Thinking About Health: High deductibles vs. lower premiums equals costly trade-off
June 5, 2015
A few weeks ago I got an e-mail from Judy, a reader who wanted to tell me about trouble she's had paying her medical bills, particularly those for prescription drugs. Severe daily headaches had just qualified her for Social Security disability benefits. After she satisfies a two-year waiting period, which the law requires, she will qualify for Medicare as all people on Social Security disability will do whether or not they are age 65. Judy couldn't wait so she looked for other insurance options.
Her monthly income of about $1,300 is too high for Medicaid benefits. "I'm $20 over the income guidelines," she told me. So she turned to an Affordable Care Act policy with a low premium but a $6,500 deductible.
That deductible pinches financially. Until she reaches the $6,500 annual limit, she pays out of pocket for her medicines and other healthcare needs while juggling the rent, utility payments, car expenses, insurance premiums, fuel and food bills and praying her car doesn't break down. "Where is all this going to end?" she asked.
Judy is one of the growing numbers of Americans who are underinsured, meaning according to one definition, those who spend 10 percent or more of their income on healthcare costs excluding premiums. That means they are spending money for coverage that might not help them. The financial squeeze is not going to end any time soon not only for those like Judy who bought an Obamacare policy through a state exchange but also for people who have chosen policies outside the exchanges and for workers who get employer-sponsored coverage.
How high deductibles can go is, of course, up to your employer or insurer. This year, policies offered through the exchanges created by Obamacare can require families to pay as much as $13,200 out of pocket. That includes deductibles but also copays and coinsurance, a percentage of the bill.
HealthPocket, a website that tracks insurance costs, says this year the average deductible for bronze policies generally the cheapest sold in the exchanges is $5,181 for individuals and $10,545 for families. Average deductibles for silver plans were about $3,000 for individuals and $6,000 for families. Any way you look at it, those are pretty hefty amounts for low and moderate-income families.
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High deductibles come at a high cost. A new report from The Commonwealth Fund, the funder of Rural Health News Service, shows that people suffer both financial and health consequences. The report said that almost half of those who were underinsured had trouble paying medical bills or had medical debt that ate up all their savings. One-third with medical bills took on credit card debt to pay them.
When the survey asked underinsured respondents if they skipped getting care — like going to the doctor, shrugging off a recommended test or treatment, or not filling a prescription because of costs — about 45 percent said yes. When researchers specifically asked those with deductibles of $3,000 or more if they got care, again about 45 percent said they didn't.
These findings run counter to a major goal of the Affordable Care Act, which was to bring more Americans under the insurance umbrella. The crisis of uninsurance is being replaced by a new crisis of underinsurance, says Jonathan Oberlander, a health policy expert at the University of North Carolina.
The theory behind those high deductibles is to make people think twice before going to the doctor and thus to save money for the whole health care system. In other words, if patients now assume more of the cost burden, fewer of them will actually use medical services. The Commonwealth Fund study shows that's true: patients are skipping care.
But we don't know yet whether that's causing a significant, sustainable drop in the national healthcare tab. Medical inflation has slowed somewhat, but no one is certain the trend is permanent.
I asked Sara Collins, a vice president of The Commonwealth Fund, about the effectiveness of controlling costs through high deductibles. She said it doesn't address the biggest reasons for them. Those "are driven by very sick people and that suggests something more fundamental," she explained.
Are employers and insurers going to sell policies with ever-increasing deductibles when we know people respond in ways that don't help them stay healthy or get better care when they are sick? Or are we going to get serious about pushing back against the power of the big insurers, drug companies, and hospitals, which like things just the way they are?
"What does it take to get affordable medications," Judy asked me. That's the question policymakers must answer.
We'd like to hear about your experiences with high deductible insurance. Write to Trudy at email@example.com
Editor’s note: The Rural Health News Service is funded by a grant from The Commonwealth Fund and is distributed through the Nebraska Press Association Foundation, Colorado Press Association, South Dakota Newspaper Association, Hoosier (IN) State Press Association, Illinois Press Association, Wyoming Press Association and California Newspaper Publishers Association.