American Workers on an Uphill Road with Consumer-Driven Health Care

Aflac
2013 Aflac WorkForces Report, April 24, 2013

New Aflac survey reveals employees are not prepared for increased costs, may not want control and lack education

The 2013 Aflac WorkForces Report is the 3rd annual Aflac employee benefits study examining benefit trends and attitudes.

Not Prepared Financially

*  Only 24 percent of workers completely agree or strongly agree they will be financially prepared in the event of an unexpected emergency or serious illness.

*  Further, 46 percent of employees have less than $1,000 to be able to pay for out-of-pocket expenses associated with an unexpected serious illness or accident, and 25 percent of employees have less than $500.

*  Four-in-ten (40 percent) workers would have to borrow from their 401(k), friends and family to pay for out-of-pocket expenses associated with an unexpected serious illness or accident; 28 percent would have to use a credit card.

Press release:
http://www.aflac.com/us/en/docs/insights/aflac_prtemplateawr2013.pdf

Fast Facts:
http://www.aflac.com/aflac_workforces_report/2013/fast_facts.aspx

And…

The Center for Consumer Information & Insurance Oversight
Centers for Medicare and Medicaid Services

Section 1402 of the Affordable Care Act requires reductions in the maximum out-of-pocket limits on silver plans for individuals with household incomes between 100 and 400 percent of the FPL. However, the statute also requires the Secretary to ensure that the reductions in the maximum out-of-pocket limits do not cause the AVs (actuarial values) of these silver plan variations to exceed certain levels.

For reasons described in more detail below, we do not plan to reduce the maximum out-of-pocket limits for individuals with income between 250 and 400 percent of FPL.

http://cciio.cms.gov/resources/files/Files2/02242012/Av-csr-bulletin.pdf

With a major trend expanding in the direction of employer-sponsored consumer-driven health care, this new Aflac report shows that workers are not ready for the change. If you look only at the financial challenge, workers may never be ready. They cannot afford to pay the out-of-pocket expenses that they would face should they or their families develop significant medical problems.

Although the Aflac study was limited to employer-sponsored benefit programs, most people purchasing plans in the new state insurance exchanges also will be selecting plans that use high-deductibles – the defining characteristic of consumer-driven health plans.

The Affordable Care Act (ACA) does require reductions in out-of-pocket expenses for individuals with household incomes between 100 and 400 percent of the federal poverty level (FPL), but another ACA requirement prohibits the covered silver plans from having an actuarial value over 70 percent (the percent the plan pays on average) for individuals with household incomes over 250 percent of FPL ($27,925 for an individual). Since it is impossible to keep the actuarial value down at 70 percent if out-of-pocket expenses are subsidized, it was decided to eliminate out-of-pocket support for individuals above 250 percent of FPL.

Some workers will benefit from employer contributions to health spending accounts (HSAs and HRAs), just as some individuals will benefit from out-of-pocket subsidies in the exchanges. In either instance, it can be anticipated that far too many still will not be prepared financially for unanticipated medical costs, just as the Aflac study reported.

Newer employer-sponsored plans and plans under ACA are moving in the wrong direction. We need a program that removes financial barriers to care, not plans that erect them. All you have to do is read the 16 page CCIIO/CMS bulletin on actuarial value and cost-sharing reductions (link above) to see how ridiculously complicated and irrational we made this system.

We really do need a single payer system. Then everyone would be prepared financially in the event of medical need.