Getting a Handle on High Deductible Insurance Plans

What with the uncertainty of the Obama Administration’s health-care reform and the increasing cost of medical care, few areas of U.S. commerce are as volatile as health insurance. But one segment of that industry is decidedly popular, although it’s fraught with “what-ifs.”

In one year, between January 2010 and January 2011, high-deductible insurance plans grew by more than 1 million customers. According to a story aired on PBS Newshour, in collaboration with Kaiser Health News, last year, nearly 3 in 10 workers covered by employer insurance were offered a high-deductible option. Enrollment in such plans has tripled in five years. A survey by the Kaiser Family Foundation (not affiliated with the health-care provider) showed that half of all covered workers in small businesses (as many as 199 employees) had a high-deductible plan.

Deductibles for these plans range from at least $1,200 for an individual to more than $10,000. Before the insurer begins to cover the costs, the consumer must pay the deductible out of pocket. The tradeoff is that the monthly premiums are lower for both employers and consumers than other plans-they average, for an individual, about $1,000-$2,000 a year.

Many employers offering these plans also create health savings accounts (HSAs), a sort of rainy-day fund to which employers and/or employees may contribute money tax-free for use in medical emergencies. The money accumulates year to year, and can be rolled over into a new employer’s plan.

Thanks to the Patient Protection and Affordable Care Act (ACA), even bare-bones, high-deductible plans must cover certain basic, preventive services for free, such as vaccinations. But they’re still risky, even for the young, healthy people for whom they make the most sense.

The PBS story profiled a young ballet dancer who opted for his dance company’s high-deductible coverage. Dennis Adams, in his mid-20s, had never had surgery, had never broken a bone, had never been in an ambulance, had never been to the hospital. He signed up for a $2,500 deductible plan.

Then he tore a knee ligament during a dance performance. The MRI needed to show the extent of the damage cost $1,600, and the provider required that it be paid up front. Adams didn’t have the money.

Lucky for him, the injury was work related, so workers’ compensation insurance covered his cost.

Whether you’re older, infirm or young and robust, high-deductible plans are designed to make you likelier to take care of yourself, and more attentive to how your health-care dollars are spent. In theory, that’s a good thing-the overuse of medical services has fueled an out-of-control medical industrial industry and increased patient harm.

But there’s a black side here, and it’s not just about lacking the cash to cover your deductible.
It’s about the inability for even the most conscientious consumer to price medical services (see Patrick Malone’s newsletter this month on “The Unknowable Cost of Medical Care,” and what you can do), and the withholding of even needed care. In the PBS story, Dr. Alison Galbraith of Harvard Medical School said that people in high-deductible plans had “a much higher prevalence of delayed or foregone care due to cost” compared with those in more traditional plans.

People are rationing their own care, which is fine for many people who otherwise would overuse the system. It’s not fine if you’re ill or have a chronic condition that can be managed with regular, sometimes minimal care.

One high-deductible plan member allowed as much. “I do get headaches about once a month,” she said, “and they can get really bad. And I still haven’t gone to see a doctor about it. … It’s like, I’m kind of trying to cheat the system a little bit, because it’s like, if I don’t go and it’s not really serious, then I’m saving money.”

But at what cost?

As Dr. Drew Altman, President and CEO of the Kaiser Family Foundation, put it, “We really need to have a national discussion about whether this is a good thing or this is a bad thing. … I think what it really means is, this is OK for some people if you are pretty healthy. But we have to worry about what these very high deductibles, $2,000, $3,000, $4,000, $5,000 deductibles, is that really even insurance coverage?”

If you’re considering insurance coverage with a high deductible, remember:

  • Out-of-pocket costs generally include the deductible, the patient’s co-pay to see a doctor, prescription medicines and/or hospital costs.
  • Often, the number of office visits allowed for only the co-pay is limited. If you exceed that number within a calendar year, generally you are expected to pay the caregiver’s out-of-network (or unsubsidized) rate.
  • HSAs allow beneficiaries to contribute, tax-free, as much as $3,100 for an individual and $6,250 for a family.
  • The plans are problematic for low-income individuals, especially those with chronic conditions, such as diabetes. People with health problems often have the toughest time meeting the high deductible because their illnesses can keep them from working.
  • The IRS determines what medical expenses qualify toward the deductible. Recently, the agency dropped over-the-counter medications from its list.
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