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.]
An insurance executive claims premiums fall about 20 percent when employers move from a $200 deductible to a $1,000 deductible. That’s a huge savings. What especially makes it nice is families may have the potential to sock money away in a health savings account (HSA) if moving from, say, a $400 deductible to a $1,400 deductible. Under such an arrangement most families would be better off.
Although many people lament the plight of workers who must cough up $1,000 or more before benefits kick in, the trend is actually good news. As a society, we will never be able to slow the rise in health costs until millions more people ask uncomfortable question of their doctor: “ Doctor, do I really need that MRI? What will that cost? Can we wait and see if I get better on my own?” As the New York Times adeptly pointed out:
“People who have to pay the full cost of magnetic resonance imaging on their knee, for example, might be more likely to shop around and pick the $500 one instead of the $3,000 one. Perhaps, they’ll decide to give their minor knee pain two weeks to see if it gets better on its own, and skip the M.R.I. The hospital offering the $3,000 M.R.I. might lose enough business that it will lower its price.”
Doctors are having to figure out how to collect from patients who don’t have an extra $1,000 in cash laying around collecting dust. According to Modern Healthcare, hospitals are adapting to life when many of their customers are becoming price sensitive because they have high deductible plans (e.g. Bronze plans).
“Some hospitals and health systems are starting to review and revise their prices to make themselves more attractive to individual consumers who increasingly experience sticker shock when they pay for services out of pocket under high-deductible health plans.”
“These efforts are at least partly driven by the growing prevalence of high-deductible plans, which prod consumers to shop around for the best price. Prices for office visits, diagnostic imaging, obstetric ultrasounds, colonoscopies and physical therapy — services that consumers increasingly must pay for themselves — especially are coming under the microscope.”
The stocks of for profit insurers are even taking a hit as customers who used to owe only a couple hundred are on the hook for the equivalent of a used car. As it turns out, doctors and hospitals are increasingly discovering, they are in the retail medical business rather than the wholesale business where they get paid for all the services they sell to price-insensitive customers.
This is what I sometime refer to as medical care in the Bronze Age. It is a necessary condition. Only when 150 million people with employer coverage (and another 150 million people with public coverage or individual coverage) begin asking tough questions and comparing prices for medical services will providers’ prices become transparent and doctors and hospitals begin to compete on price, quality and other amenities.