Category: Health Insurance

What Holds Back Consumer-Driven Health Plans?

health-insuranceA previous entry discussed new evidence that so-called consumer-driven health plans (CDHPs) reduce health spending one eighth among employer-sponsored group plans run by national health plans.

CHDPs are defined as High-Deductible Health Plans coupled with Health Savings Accounts or Health Reimbursement Arrangements). These plans became available in 2005. However, they only appear to cover a little over one quarter of employed people or their dependents who are enrolled in their benefits.

The case for CDHPs is that consumers (patients) will spend their health dollars more prudently than insurers or employers will. So: How can such a small proportion of people be enrolled in CDHPs after over a decade of evidence supporting the case that they cut the rate of growth of health spending?

Consumer-Driven Health Plans Reduce Health Spending One Eighth

credit-card-2The Health Care Cost Institute has released its analysis of claims data for the years 2010 through 2014, examining consumer-driven health plans (CDHPs, which HCCI defines as High-Deductible Health Plans coupled with Health Savings Accounts or Health Reimbursement Arrangements). HCCI examines a database of claims submitted by Aetna, Humana, Kaiser Permanente, and UnitedHealthcare for their employer-sponsored group plans.

CDHPs shift payment from third-party bureaucracies (that is, insurers) back to patients directly. The results continue to impress:

Premiums For Employer-Based Family Health Insurance Up One Fifth Since Obamacare

The Kaiser Family Foundation/Health Research Educational Trust has released its 2016 Employer Health Benefits Survey. The survey covers almost 1,900 private and public (non-federal) employers. The results show Obamacare has not reduced premiums, which have increased by one fifth for family plans since 2011.

The good news is the proportion of beneficiaries with “High-Deductible Health Plans with a Savings Option” (HDHP/SOs) has increased from 20 percent to 29 percent in two years. Only four percent of covered worker were in such plans in 2006, and 17 percent in 2011. (In 2015, a HDHP had to have a minimum deductible of $1,300 for single coverage and $2,600 for family. The “Savings Option” would be a Health Savings Account or Health Reimbursement Arrangement.)

These plans were first available in 2005, and correspond with an immediate slowdown in the rate of growth of employer-based benefits. In real terms (adjusted for changes in the Consumer Price Index), dropped from double digits in the early 2000s to single digits after 2005 and bottoming out at an increase in premium of just two percent in 2009. There was an immediate jump of 11 percent in 2011, Obamacare’s first year. Since then, both High Deductible Health Plans and the burden of Obamacare have continued to grow. This struggle has resulted in mid-single digit premium growth.

See Figure I below the fold:

More Than One In Five Americans “Churn” Through Health Coverage Within A Year

Census2The U.S. Census Bureau has just released the Current Population Report’s Health Insurance Coverage in The United States, 2015. This report sits alongside the Centers for Disease Control and Prevention’s National Health Interview Survey as a critical source of understanding changes in health insurance in recent years.

The report discusses coverage during the three years from 2013 through 2015, so it does not reveal the large increase in employer-based coverage since the great recession. During this shorter period, there was an insignificant gain in employer-based coverage, and a large increase in persons dependent on Medicaid, the joint state-federal welfare program that provides health benefits to low-income residents. The number of people dependent on Medicaid for at least part of the year increased from 55 million in 2013 to 62 million in 2015. (Almost the entire increase took place in 2014, Obamacare’s first year of implementation.)

Consumer Driven Health Care Gets Messy: That’s the Good News

According to a new health benefits survey by the Kaiser Family Foundation, premiums for employer coverage rose only about 3% in 2016. The low increase was due to rising deductibles. A slight majority (51%) of workers have a deductible of $1,000 or more. Two-thirds of workers in small firms do, while slightly less than half of large firm workers (45%) are covered by $1,000 or higher deductible.  About 10 years ago, only 4% of workers were enrolled in a high-deductible plan with a savings component. Now, nearly one-third are. [See the figure.]

Brookings: The Unaffordable Care Act Lowered Individual Premiums

Significant premium hikes in the Obamacare exchanges have been in the news lately. A Dallas Morning News article recently proclaimed, ‘When your health insurance is bigger than the mortgage, something’s wrong’. Indeed, insurers are charging premiums that about the size of a car payment on a late model used car. For a family the premiums are sometimes as high as a mortgage payment. Yet, insurers are hemorrhaging money – suffering losses to the tune of billions since Obamacare went into effect.

But apparently my perception is dead wrong. A pair of Brookings scholars argue individual premiums are actually lower than they would have been absent the Affordable Care Act. What???

Health Insurers, Hospitals Cannot Figure Out How To Pay For Catastrophic Care

Physician and Nurse Pushing GurneyAn advocate of consumer-driven health care, who makes the case that individuals should control most of our health spending directly, will not get very far before hearing the rebuttal: “When you have a heart attack or get hit by a bus, you won’t be in any condition to negotiate which hospital you go to.”

Fair enough, which is why we advocate insurance for catastrophic events, just like for houses or automobiles. However, in the current system, insurers and hospitals are dropping the ball on even that:

Weakening Business Case For Health Insurance

BoeingBoeing, the giant aerospace concern which is celebrating its centennial this year, has been cutting out the middle-man for health benefits:

In another sign of growing frustration with rising health costs, aerospace giant Boeing Co. has agreed to contract directly for employee benefits with a major health system in Southern California, bypassing the conventional insurance model.

The move, announced Tuesday, marks the expansion of Boeing’s direct-contracting approach, which it has already implemented in recent years in Seattle, St. Louis and Charleston, S.C.

In other examples, Intel Corp. contracted directly with a major health system in New Mexico, where it has several thousand employees.

Retailers Wal-Mart and Lowe’s took a different approach, striking deals with select hospitals across the country for bundled prices on specific surgeries. The companies steer workers to those hospitals.

(Chad Terhune, “Boeing Contracts Directly With California Health System for Employee Benefits,” Kaiser Health News, June 21, 2016)

I recently discussed evidence that insurers inflate rather than decrease prices for medical goods and services.

Appeals Court Ruling Saves Fixed Indemnity Health Coverage

The indemnity insurance model is alive and well thanks to a federal appeals court for the District of Columbia. So-called “fixed indemnity” insurance pays a fixed amount for a given claim – such as $500 per day for hospitalization or $50 for a doctor visit.  Often, fixed indemnity plans only cover specific conditions, such as cancer.

In 2014 the Obama Administration ruled that only individuals who already had comprehensive coverage could purchase fixed indemnity. The reason the administration did not want fixed indemnity coverage available was because it was trying to prop up Obamacare. The administration thought a cheaper option would undermine the goal of “maximizing the number of individuals who have comprehensive, major medical coverage.”

Under the administration ruling, individuals buying fixed indemnity coverage had to attest on their application they already had comprehensive coverage with minimal essential coverage. The plaintiffs argued the 2014 regulatory ruling essentially destroyed the market for their products. The federal court and the appeals court agreed, ruling that the administration had overstepped its regulatory power. Fixed indemnity insurance has been exempt from federal insurance standards for 20 years. The appeals court explained the Affordable Care Act did not change that nor was there evidence Congress planned for the ACA to change that fact. Unfortunately, people who buy fixed indemnity coverage still must buy Obamacare coverage to avoid getting fined. But they can now at least make the choice.

Is this the Insurance Casualty Model; Or Just a Dirty Trick?

The health insurance “Casualty Model” is alive and well in Georgia — but only as a punishment for not signing an in-network agreement or accepting usual and customary reimbursement for emergency room treatments.  At issue is a Georgia hospital (and one in Los Angeles) that are not part of the Blue Cross and Blue Shield of Georgia network. Because neither of the hospitals are part of the insurer’s network, when covered individuals go to the hospitals’ emergency rooms, the insurer sends reimbursement checks for emergency care directly to enrollees. The enrollees are then supposed to endorse the checks over to the hospital.  This is similar to the casualty model when an insurer provides funds for a covered claim and the covered individual shops around and receives a service at the provider of their choice. When someone slid into my car during an ice storm a few years ago, an adjuster came to my office and calculated an estimate. I received the check and was told I could get my car repaired almost anywhere for the estimated amount.