Insurance coverage grew, but spending by individuals rose

Filed Under: Costs, Health plans, Patients

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We are often asked:  “Why do people care about the cost or price of health-care procedures? Most people are insured, so the insurance company pays, right?”

For an answer, let’s go to Massachusetts, where many people are insured as a result of “Romneycare,” the precedessor to the Affordable Care Act. In fact, that’s the state with the lowest rate of uninsured people, 4 percent. (Highest is Texas at 24 percent; the U.S. nationwide rate is 16 percent.)

In essence, what happens in Massachusetts may be looked at as an example of what happens in the rest of the nation with the expansion of insurance coverage.

Because many of us grew up in an environment in which health insurance resulted in a $20 copay, and premiums covered by one’s employer for the entire family, and few out-of-pocket payments, this is a common thread. People whose employers offer that kind of health insurance have a hard time

understanding why costs or prices are really important. Insurance coverage, this thought goes, means individuals don’t care about costs.

But increasingly, insurance plans come in various forms — catastrophic, for example, which covers, well, catastrophes, but leaves the garden-variety stuff in the patient’s responsibilities. Many newer insurance plans require an insured person to cover 10 percent, 20 percent, maybe even 40 percent of the price of care. So insurance is no longer a $20 copay.

Many people in Massachusetts are choosing less expensive insurance plans that cover less care than before, says Dr. Neel Shah, founder of costsofcare.org, a Boston nonprofit  with a mission of  “transforming American healthcare delivery by empowering patients and their caregivers to deflate medical bills.

“The expectation in the Affordable Care Act is that we will see a big upswing in high-deductible plans,” said Neel, referring to the type of insurance plan that typically comes at a lower premium but with a higher out-of-pocket deductible one must spend before the insurance plan starts covering costs.

“The growth rate in premums is 10 percent a year,” he said. ” Every  year it takes a bigger percent of household budgets. So a lot of people are choosing less expensive insurance.”

The expansion of coverage means, in other words, that more people are covered by health insurance of some sort, but overall, people are less  financially protected against high bills.

“It’s ironic: we are covering more people, and for really catastrophic events, some are better off,” he added. “But there is a large and growing sector of the middle class that, for routine health care spending, are much more price-sensitive, because they haven’t  reached their deductible.”

Those deductibles, he added, generally are around $2,000 to $5,000. So insurance coverage expanded, but spending by individuals on health care rose.

It is not infrequently said that the Affordable Care Act is “not health care reform, but health insurance reform.” While I don’t fully subscribe to that view, Neel’s experiences of what happened in Massachusetts is instructive as we look toward Jan. 1, 2014, and the implementation of the law.<