• Quote: Expect higher deductibles

    In the ACA, Congress chose market-based cost controls over measures that are common internationally, such as global budgets. Mandating coverage while requiring affordable premiums without enacting other cost-control mechanisms almost inevitably gives rise to increased cost sharing as the simplest mechanism for reducing premiums. The ACA is therefore expected to cause a “seismic shift” in HDHP enrollment. Small employers newly required to purchase employees’ insurance may well choose HDHPs as the least expensive coverage option. Larger employers might adopt HDHPs to achieve ACA-regulated premium levels and avoid the 2018 “Cadillac tax.”

    J. Frank Wharam, Dennis Ross-Degnan, and Meredith Rosenthal, the New England Journal of Medicine

    @afrakt

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    • SUCH an improvement!

      Before, I was financially irresponsible and uninsured. If something happened to me, I’d exhaust my savings trying to get care!

      But now with the ACA everything is fixed! Now if something happens to me, I’ll have to exhaust my savings to try to get care, but as an added bonus, those savings will be reduce by the months and months that I paid a premium to the insurance companies.

      I still pay for it out of pocket and am effectively uninsured in terms of my behavioral incentives, but a corporation has a lot more money than it used to have. This, my friends, is what victory looks like.

    • As you trade off a higher premium for a higher deductible, there’s a sweet spot. Most of the high deductible plans I’ve seen don’t meet it.

      As you can see in these charts: http://theincidentaleconomist.com/wordpress/why-im-skeptical-that-increased-cost-sharing-will-work-to-reduce-spending-part-1/

      The spending curve is climbs slowly at first and very steeply at the end. The most expensive 5% account for nearly half of all medical spendings. So, moving from a $1,000 to a $5,000 or $10,000 deductible doesn’t save all that much in premiums, but does make a huge difference in how much trouble it is for a family to deal with an expensive medical problem.

      • I ran some rough numbers several months back get some idea of how many Americans (including dependents) would wind up high-deductible plans after Obamacare was implemented, I came to around 70 million or so. I’m generally a fan of HDHP’s, so this isn’t a problem with me, but the problem is that most providers aren’t really set up to deal with patients who are paying for some or all of their health care out of pocket. There’s a small free market in health care, which I cover at my blog The Self-Pay Patient (http://theselfpaypatient.com/), but I expect most covered under HDHP’s will stick with their ‘networks’ and ‘negotiated rates’ and therefore not really get the benefits of having these plans.

    • Yup! Having been the “beneficiary” of a HDHP plan at one
      time (thank God i got old enough for Medicare), I can testify that
      it affects decisions not only about how much to seek healthcare
      services, but when to seek them – if I was getting toward the end
      of the year and hadn’t met my deductible, i would postpone any
      visits until the beginning of the new year when my cost would go
      toward my new deductible instead of “finishing off” the old … It
      became quite clear to me what a scam this was – all my premiums
      bought me nothing in terms of health care – only the “service”of
      “bargaining” for “lower rates” from providers … Reading the NEJM
      article and going through the not only highly convoluted but highly
      improbable solutions offered to this problem, the image of the
      Gordian Knot came to mind along with the fate of all those who
      attempted to disentangle it – the ultimate solution being
      Alexander’s sword – in this case Single Payer ….

    • I remember when Hillarycare was blamed for the explosion in
      the popularity of HMOs. That’s right, Hillarycare, which, as you
      recall, didn’t pass! So I won’t be surprised if Obamacare is blamed
      for the popularity of HDMPs. Of course, Obamacare isn’t the cause
      of the popularity of HDMPs, the high cost of health care and health
      care insurance is the cause, the same cause of the popularity of
      HMOs. .

      • The biggest proponents of HDHP’s have historically been the ACA’s biggest opponents, so I would be interested to see how they pull that one off.

      • Basically you are correct. High costs in health care lead to high deductibles or higher premiums, but that doesn’t mean that ObamaCare has nothing to do with it. I will provide one example.

        Guaranteed issue automatically increases either the premium or the deductible.

        If we believe it desirable to carry health insurance then we have to recognize that higher premiums converted into high deductibles will reduce the incentive to carry insurance. Guaranteed issue adds to total costs so one might want to consider managing the problem of those that cannot afford or cannot buy insurance outside of the general pool. This was done by high risk pools in many states and that kept premiums and deductibles lower.

    • Ironically, the ACA outlaws today’s highest deductible/oop
      plans. BCBS FL offered a predictable cost 10k ded/oop plan that
      offers many cost reductions before you hit the 10k. And even when
      you do pay out of pocket, you are paying at BCBS rates, not the
      absurd retail prices. Sadly, there are many private health plans
      created after 2010 that will disappear.

    • Chances that businesses actually implement those suggestions mentioned in the article?

      Interesting idea- “They could do so in a cost-neutral manner by cross-subsidizing low-income workers.”

    • You guys don’t get it.

      Corporations that offer health coverage, and the cost sharing methods they deploy, already substantially subsidize lower income Americans.

      Cost of health coverage – according to BLS survey data issued in March 2013:

      Table 10 (includes minority with employer pay all coverage):

      Percentage of cost paid by employers – single coverage, 81%
      Percentage of cost paid by employers – family coverage, 69%

      Table 11 – Average contributions in contributory plans
      Single: Employer: $362.85, Employee $111
      Family: Employer: $874.44, Employee $442.55

      So, as the median weekly wage in America is $776 (BLS, 2nd Quarter 2013), it means that employer contributions for single coverage are approximately 10.7% of median wages. And, for comparison, median household income in 2012 was $51,017 (BLS), so, the employer contributions for family coverage represent approximately 20.6% of median household income.

      Most employers don’t vary employer financial support based on income – but when they do, perhaps up to 20% of larger employers, they pay more for lower income employees; further increasing the allocation towards the lower paid.

      So, for someone at the social security wage base, the BLS survey data about the employer contribution yields a percentage of 3.8% and 9.2%, single and family respectively.

      You guys don’t even recognize the two most likely casualties of PPACA when it comes to employer sponsored plans:
      – First, the subsidy for dependents. There is no significant, measurable performance differential between single workers and workers with families, and, more importantly, not all workers with families enroll family members as most married, working Americans have a working spouse, and
      Second, the exposure to double digit inflation (because of how Health Reform is funded) will trigger a shift from “defining benefit” health plans to “defined contribution” health plans (sound familiar, repetitious, etc.)? — particularly as plans approach the cadillac tax threshold.

      HDHPs are an indicator of the increased willingness of employers to make changes at this time – to disrupt their workforce, to disrupt the coverage they offer, etc. An HSA-qualifying HDHP (deductibles of $1,250 single/$2,500 family) is not all that “high” of a cost sharing level – and are much less than the $200/$400 deductible in my health plan 30 years ago (certainly as a percentage of health costs, and as a percentage of health coverage costs).

      It will take many years of migration to HDHPs before Americans have point of purchase cost sharing that is anywhere near the percentage they paid in the 1970’s or early 1980’s – before the advent of HMOs

    • There are a lot of posts in conservative blogs from people who have been carrying high deductible plans and doing just fine with them.

      One post I read yesterday was from a man who has been paying $350 a month for family insurance with a $10,000 deductible. He had put aside $10,000 in the bank in case he needed it.

      The ACA was of course determined to help the people who were forced to buy a $10,000 deductible plan due to their own low incomes, and had nothing to speak of in the bank.

      I would favor letting the high deductible plans continue, but one would have to post a bond in order to buy them.

      • Thanks for sharing Bob. I never thought of “ultra-HD” plans as conservative candy, but it makes sense as they bring more decision making into health care consumption.

        Given the spirit of “you can keep your existing heath plan”, you’d think this level of insurance would be restored. But I doubt we’ll see any improvements in the current political climate.

        I also wonder if the 2011-2013 health plans were insurance company loss leaders, on their way to the 2014 plans.

        I’d guess that Aquifer’s HDHP experience was before 2011. My current plan pays for yearly preventative measures, and pays half of my Doctor costs even before I’d ever hit the 10k det.

        P.S. I’m basing my thinking on FloridaBlue’s at:

        http://floridabluehealthcarereform.com/timeline

    • A few years ago, Matthew Holt went through a lengthy description of how High deductible plan pools would all see very large premium increases about 4-5 years after the pool was first established.

      This was true long before the ACA. It has to do with the way that a few large claims impact the risk pool..

    • Say that you insure 100 people.

      50 of them file no claims during the year.

      45 of them file claims that average $3,000 each.

      5 of them have a serious illness and/or surgery/ or hospitalization that costs $75,000 each.

      So the total claims cost is $500,000. Add in the insurance company loading and you have a premium of $6,000 a year.

      So in desperation you go to a $5,000 deductible.

      That knocks your claims down to $375,000. But by not seeing doctors promptly, you get one extra large claim. Now you are up to $450,000 in claims costs.

      So you have in fact saved 10% on premiums. In the long run, big deal.

      The solution of course is to enact price controls on the $75,000 claims.
      But no single insurance company can do this. It would take a government that had no fear of academic medical centers and large hospitals.

      There is your problem in an oversimplified nurshell.

      • Bob, The motto of a local HMO was “Delay in treatment means profit”. That is right; profit, not loss, and it is true.

        You wrote: ” But by not seeing doctors promptly, you get one extra large claim.”

        That statement leads to false conclusions and based upon the fact that it excludes the greater costs it is wrong in the context of your argument.

        The same proof for what I say can be seen in the proof that most preventative care or early diagnosis costs money. It doesn’t save. On the other side of the coin there are losses as well. A man delays going to the hospital for chest pain. He dies at home from a heart attack that could have been treated but would have required CABG etc. That means no medical costs are created.

        One can also see the savings based upon the studies of HSA’s. There are two reasons for the savings that have been demonstrated. 1)Skin in the game 2)Attempts at early diagnosis of minor problems that would have disappeared unnoticed end up creating extensive, expensive work ups.

      • Bob Hertz

        “The solution of course is to enact price controls on the $75,000 claims.
        But no single insurance company can do this. It would take a government that had no fear of academic medical centers and large hospitals.

        There is your problem in an oversimplified nurshell ”

        Bingo! Precisely why we need SP.

    • Nope, you still don’t get it. The hdhp design is relative… To what the individual can obtain elsewhere, spouse plan or parents plan or public exchange.

      Most people don’t have $12,700 sitting around should they have a major claim… So, people at risk often waive such an offer in favor of other alternatives, including uninsured status (where they conclude they can’t afford the contribution) for such lousy coverage.

      That is, the plan may also serve a sentinel effect for those who anticipate significant costs.

      And, other than in staes like California, many times the plan is self insured with a very low attachment point for stop loss/reinsurance.
      P
      Bottom line, most Americans want “the best coverage YOUR money will buy” … for comparison, they believe they fully funded the promised ss benefit and medicare coverage… which is why it is so hard to change expectations. here, we are shifting health coverage to an entitlement, a right, and PPACA taps into that well … Of looking to others to shoulder even everyday costs… Like preventive services and birth control Rx…

    • Emily and Benefit Jack are correct in their depiction of low deductible insurance as a bottomless financial pit.

      The countries that do have low deductible insurance also have strict price controls. If the number of diagnostic tests goes way up, the allowable fee goes down. If a doctor has used up his allowable fees by December 1st, he goes on a forced vacation.

      What I was trying to figure out is why high deductible insurance does not save very much money at all at least for some. Maybe I am reacting to the severe age rating in pre-ACA insurance. I have seen numerous persons over age 55 with a deductible of $10,000 and a premium of $1,000 a month. The insurer had no exposure until the insured had paid out $22,000. Only a very desperate person would pay $1,000 a month for what feels like garbage insurance.

      Benefit Jack has another good point. High deductible plans in combination with a funded savings account have made good sense.
      The problem has been with people who were forced to high deductibles and had no savings whatsoever.

      The ACA tried to help the latter group, but in doing so dropped extra costs on the former group. Once again we see the futility and unpopularity of narrowly designated taxes. Broad payroll and income taxes are much more palatable and efficient.

      • “Broad payroll and income taxes are much more palatable and efficient.”

        The ‘tax’ from income taxes and the ‘tax’ from having to pay a higher premium are not much different. Both leave the individual with less money. But that is the minor problem as the broad tax system you refer to creates a third party payer that leads to much higher costs unless drastic measures are taken. Third party payer is one of the major reasons our bills are so high today.

        “The countries that do have low deductible insurance also have strict price controls. If the number of diagnostic tests goes way up, the allowable fee goes down. ”

        Presently that is one of the ways Medicare controls costs, but it hasn’t solved the problem and created more.

        • “The ‘tax’ from income taxes and the ‘tax’ from having to pay a higher premium are not much different.”

          Depends on who is paying them and how progressive the tax structure is ….

          ” …the broad tax system you refer to creates a third party payer that leads to much higher costs unless drastic measures are taken. Third party payer is one of the major reasons our bills are so high today.”

          Especially when the “3rd party” is a profit making venture

          “Presently that is one of the ways Medicare controls costs, but it hasn’t solved the problem …”

          Perhaps because there are a whole lot of costs it isn’t permitted to control …. And the fee for service model certainly needs tweaking. Once it became the only game in town, ala SP, its ability to control costs would increase considerably ….

          • “‘tax'”

            In the end the middle class ends up paying even when the tax is intended only for the rich. Take a look at who is financing ObamaCare. I understand class envy and class warfare. For those that believe in those things remember that the middle class suffers as well.

            “3rd party”:

            Profit or non profit third party payer creates higher expenditures.

            Medicare:

            I have to laugh at your response because Medicare and government have total control. Medicare has broken contract law time and again. I refer you to the federal courts that have adjudicated many suits against Medicare and found against Medicare. What does Medicare pay when it loses a suit? Almost nothing except what it had to pay in the first place or it was prevented from levying illegal and wrongful fines etc.

            I see that you wish to make Medicare “the only game in town”. Does that mean that you will prohibit the private practice of medicine outside of medical care? Does that mean you will make it a criminal offense if a person gets care out of the country? Are you going to create a new investigative office to see to it that providers don’t take bribes to make sure their patient is at the top of the list?

            Medicare for all sounds great until you realize that Medicare has been a government run monopoly for virtually everyone over 65 and still hasn’t gotten it right. Why don’t you fix Medicare first and make it workable, cost effective, etc. and then ask for Medicare for all. If we could get it right with the seniors I might join in on the cause, but almost 50 years after its passage Medicare is getting worse not better.