executive director of the Pittsburgh Business Group on Health.
“Early adopters saw this as a cost-saving opportunity,” she said, “but what will that look like on the back end when they’re delaying care? Now as more data is coming out, they’re wondering if this is going to be a sustainable option for us.”
A January 2014 study by the Kaiser Family Foundation estimated 1 in 3 Americans had trouble paying their medical bills the previous year. Most had health insurance, the study found, but their plans left the patients bearing a significant share of the costs for a variety of reasons including high deductibles.
As a result, the study said, “People who have difficulty paying medical bills are more likely to forgo needed care, for example, by canceling routine doctor’s appointments, delaying recommended follow-up care, or failing to fill prescriptions.” Medical bills remain a leading reason for personal bankruptcy filings.
Haviland said that just 12 years ago, the median deductible on an employer-based health plan was “zero dollars.” Now, even traditional PPO plans typically will require a patient to pay the first few hundred dollars for their care each year “and even the low-deductible plans are inching up,” she said.
High-deductible plans, by contrast, will usually start at about $1,000 yearly but can be several thousand dollars a year for family coverage.
Under the health insurance marketplace established by the Affordable Care Act, out-of-pocket costs — including deductibles, coinsurance and co-payments — can be no more than $6,600 for individual plans and $13,200 for families.
The financial implications spill over to hospitals as well.
“There’s no question that hospitals’ bad debts have increased as a result of the higher deductibles,” said Denis Lukes, CFO for the Hospital Council of Western Pennsylvania, which represents the interests of the region’s hospitals.
“Every meeting we’re in, I have members talking about individuals with $5,000, $10,000 deductibles. They’re surprised they have it and they are not prepared to fund it,” he said.
To address this issue, Punxsutawney Hospital (about 80 miles northeast of Pittsburgh) has hired a finance counselor to meet with patients before elective surgery and explain what costs they’ll be facing under their insurance plan. They also may tell the patient they’d like 25 percent of that payment upfront.
“It’s not that we don’t want to do the surgery,” said CFO Jack Sisk, “but once we replace your knee, we’re not going to take it back.”
Some patients are angered by the upfront request and some have delayed elective procedures while they get the money together, he said, but others are happy to know ahead of time what their out-of-pocket cost will be.
“We don’t want to be the bad guy. We just want to make sure we can pay our employees every two weeks,” Sisk said.