BEWARE: The high-deductible health plans are coming, the high-deductible health plans are coming

Some of you are saying – they are already here.  Others of you are wondering, the what is coming?

First, some background.  If you have medical insurance via your employment, you typically  have a plan where you have to pay a deductible for medical expenses and will have to reach a certain threshold before the insurance covers the rest.  The threshold may be only a couple of hundred dollars.  Under such a system the employer pays a signficant share of its employees’ health insurance.

With high-deductible health plans, which someone crazily dubbed consumer driven insurance [what consumer do you know would drive to pay a lot more out-of-pocket medical expenses?], the costs of health insurance are shifted more to the employee.

In the Sunday, June 3, 2012 issue of The Washington Post, Jay Hancock wrote an article entitled “High deductibles hit the Fortune 500.”  Of interest are the following paragraphs:

Supporters say the plans can contain health costs.  Patients who have to pay for care up front will take better care of themselves and shop more carefully, the thinking goes, seeking lower-cost providers or asking whether tests are necessary.  High-deductible plans, known as “consumer-driven” insurance, may partly account for a recent slowing in the upward spiral of medical spending, analysts say, although reluctance to buy health services in a poor economy is also a factor.

Critics say high-deductible insurance is just a way for corporations to shift costs onto workers, especially those dealing with chronic illness such as diabetes and arthritis.  Further, consumers aren’t prepared to shop for treatment because reliance information on price and quality is difficult, if not impossible, to find.  High deductibles, they say, boost chances that patients will delay seeking care until ailments become acute.  Still, high-deductible plans, long promoted by Republicans as a way to bring market forces to medicine, are here to stay no matter how the Supreme Court rules on the 2010 health-care law, experts say.

“There’s no question that high deductibles are spreading,” said Jonathan Oberlander, a health policy professor at the University of North Carolina.  “That’s a pretty significant trend, and I don’t expect it’s going to slow up anytime soon.  Employers like it because they’re providing less coverage.  If they can relabel it as consumer-driven then it even sounds good.”

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Among high-deductible plans’ advantages: For both companies and workers, premiums are substantially lower than for traditional coverages.  Employers often use money saved on premiums to fund tax-free health savings accounts and similar arrangements to help workers pay for deductibles.

Even before the Affordable Care Act required all plans to pay for preventative care, high-deductible insurance typically covered 100 percent of the cost of physicals and screenings, GE contributes company money to the tax-free accounts – $500 for individuals, $1,000 for families – for employees to pay some of the deductible.

The idea is for people to receive the preventative care they need and seek lower-cost treatment when they get sick, knowing their money is first in line to be spent.

Forewarned is forearmed!  Some of you may have considered The Money Heifer a little extreme when I discussed the need for establishing a “medical health fund.”  Probably, within the next five years, we will all have to pay significantly more out-of-pocket for medical care.  You will want to enroll in health savings accounts to build up sufficient funds to cover significantly higher out-of-pocket medical costs.

Hmmm, you think the American economy will return to the good ole days, pre-2005?  Not a chance.  We as individuals Americans have more and more costs shifted to us.  We, in turn, have less disposable income.  Yup, times are changing.  Be prepared!

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2 Comments

  1. June 10, 2012 at 2:34 pm

    The only way to make health care affordable is to eliminate the use of insurance on routine office visits, while expanding the use of health savings accounts (HSAs);the opposite of Obama-care.

    Insurance was originally established to guard against risk of financial devastation resulting from accidents and debilitating diseases such as cancer. Routine office visits are not a risk; they are a common event, a certainty. To fund office visits through insurance premiums is simply a more expensive way to pay for them. With so many Americans using high co-pays and HSAs to pay for routine care, it is not a big leap to simply exclude these services from insurance reimbursement. HSAs allow the individual to use tax exempt dollars to pay for medical services even if those services are not recognized as covered health insurance expenses. In fact, by excluding this level of service from being eligible for insurance reimbursement we eliminate a layer of administrative service and expense both for the insurance carrier and the physician’s office. A reduction in administration would have an immediate and dramatic impact on the cost of health care, as 25% of every dollar that currently flows through an insurance company is eaten up in administrative cost.

    To use insurance to pay to see a doctor for a sore throat, sports physical, or annual routine exam does not shield the patient from the cost, but only the knowledge of the cost! It is absolutely necessary for individuals to have an awareness of the cost of medical services.

    Eliminate the involvement of insurance carriers at the routine care level of service and you have not only removed the incentive to exploit the system, but you have also eliminated 25% of administrative costs on those services.

    • June 11, 2012 at 8:33 pm

      Thanks for your comment, Mike. This country is going back to the future – “pre FDR.” Based on your position, don’t expect Americans to have any disposable income. I think companies like Apple are in trouble, domestically because this nation has too much debt – individually and at the national level. If you have to pay upfront from many things, you don’t have money to spend on the frivolous. That’s a reality I see in the near future. That’s why smart people are not “keeping up” with the technology rat race with smart phones, that’s why people are ditching cable, that’s why people are “growing their own food,” that’s why people are eating out less. Eliminating medical insurance as it presently exists and making Americans pay more upfront for those various office visits will have unintended. Will we need the number of doctors that we have in this country, particularly when people rationalize going to the doctor? Will there be a boom in alternative medicine?


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