High deductibles, limited coverage and consensus for change

Health insurance deductibles are rising, leaving more and more people with out-of-pocket costs they didn’t expect.

This is important partly because it explains why Americans have a hard time finding consensus on what should be done about rising health costs: people who are insulated from rising costs by a low deductible or other things, including blissful ignorance, don’t see what the problem is. Everybody else is in pain, though.

I’m often asked who’s interested in knowing the prices of health-care items and procedures. The person doing the asking is usually someone who’s got great health insurance, or who is well-to-do, or both — people who don’t have to worry about prices.

People who are insulated from rising costs include: members of Congress, members of unions with strong benefits plans, people at big companies with low-deductible plans, people who have health insurance that they feel is going to cover them in the event of problems. To a certain degree, people on Medicare and Medicaid feel less of the immediate out-of-pocket pain than do others.

People who  are not insulated from  rising costs: the uninsured, people on high-deductible plans (often employees of small companies), people with jobs that don’t automatically bring great insurance policies — restaurant and other service workers, retail workers, recent college grads working on the gig economy, people with “mini-med” plans that offer coverage but minimal coverage, which runs out in the case of emergencies.

Sometimes people think they’re in the first group but are actually in the second group. Among those people: the couple featured in the  Time magazine article about rising health costs by Steven Brill.

They were insured, the article says, by “Assurant, which sells health insurance to small businesses that will pay only for limited coverage for their employees or to individuals who cannot get insurance through employers and are not eligible for Medicare or Medicaid. Assurant also sold the Recchis their plan that paid only $2,000 a day for Sean Recchi’s treatment at MD Anderson. Although the tight limits on what their policies cover are clearly spelled out in Assurant’s marketing materials and in the policy documents themselves, it seems that for its customers the appeal of having something called health insurance for a few hundred dollars a month is far more compelling than comprehending the details.”

The high-deductible plan is increasingly the only plan offered by many employers, and the size of the deductible is rising.

The Kaiser Family Foundation did a report about the rise in deductibles in general, and found that they are increasing. In 2006, jsst 52 percent of covered workers had a deductible for single coverage; by 2012, 72 percent of covered workers did. And high deductibles are increasing.

 

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Beyond that sobering fact, the size of the deductible is rising too: “There is increasing variance in the average deductible across all plan types,” the report says. “In 2006, 50% of workers had a deductible between $250 and $665. In 2012, 50% of workers had a deductible between $417 and $1,500.  With the growth of higher deductible plans over the past couple of years, some workers are facing much higher deductibles than others.”

The highest deductibles tend to be in smaller companies, the authors add:

‘The average deductible for covered workers enrolled in single coverage at a small firm is nearly twice as much as the deductible for covered workers at larger firms.  Within PPOs, the plan type with largest enrollment, the average deductible for workers at small firms is $1,260, compared to $563 for workers at large firms.  The average deductible among all plan types for workers at small firms is $1,596, more than the $875 dollars for covered workers at larger firms.” (A small firm is defined as 3 to 199 workers.)

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The difference between small and large firms is pretty graphic, even across type of plan: HMO, PPO etc.

DeductibleComparisonSmallLargeFirm

So if you’re in a larger company with a low deductible, you may feel insulated from rising costs and therefore slightly unsettled abou the health-care marketplace because you know people are suffering out there somewhere.

If you have an insurance plan like the Assurant one that you think covers you, you may feel insulated from rising costs — until something bad happens and you realize that you’re not insulated.