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By Monica E. Oss

A few weeks ago a popular editorial asked the question: “What good is health insurance coverage if you can’t afford to actually use it?” (see California Health Insurance Deductibles Going Up). Author Nathan Nascimento was referencing the rising costs of health insurance deductibles, but his question could apply to all consumer contributions to health care – from deductibles, to copayments and other cost sharing. Even for consumers with insurance, there are plenty of out-of-pocket (OOP) costs to consider.

The trend is “up.” The average annual deductible paid by single adults with employer-sponsored health insurance increased by 67% – from $646 in 2010 to $1,077 in 2015 (see Deductibles For Employer-Sponsored Health Insurance Increased 67% Since 2010). Why such a large increase? There are a few factors at play:

  1. Since 2006, the share of workers in plans with a general deductible has increased from 55% to the current 81%. The average deductible for all covered workers has more than tripled, from $303 to $1,077.
  2. The percentage of workers enrolled in an employer-sponsored plan considered a high-deductible plan has increased from 10% in 2006 to 46% in 2015. A high-deductible plan is defined as one with a general deductible of $1,000 or more.
  3. About 24% of employees in 2015 are enrolled in a high-deductible plan linked to a health savings account or a health reimbursement account. In 2006, only 4% of employees were enrolled in this plan type.

Why does this matter? For health plans, the perception that the plan “doesn’t pay for anything” creates consumer dissatisfaction with their coverage. And for provider organizations, there is the issue of collecting those OOP amounts. On this issue, my colleague Jamie Stewart, Executive Vice President & Chief Administrative Officer, Grafton Integrated Health Network and OPEN MINDS Advisory Board member, had an interesting observation:

Jamie Stewart

Most health systems overlooked the fact that the health insurance marketplace plans were for the most part “high-deductible plans.” This means that while the indigent now had a payer, it was likely the first $xxxx thousand dollars of a deductible would have to be collected from the consumer…the same consumer that couldn’t pay for health care services before. So what really happened is the amount of indigent care per consumer is defined by that deductible amount. For provider organizations, this means they have much greater exposure to bad debt since obviously, collections from private individuals is much harder than collections from insurers – this has created an increase in bad debt that not too many foresaw (see The Changing Landscape Of Bad Debt & Charity Care).

But OOP expenses in health plans isn’t the only issue. A new study reports that a healthy 65-year old married couple retiring in 2016 will have average OOP health care costs of $395,000 over the next 20 years for Medicare premiums, copayments, and coinsurance (see Average Out-Of-Pocket Health Care Costs Estimated At $395,000 For A 65-Year-Old Healthy Couple Retiring In 2016). What do numbers like that mean for consumers in practice? My colleague Gary Humble, the Executive Director of Pinnacle Partners and OPEN MINDS Advisory Board Member, observed that the health care provider organizations aren’t up for the challenge of this increase in consumer private payments.

Gary Humble
Gary Humble

With the financing responsibility now squarely on the shoulders of the consumer, it presupposes the system is transparent. You know what a procedure costs and you pay for it, just like any other transaction (whether buying a loaf of bread or a computer). No haggling over the “price” six months later.

This presupposition, in general, does not exist in our current system today. Until there is price transparency between both provider and payer, the consumer is stuck in the middle having to fight to get a simple answer to a straight forward question: how much is this procedure/visit going to cost me?

Until we address this lack of price transparency, consumers will continue to self-ration care or incur large amounts of medical debt. Still other consumers will turn to alternative means of receiving care through technology-based therapies. Financing tools, like health savings accounts (HSA) and flexible spending accounts (FSA), are a good start in helping consumers finance their care.

But until consumers can get a simple answer to what the procedure will cost, so that they can make an informed medical and economic decision regarding their care, the latest trend of shifting the financial burden to the consumer only makes matters worse. We are simply squeezing the air in the balloon from one side to another. Unfortunately, it’s the consumer side of the balloon that will burst.

Rising consumer payment for both premiums and health care expenses is changing the market – and creating a new set of challenges for executives of health plans and provider organizations alike. Later this week, we’ll take a look at the financial and administrative strategies that managers of provider organizations can use to revamp their billing and collection processes for this new era in consumer contribution.

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