Insurance companies are requiring higher out-of-pocket expenses to pay for complying with new rules
By Peter Frost
Chicago Tribune, Oct. 13, 2013
Adam Weldzius, a nurse practitioner, considers himself better informed than most when it comes to the inner workings of health insurance. But even he wasn’t prepared for the pocketbook hit he’ll face next year under President Barack Obama’s health care overhaul.
If the 33-year-old single father wants the same level of coverage next year as what he has now with the same insurer and the same network of doctors and hospitals, his monthly premium of $233 will more than double. If he wants to keep his monthly payments in check, the Carpentersville resident is looking at an annual deductible for himself and his 7-year-old daughter of $12,700, a more than threefold increase from $3,500 today.
“I believe everybody should be able to have health insurance, but at the same time, I’m being penalized. And for what?” said Weldzius, who is not offered insurance through his employer. “For someone who’s always had insurance, who’s always taken care of myself, now I have to change my plan?”
Many Illinoisans buying health coverage on their own next year will face a similar dilemma spurred by the health care overhaul: pay higher monthly insurance premiums or run the risk of having to shell out thousands more in deductibles for health care if they get sick.
To promote the Oct. 1 debut of the exchanges, the online marketplaces where consumers can shop and buy insurance, Obama administration and Illinois officials touted the lower-than-expected monthly premiums that would make insurance more affordable for millions of Americans. But a Tribune analysis shows that 21 of the 22 lowest-priced plans offered on the Illinois health insurance exchange for Cook County have annual deductibles of more than $4,000 for an individual and $8,000 for family coverage.
Those deductibles, which represent the out-of-pocket money consumers must spend on health care before most insurance benefits kick in, are higher than what many consumers expected or may be able to stomach, benefit experts said.
By comparison, people who buy health insurance through their employer have an average individual deductible of just more than $1,100, according to the Kaiser Family Foundation.
Although millions of Americans will be eligible for federal assistance to help offset some of those costs, millions will not, underscoring one of the trade-offs wrought under the law’s goal to ensure most people have access to health insurance.
“It’s been major sticker shock for most of my clients and prospects,” said Rich Fahn, president of the Northbrook-based insurance broker Excell Benefit Group. “I’m telling (clients) that everything they know historically about health plans has changed. They either have to pay more out-of-pocket or more premiums or both. It’s an overwhelming concern.”
Plans with the least expensive monthly premiums — highlighted by state and federal officials as proof the new law will keep costs low for consumers — have deductibles as high as $6,350 for individuals and $12,700 for families, the highest levels allowed under the law.
Because the federal website that runs the Illinois exchange remained largely inoperable as of late last week, the Tribune used data from websites of four of the five insurers that will offer plans in Cook County on the marketplace. One insurer, Coventry Health Care, did not have plans available on its website last week but provided data to the Tribune.
Insurers say the price and cost hikes result from new benefit mandates, additional taxes levied as part of the law and a requirement that they can no longer deny coverage to people with pre-existing medical conditions.
The vast majority of insurance plans for 2014 must include a list of 10 essential health benefits, some of which, like maternity care, weren’t necessarily included in all health plans a year ago.
The law also includes mandatory coverage of mental health and substance-abuse treatment, prescription drugs and rehabilitative care. All preventive care, including annual physicals and routine immunizations like flu shots, must be covered at no cost.
Further, insurers are required to take all applicants, regardless of whether they have pre-existing medical issues that may have locked them out of coverage in the past. And they’re prohibited from charging their oldest, sickest members any more than three times as much as their youngest, healthiest members, causing premium prices to rise for many younger people.
Costs associated with those mandates are passed along to all members of a health plan.
Considering those factors, “the rates are actually quite reasonable,” said Kelly Sullivan, a spokeswoman for the Illinois health insurance marketplace.
Under the law, most of the estimated 15 million Americans who bought plans individually this year, like Weldzius, will have to choose new insurance coverage that meets federal guidelines.
Because of the myriad changes to most plans, “it’s hard to know whether you’re really going to be able to compare like policies” from year-to-year, said Karen Pollitz, a senior fellow with the nonprofit Kaiser Family Foundation.
The health care law established four broad categories of coverage — platinum, gold, silver and bronze — for which premiums vary based on the amount of out-of-pocket health care expenses consumers are required to pay. Bronze plans have the lowest monthly premiums, but they cover only 60 percent of projected medical costs. Platinum plans have higher premiums but cover 90 percent of medical costs.
State officials expect most consumers to select either bronze or silver plans because monthly costs are lower.
To develop the new plans that meet the federal coverage levels, insurers in Illinois took two distinct routes.
Land of Lincoln Health, a new nonprofit insurer, opted to design most of its bronze and silver plans with lower annual deductibles in exchange for higher monthly premiums. All of its plans also offer a broad range of providers, though certain discounts are available for using a selection of them.
“When we sat down and looked at how to design our plans, we felt it was very important for consumers to not be afraid to use their health coverage,” said Dan Yunker, Land of Lincoln’s chief executive. “We can’t have people not using their health plan because they can’t afford it when it’s time to use it.”
Meanwhile, the state’s dominant insurer, Blue Cross and Blue Shield of Illinois, was able to offer plans with lower monthly premiums by crafting narrower networks of doctors, specialists and hospitals.
The least expensive “Blue Choice” plans offered by Blue Cross, which carry the lowest monthly premiums in Cook County, contract with 4,100 primary care providers in the Chicago metro area. That compares with about 15,775 providers in its largest preferred provider network, according to company data. The “Blue Choice” network also includes 57 acute-care hospitals versus 213 in the larger network.
People who choose to go to an out-of-network hospital or physician will foot the entire bill, in most cases, and those expenses typically are not applied toward annual deductibles.
The network “was created to offer a most cost-effective and affordable network of physicians and hospitals without compromising quality,” said Steve Hamman, the insurer’s senior vice president of network management.
Company data show that patient outcomes are actually slightly better in its narrower network, he said.
Some plans offered by Humana Inc. and Coventry also have narrow networks.
Insurers and brokers recommend people carefully study narrow-network plans to ensure their preferred doctor and hospital are included.
“Y
ou have to be very careful about choosing a plan with a smaller network … or there will be some big surprises,” Fahn said.
Insurance brokers and health care experts also urge caution for consumers who choose plans with higher deductibles.
“Yes, rates are really low, but that’s like saying, ‘Here’s a free car,’ but if it costs you $500 a month to run, it’s not really a free car,” said Dave Stumm, executive vice president at Stumm Insurance, a Chicago-based brokerage.
Fahn calls the bronze plans “smoke-and-mirrors catastrophic plans,” which don’t provide benefits until and unless something bad happens — a car wreck, a major surgery or a chronic illness.
For many low-income Americans, the law offers some help, though how much will vary by the individual.
The vast majority of the uninsured — an estimated 80 to 90 percent, according to the Congressional Budget Office — who buy coverage on the exchanges will qualify for federal subsidies in the form of tax credits. Those who make up to 400 percent of the federal poverty level (about $46,000 for an individual and $94,200 for a family of four) will be eligible for the subsidies to help offset the cost of premiums.
Further, people with incomes up to 250 percent of the federal poverty level (about $28,700 for an individual and $58,900 for a family of four) will qualify for cost-sharing subsidies that will reduce deductibles, in some cases substantially.
Brokers say they worry most about people who qualify for lower subsidies or none at all. Those with more modest incomes might not have enough in savings to pay for medical expenses.
They “could get slammed if they get sick,” said Pollitz, of the Kaiser Family Foundation. “They just won’t have the money. They just won’t.”
A potential consequence could be that some individuals may not seek medical care beyond routine office visits when they should, dissuaded by the specter of having to pay for it out of pocket.
“They’ll just live without,” Pollitz said, “kind of like they do now.”