In yesterday’s thread that PPOs are merely a plan design and not an indicator of quality nor shittiness, Dr. Bloor restates a very important point about high deductible plans in response to another comment:
The High-Deductible Health Plans scare me. Are the prescription rates for these plans pre-negotiated, or do you eat the cost of prescriptions at retail rates until you hit the deductible?
You should never take on more of a deductible than you can assume you’ll spend in the course of a year. Folks who either opt for big deductibles or have them foisted on them by their employers for the sake of saving a few bucks on their monthly premium are aching to be victims of the penny-wise-pound-foolish approach to insuring their families.
High deductible health plans (HDHPs) are “consumer-driven” health insurance. The theory of change is that the consumer (not patient, and not person but consumer) will be able to effectively assess their healthcare needs and since they are paying the first several thousand dollars in expenses, they will not use healthcare that is low value to them. The IRS defines a HDHP as having a deductible of at least $1,300 for an individual in 2016. A HDHP at $1,300 deductible and no other cost sharing has an actuarial value of 77% or 78% at a rough back of the envelope guess.
HDHPs are often tied to Health Savings Accounts (HSA) where people can put pre-tax money into an account to cover the deductible. The money rolls-over year after year (unlike a Flexible Spending Account) and it can be placed on Red at the casino or invested.
I am not a big fan of high deductible health care as the evidence is good that they reduce utilization but the utilization reduction is not targeted at bad or low value care, it is not targeted at all. Good care is excluded due to cost. Recent evidence has shown that there is not a cost cascade two or three years out after employer sponsored insurance switches to HDHPs from low deductible health plans, but that study is fairly limited to a healthy population (employed individuals).
This is a problem with the ACA. Catastrophic, Bronze and non-cost sharing Silver plans are low actuarial value plans when taken in the context of defining a HDHP. Most of these plans have HSAs attached. However I have a question about whether or not HSAs can be attached to some Silver plans? Do no deductible Silvers qualify for HSAs?
As I noted in April, some insurers are manipulating their products to get a good search score on the Exchanges:
one insurer has offered no deductible Silver policies without any cost sharing assistance. How is that done? These plans are structured with no first dollar obligation. However every service has a very high co-pay that is at or above typical pricing for the service. Every PCP visit has a $125 co-pay, every specialist visit has a $200 co-pay, and a hospitalization has a $3,500 co-pay. The plan design is structured to make the co-pays act like a deductible without calling them deductibles. It is a clever way to game the search logic in order to artificially bump these plans’ attractiveness.
Is that plan eligible to have a HSA attached to it? The deductible is zero, but maximum out of pocket was $6,200.
Another example is in Idaho:
There is no deductible, but the insurer only pays 50% for the first $12,700 of contracted charges and you pay the rest. This sure as hell acts as a deductible in making you want to stop before going to the doctor’s. There is a significant first dollar exposure that is not absolute (that is the definition of deductible) but it is still significant.
The Silver Choice 2,000 should be HSA qualified but on a naive reading of the law, the Silver Choice No Deductible is not HSA qualified. It is shittier insurance and on a tax basis, it is probably a more expensive insurance product for someone who uses up most of their out of pocket limit.
What are the fixes? The realistic fix in the short term is to change the qualification requirements of an HSA qualified plan from the size of deductible to the actuarial value of the plan. If the goal is to encourage more consumerism (not a great goal in my mind), then it should be benefit configuration agnostic. That goal is theoretically achievable in this political environment as it is more tax cuts although those tax cuts are not focused at the top 1% of the country so it would be a slog.
The longer term fix would be to move people from low actuarial value insurance to higher actuarial value insurance so benefit configuration shenanigans can occur at the margin but even as they happen, they are nearly irrelevant.
CrustyDem
Besides limiting care, is there even any benefit for the provider to set a 50% deductable for the first XXX dollar? Based on my own bills, if the deductable is >25%, the insurance company will pay $0 or damn close to it..
sam
My company switched us all over to HDHPs two years ago, and when it first happened, we were all really upset. After two years, I have to say, I’ve saved a significant amount of money. My “old” plan involved me contributing a not huge but non-insignificant amount of money as part of the insurance premium (abut $130/month) out of my paycheck every month, whether or not I used any healthcare.
When the HDHP was instituted, a coworker and I crunched the numbers, and figured out that, except for a narrow band of costs, it would be more advantageous for us to get the “cheaper” premium plan (higher deductible, lower premium) option. So now I pay $7/month as my part of premiums, and send the $130/month I used to pay in premiums to my HSA. I’m “paying” more for each individual doctor’s appointment, in that I pay the cost of the appointment rather than what used to be just a copay, but given the significant surplus of money sitting in my HSA now, and the realization recently that at the very least the money I’m spending is tied more closely to services I’m actually receiving (rather than going to premiums for services I might never use), I think I’m actually coming out ahead. At least for now.
But it’s a BIG psychological hurdle to get over. And a lot of it is tied to the fact that my employer is picking up a lot of the tab. The calculations may be very different if you’re also paying your own premiums on, say, an ACA plan.
And to answer the specific question regarding what you pay – you always pay the “health insurance negotiated rate”. You still get the negotiating power of the insurance company, even when you’re in the deductible period. For example, when I go to one particular doctor that I see every three months, the “market” bill is $250. I don’t pay at the office – they send the bill to the insurance company. The insurance company then “knocks off” their negotiated discount. about a month later, I get a bill for about $163. For prescriptions, it’s similar, except the pharmacy usually knows the negotiated rate when you show up – When Walgreen’s was having their computer issues a few weeks ago, they had to manually apply my insurance discount, so I was able to see that a prescription I generally pay $7 for actually cost about $40-$50 retail.
Richard Mayhew
@CrustyDem: I am not sure I understand the question. The deductible is a Yes/No question on a dollar… do I pay or does the insurance company pay.
Co-insurance is what I think you are referring to and yeah, a provider who is treating someone with a 50% co-insurance (or a high deductible) will be chasing the individual patient for payment. And if they are buying a bronze, catastrophic or no deductible silver, they are probably not rolling in dough, so getting $1,200 or $4,000 out of that person will be a pain in the ass and a decent amount of debt will be written off by the provider.
Richard Mayhew
@CrustyDem: Your line of thought led me to this previous post about payment mixtures:
https://balloon-juice.com/2014/05/27/provider-ar-preferences/
biz5th
Insurance of any kind is a necessary evil in maintaining financial security. You should buy the least amount of insurance you can afford, whether it’s auto insurance, homeowners, or health insurance.
If you have some money saved and can afford to set aside a few thousand dollars in a Health Savings Account, HSAs can be a great deal. The account is a wonderful tax shelter and savings mechanism.
But if you are living paycheck to paycheck, you need more insurance than an HSA (or really even a Silver plan) can provide, and you need the subsidies of the Exchange or a decent employer-provided plan.
Richard Mayhew
@biz5th: Yep, agreed, high deductible health plans with tax advantaged savings can make sense for people who can afford getting kicked in the balls once in a while with a full deductible charge on January 2nd. Not everyone falls into the two unions of categories — afford a full deductible and have it as a quasi-random event. People with chronic conditions that require expensive maitenance medication should not be in a HDHP, and people who can’t afford a $3,000 charge should not be in a HDHP.
gene108
Sometimes high deductible plans is all an employer can afford. With th sky rocketing cost of health care, there’s not a lot employers can do when you get your “friendly” 10% to 30% annual rate increase year after year after year.
And your question of, “Why the fuck do we have a 15% increase this year, we did not have any major claims” is met with the “friendly” response of “it is just the trend of your plan, folks with chronic conditions are getting a year older and the actuaries wanted to build in a buffer” or “well that’s just the going rate of medical inflation, 15% is the lowest increase anyone has gotten, it’s usually 25% to 40% , so consider yourself lucky.”
Central Planning
I just got our 2016 booklet in the mail. We have either the HDSP (high deductible savings plan) or PPO options. I work for a large company that self-insures. Regardless of how I look at it (even with their math), the minimum cost for the family plan is always lowest with HDSP, and the most I would pay is also lowest with the HDSP plan.
We’re lucky (?) that we get health incentives that help fund the savings account for when my family invariably maxes out the plan for the year. Migraine meds seem to max us out the quickest, but we’ve had two separate years of unplanned surgeries that really blow through the portion I owe.
artem1s
my non-high deductible plan’s out of pocket was almost as much as the deductible for the HD plan, out of pocket was not that much more. I went with the lower up front premium and took the difference and put it into an HSA. After one year I had about 3/4 of the equivalent of the out of pocket max saved up in my HSA. I also got a much better tax benefit for contributing to the HSA. In year two, I am more than ahead on the out of pocket max and will continue to add to that account. Granted, I have no chronic health problems and don’t have any scripts. I would highly recommend anyone who is in good/decent health to go with a HD plan as long as they are also diligent about taking at least part of the premium difference and putting it away for yourself. The best part is you get to keep your money and use it when you need it. It doesn’t go down the insurance sink hole and disappear. I think it would be good policy to allow HSA for even low deductible plans for low and middle income families. Why is this not a regular thing in an age when policy makers know that medical care can put a family into foreclosure or on the street? HSA’s are a great savings tool but hey, it doesn’t benefit hedge fund managers so, non starter.
Steve in the ATL
My company is on its third year of a high deductible plan. It’s awful. I’m lucky to be on my wife’s PPO, but the rank and file on the HDHP are getting hit hard with much higher medical expenses, especially those with chronic conditions.
Were our unions able to negotiate a better plan for their members? Of course not–they are screwed too.
Hopefully single payer will come along eventually.
Redshift
I’m on a high-deductible plan at my current employer (they used to offer two options, but now it’s the only one) and it really sucks. In addition to being terrible for a family member with a chronic condition and medications (as previously mentioned), it’s full of provisions to nickle-and-dime us. There’s a separate (high) deductible for in-network and out of network, virtually guaranteeing they’ll never pay anything for out of network. Prescriptions are subject to the deductible. They pay little or nothing for brand-name medications, which I understand, but they do that even if there’s no generic or generic alternative.
The whole idea that health care is something people will use “too much of” if it’s too cheap is just infuriating.
Roger Moore
@biz5th:
You can make an argument about that for other forms of insurance, but “health insurance” is something of a misnomer. What we call health insurance is a mix of actual insurance and a payment plan for predictable health costs. For people whose predictable health costs are high, like anyone with a chronic health problem, the value of the payment plan can easily dominate purchasing decisions.
CrustyDem
@Richard Mayhew: Sorry, meant co-insurance/no deductible. My experience is that if I have a 20% deductible, I’m paying more than my insurance company, since they’re paying their negotiated rate minus my co-payment (I know there are exceptions, but if I go back through my bills, that is generally the case). If the co-insurance is 50%, is the insurance company paying anything?
Obviously for the provider this sucks. I’m just wondering whether the insurer could do better by playing with the co-insurance (rather than 50% co-insurance to $12,700, 25% to $25,400).
CrustyDem
@CrustyDem: And I still screw up co-insurance and deductible. Sorry. Not my language (insurance, not English, though…).
Mnemosyne (tablet)
Did you already do a post walking us through that type of chart to figure out how to compare plans? If not, open enrollment season is upon us and it would be really, really nice to have a way to better interpret those charts.
:-)
Bill
As a self employed insured, high deductible plans are effectively all that’s available to my family. $10,000 deductible for $16,000 annual premium. I could get a lower deductible, but the premium increase doesn’t make it worthwhile. It’s effectively just catastrophic loss cover.
Washington needs to fix the ACA on this issue.
Yeah…I’m not holding my breath either.
KithKanan
@CrustyDem: I’m confused on this, because (at least if you’re in-network as opposed to out-of-network where the provider can balance bill you for charges beyond the insurer’s ‘allowable’ amount the insurer bases the percent they will pay off of), the 20% coinsurance you have to pay should be 20% of the insurer’s negotiated rate, not 20% of the provider’s initial bill.
Are you sure you’re not thinking about a fixed-dollar copayment, not a percent coinsurance? I’ve definitely had cases where I’ve ended up paying more than my insurance even though my insurance was paying “100%” beyond the copayment and a basic office visit had a $35 copay out of a $57 negotiated rate.
Flukebucket
If you have written anything in regards to the Kentucky Co-Op collapse please point me to the post so I can read your take on it.
Seanly
The overall fix is that we switch to some sort of universal coverage.
As with some of the other commentors, my private company is down to a HDHP and something that has lower deductibles and higher premiums, but doesn’t allow for HSA’s. IIRC the non-HDHP does have a lower out of pocket max, but when I look at premiums + out-of-pocket max – company contribution to HSA, the HDHP is still a better deal. It is very close though.
My wife & I both have chronic conditions as well as continuing care for my wife’s leukemia and transplant (100% grafted & no sign of leukemia, but she has ongoing weakness from lung issues). So we’ve hit our max payout both of the last 2 years and expect the same next year. However, the premiums and lower max out of pocket plus some employer contribution to the HSA mean the HDHP are still a net savings (though not by much and I conservatively assume I will pay about 15% more than max out of pocket because insurance).
We’ve had nothing but good experiences with the insurance company (knock on wood), so we’re reticent to change plans (same insurance company but different program). And as I said above, if we hit the out-of-pocket max, the total cost is roughly the same anyway.
benw
@Seanly:
Congrats! A marrow transplant is an amazing and terrifying thing.
bmcchgo
I just left a small start up that finally offered a high-deductible plan to its employees back in August. I soon learned that I would be paying $3K out of pocket for the next 12 months for my IBS medication and told the CEO of my decision to drop out of the company and look for better coverage on the Exchange. I think it was a major factor in my termination because opting out the plan would affect their overall rate.
Duane
I am confused by the place the money on red at the casino or invest it… I have an HSA and I thought my money was stuck in a shitty savings account that pays less than 1% in interest /year. I don’t ever go to the doctor–pure luck— I am a ticking time bomb of bad health but not sick. I have been in HDHPs for years and have over 20,000 in my HSA, its sunk money but I can use tax benefits. So my question is how can I store that money some where else?
KithKanan
@Duane: It looks like you can probably open your own HSA and transfer/roll over some or all of the balance of your existing HSA.
See https://crewconnect.vanguard.com/totalrewards/benefits/healthandwellness/medical/hsa_faq_transfers_rollovers.html for more details.
Duane
@KithKanan: damn I had no idea… thought it was stuck in the lousy bank savings account forever…or at least until i get sick!
Morat20
My company switched to HDHP last year. As a known worrier and general pessimist, I maxed out my HSA. Didn’t really help when my wife needed surgery in March, a hole I have barely dug my way out of. I’ve got a HDHP 80/20 plan — hit my family deductible, switch to 80/20 until OOP max is met.
On the other hand, this upcoming year I’ll start with 1500 or so in my HSA (I didn’t fully pay myself back from my wife’s surgery and other bills).
I do note that the difference between the first and second plans I can choose is…really non-existent. I can pay 2k more a year for plan 1, and get a 2k lower a year family deductible. (It’s 1900 actually) and 4k less for the out-of-pocket maximum than Plan 2.
Plan 3 (with the highest deductible) is more of the same. Premium reduction is almost identical to deductible increase. It’s really a question of whether I want to pay the extra money as premium (guaranteed), deductible (very likely), or out of pocket max (unlikely).
Jan 2 surgery pain is what I based my plan on. With the amount I should have in my HSA in January, I’ll be at risk of 900 dollars if someone maxes out their individual deductible on January 2 with the plan I’m going with. I can accept that. I don’t LIKE it, but it’s the best option.
I still hate HDHP. The only bright side is the pharmaceutical side decided to expand their list of ‘no deductible’ (I pay the usual 20% rather than 100%) drugs. Apparently they’ve decided that making diabetics and other people with required medicines choose between eating and their freakin’ pills, that it’s cheaper all around if they just pay for the freakin’ pills.
Maybe this year they’ll cover epi-pens.
Nutella
For you folks on HDHP plans, how is the paperwork? It seems to me that the moving money in and out of accounts all the time is a lot to ask of someone who is sick, but I’ve never had that type of plan so I’m interested in hearing about your experiences.
Richard Mayhew
@Mnemosyne (tablet): Let me look through my back archive as I want to think I did that a year or two ago, but if not, I will get one by the end of the week :)
KithKanan
@Nutella: It wasn’t too bad for my former HSA — I received a VISA debit card for the account and as long as I used that card to pay medical bills there was zero paperwork involved.
If I needed to reimburse myself for something I’d had to pay for some other way, I did have to fill out and mail in a form which was a bit of a pain in the butt.
YMMV depending on your HSA administrator.
Seanly
@KithKanan:
I have to submit PDFs (or could snail-mail I guess) paperwork if I use the HSA debit card to pay a bill. This year I was smart & put the bills in a folder to then scan & transmit later. If I was really smart, I would scan & send them during the year so I don’t have to worry about it at the end of the year (actually have until April to send in the required backup).
sam
@Nutella: agreeing with KithKanan. It REALLY depends on your provider/administrator. I just pay for everything with my HSA-provided debit card and that’s it. I suppose it also depends on whether your medical provider is correctly categorizing their charges as qualifying for FSA/HSA spending and such.
There was another option my Ins Co provided to pay balances directly through their site – but this resulted in the biggest hassle I’ve had to date – when one of my medical providers lost my payment and then made me run around for months trying to track it down, even though every piece of evidence provided showed that they received it and deposited it, and just didn’t apply it properly to my account. They kept trying to claim that it was because my Ins. Co/HSA had the wrong account number, but given that (a) I had made payments in the exact same manner before with zero issues and (b) the account number was tied to the insurance billing discount for the SAME BILL that had been processed correctly, I didn’t buy any of that. I finally had to escalate to public shaming, which is what ultimately solved the problem.
But through all of that, the HSA account people were actually incredibly helpful and provided reams of “tracer” information on the payment in a very quick manner.
Edward G. Talbot
As a matter of public policy, I agree that HDHP plans are not likely to result in optimal outcomes on average. So I wouldn’t have a problem seeing them eliminated in favor of some better reforms.
That said, I love my HDHP which has the $6650 family deductible, which matches the max tax-deductible HSA contribution annually. I make that contribution, which means my deductible costs all come out of my HSA. It saves me significant money over the alternative plans. I don’t hesitate to get care because I’ve run the numbers and I know that if my family’s healthcare behavior is the same as it would have been under a standard plan, I will wind up spending less unless I wind up spending in a specific very narrow range which I have never yet wound up in. And of course I know that a high deductible plan will on average wind up cheaper for the buyer because it means the ins. co is taking on less risk and risk costs money – doesn’t mean it’s better for every individual situation, just on average. I think the comment that this requires a psychological shift and is tough for people who live paycheck to paycheck are accurate, though.
One other note on prescriptions – one of the reasons why this plan is significantly better for us is that the HDHP law has certain requirements about preventative coverage that make several prescriptions much cheaper (or free) even before the deductible under the HDHP plan vs the PPO plan my employer offers from the same company. This is why it is important to really study carefully what your expenses are and EXACTLY what they will be under alternative plans. Don’t assume that your regular prescription which you current pay $50 a month full price for before deductible will cost $50 on an equivalent HDHP plan. It could be more or less. BEfore we switched our plans, we spent two hours on the phone nailing this down and found that we would spend over 50% less annually on regular prescriptions on the HDHP, all due to the details of what the HDHP law requires.