By Trudy Lieberman, Rural Health News Service
Funded by a grant from The Commonwealth Fund and distributed through the Nebraska Press Assoc.
Even those of us with health insurance have seen our insurance policies pay less in recent years while we pay more to go to the doctor, have an out-patient procedure, or buy prescription drugs. One important provision of the Affordable Care Act aims to address those rising concerns.
What’s happened is a not-so-subtle cost shift to patients from their employers who buy most of the coverage and insurance companies who sell to people who don’t have company-provided insurance. It’s a way employers and insurers can save money and discourage consumers from using more medical services than they really may need. The hope is that fewer people seeking treatment will result in a lower national health care bill.
But this cost-sharing had gotten out of hand with deductibles as large as $15,000 or $20,000 for some individual policies and coinsurance as high as 30 or 50 percent for some services. Coinsurance is a percentage of a bill for a medical service, and is often confused with a co-pay, which is a set amount you pay for a service. For example, 50 percent coinsurance for a $150 doctor visit–$75–will be considerably higher than a set co-pay of $25.
Until recently policies with co-pays have been more common. Consumers almost always pay more if a policy calls for coinsurance rather than copayments, a point that’s not well understood.
Because it was becoming hard for many insured families to pay these out-of-pocket expenses, Congress limited them to $6,350 for individuals and $12,700 for families beginning in 2014. (They will increase somewhat each year thereafter.) But in February the Obama administration announced a one-year delay for this provision of the law saying that insurers and employers needed more time to get their computers up to speed to keep track of medical expenses and pharmaceutical expenses.
The administration said it had to balance the needs of consumers and insurers. So in 2014, the cost of deductibles, coinsurance and co-pays could still continue to rise.
Although the caps on out-of-pocket expenses will help many families when they do take effect, it’s easy to argue that some people will still have trouble paying those amounts. Last week the Kaiser Family Foundation announced that premiums for employer-provided insurance rose four percent last year making the average annual premium $16,351 for a family and $5,884 for individuals. People buying their own coverage face premiums like these as well.
While this year’s increase may seem modest judged against past premium hikes, the cost of health insurance is still outpacing wages, which grew 1.8 percent last year and the general inflation rate which rose 1.1 percent. Even with slower growth in premium increases and with the subsidies that Obamacare provides to help consumers buy health insurance, paying for coverage will continue to be a financial burden for many families.
Here’s an example. Let’s say a family with an income around $47,000, somewhat below the median, could get a subsidy of around $9,000. If they chose a policy that costs about $12,000, they’d have to pay about $3,000 out of pocket for the rest of the premium and another $10,000 or so in deductibles, coinsurance, and co-pays over the course of the year if they get sick. How many families with modest incomes have that kind of money lying around after paying taxes, Social Security contributions and general living expenses?
Families may be tempted to buy the cheapest policies to keep the premiums and their up-front costs as low as possible. But that strategy comes with a big trade-off. Policies with low premiums generally have high deductibles and coinsurance. It’s tricky to decide whether you want low premiums hoping that you won’t get sick and have to spend a lot on coinsurance and co-pays, or whether to opt for high premiums and lower cost-sharing. Most people have no idea what illnesses might strike during the year.
While limits on out-of-pocket expenses will be a big help when they are finally implemented, it remains to be seen whether the president’s promise that the health reform act would make insurance affordable comes to pass.