Non-Group Health Insurance: Many Insured Americans with High Out-of-Pocket Costs Forgo Needed Health Care
Families USA, May 2015
Our study examined adults who bought private health insurance in the non-group market in 2014
- Just over one-quarter (25.2 percent) of adults who were insured for a full year went without needed medical care because they could not afford it
- Adults with lower to middle incomes were the most likely to forgo needed medical care
- Adults with high deductibles were more likely to forgo needed medical care
- In 2014, half (50.6 percent) of adults had high deductibles of $1,500 or more, and 30 percent had exceedingly high deductibles of $3,000 or more
Why are people still struggling with out-of-pocket costs?
- Premium tax credits are tied to silver plans, which often have cost-sharing that is too high for many consumers to be able to afford
- Only a portion of the lower-income consumers who are eligible for subsidies to reduce cost- sharing in silver plans receive substantial help to also reduce their deductibles
- Insurers are choosing to design silver plans with upfront cost-sharing that is too high for lower- and middle-income consumers to afford
- Health insurers should offer more plans at the silver level that have low or no cost-sharing for primary care, other outpatient services, and prescription drugs.
- Policymakers at the state and federal levels should require health insurers to sell silver plans with lower cost-sharing for primary care, other outpatient services, and prescription drugs.
- At the federal level, Congress should: Provide cost-sharing reduction subsidies to middle-income consumers (above 250% FPL) and increase the generosity of this help.
- At the state level, lawmakers can also strengthen financial assistance.
Designing Silver Health Plans with Affordable Out-of-Pocket Costs for Lower- and Moderate-Income Consumers
Families USA, May 2014
Silver plans have an actuarial value of 70 percent, meaning that they are required to cover 70 percent of people’s health care costs (on average).
Insurers have some flexibility in how they design plans to meet the actuarial value requirements for silver plans. However, analyses of current marketplace plans suggests that the majority of silver plans have high deductibles.
When we say that silver plans must meet an actuarial value of 70 percent, we mean that a silver plan’s cost-sharing must be designed so that the plan pays for, on average, 70 percent of people’s medical expenses in a year. Consumers are expected to pay 30 percent of the cost of care out of pocket (on average) through deductibles, copayments, and co-insurance.
Because silver plans must stay within the bounds of a 70 percent actuarial value, they can never completely protect consumers from having to pay higher out-of-pocket costs if they need expensive care.
Insurers must make trade-offs when deciding how to distribute the cost-sharing in their silver plans to meet the required 70 percent actuarial value. Silver plans that set higher deductibles are able to charge relatively lower copayments for care received after a consumer meets the deductible. On the other hand, silver plans that set low deductibles, or that exempt coverage for certain services from the deductible and instead charge copayments for those exempted services, may have to charge relatively higher copayments or co- insurance for other health care services.
Actuarial value considers only the costs of covered services that are delivered by in-network health care providers. A plan’s actuarial value does not consider out-of-pocket costs that consumers must pay if they need services that are not included in the plan’s covered benefits or if they receive care out of network.
Trade-Offs in Plan Design
The featured plan designs show that, because silver plans must meet specific actuarial value requirements, the plans are limited in how low they can keep cost- sharing overall. This is evident in the trade-offs that these plan designs make: Since the plans keep cost-sharing for some services more affordable, the plans must charge relatively higher cost-sharing for other services.
Many of the plan designs with affordable cost-sharing for routine and minor care charge higher cost-sharing for more expensive services, such as inpatient and emergency care, outpatient surgeries, imaging, and specialty drugs.
When silver plans have relatively affordable cost-sharing, consumers with greater health care needs will likely still face high out- of-pocket costs. For example, consumers who need expensive medications or more complex care (such as surgery) will still have to pay high out-of-pocket costs in many of these plans until they reach their out-of- pocket spending limit.
Potentially Problematic Cost-Sharing Designs
- Three-Tiered Provider Networks
- Four-Tiered Drug Formularies
- Potentially Discriminatory Cost-Sharing for Select Treatments
The findings of our analysis prove that it is possible to design silver plans that don’t have high deductibles and that do have more affordable copayments, at least for routine care and care for minor health problems. Putting policies in place that require or encourage insurers to offer these types of plans in the marketplace will help make sure that lower- and moderate-income consumers can afford routine care.
By design, silver plans cannot necessarily shield consumers who need expensive care from high out- of-pocket costs. That is why, over the longer term, efforts to get marketplaces to offer more diverse silver plans must be part of a larger initiative to identify and implement state and federal solutions that will prevent lower- and moderate-income consumers from being underinsured. Examples of such solutions include policies to ensure that this population receiving greater financial assistance to help them afford more comprehensive coverage, or policies to expand cost-sharing assistance to more moderate-income consumers.
By Don McCanne, MD
Today Families USA released their report that confirms, once again, that many adults insured with high-deductible health plans are likely to forgo needed medical care, especially if they have lower to middle incomes. So what are their recommendations?
In order to remove financial barriers to care, they recommend that more plans offered at the silver level – the benchmark plans – have lower or no cost-sharing for primary care, other outpatient services, and prescription drugs. This has the advantage of increasing access to primary care services, which most agree would significantly improve the performance of our health care system.
The problem is that the barely affordable silver plans must have an actuarial value of 70 percent (the patient pays 30 percent of health care costs, up to a given maximum). Higher deductibles are used in most of these plans in order to meet this actuarial value. But in a report that Families USA released last year, they explain that if the deductibles and copayments were reduced to more affordable levels, then the required 30 percent of out-of-pocket costs must be shifted to more expensive services.
So this scheme would help the majority who simply need primary care services, but it would make care less affordable, even catastrophic, for those who have greater health care needs. As long as our benchmark plans are set at an actuarial value of 70 percent, this trade-off cannot be avoided.
Families USA also suggests the obvious. We should increase federal and/or state subsidies for both the purchase of plans and for cost sharing for low and middle income individuals and families.
But if you are going to make care affordable for everyone, why continue with this highly inefficient, administratively complex system that wastes so many of our health care dollars. Surely by now Families USA should acknowledge that our dysfunctional system should be replaced by a much more efficient single payer national health program – an improved Medicare for all. We’ve experimented extensively with their preferred model, and it didn’t work.