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When It Comes to Health Insurance, What are We Paying For?

Health plans cost more and cover less. How did this happen?

By Wendell Potter

The COVID-19 bills are coming. A year and a half into the pandemic, health insurers have found yet another way to create financial hardships for patients, as well as the hospitals and health systems working valiantly to keep them alive.

Insurer by insurer, health plans are making COVID-19 patients pay thousands of dollars out of their own pockets before they will pay a dime. UnitedHealth and Anthem both stopped waiving deductibles and other out-of-pockets requirements for COVID patients at the end of July. Now most, if not all, of the other payors are following their lead, which means bills will hit patient mailboxes, and hospitals will be saddled with even more uncompensated care.

This is because out-of-pocket maximums – the amount patients have to pay before payors pony up – have gotten so high that millions of Americans with insurance are falling deeply and hopelessly into debt.

They simply don’t have the cash to pay the doctors and nurses trying to keep them out of the cemetery.

The rise of high deductibles

Too bad, so sad, is the payors’ attitude. High-deductible health plans enable insurance companies to avoid paying billions of dollars a year in claims they once covered, and that has enabled them to rack up record profits year after year. Continuing to waive COVID patients’ out-of-pocket costs, as they did at the beginning of the pandemic, would have put the big publicly traded insurers at risk of missing Wall Street’s quarterly earnings per share expectations. As someone who used to handle financial communications for Cigna, I can assure you that the executives of those corporations will do whatever it takes to avoid disappointing Wall Street financial analysts and their shareholders.

Payors’ decision to resume the cost-sharing requirement for COVID-19 patients exacerbates an existing problem for hospitals that is worsening: because insurance covers less, the amount of money patients owe after insurance chips in is much higher than it used to be.

This is called patient balances after insurance (PBAI), and it was a problem before the pandemic.

A 2018 analysis by TransUnion Healthcare found that patients’ responsibility jumped from 8% of total bill responsibility in the first quarter of 2012 to 12.2% in the first quarter of 2017. During that time, patients with private insurance experienced a PBAI increase of 65%.

“Higher out-of-pocket costs from cost sharing has made patients responsible for an increasing percentage of the bill. Most patients simply cannot afford that,” TransUnion’s Jonathan Wilk said when the study was published.

This trend doesn’t just hurt patients. Hospitals, many of which operate on thin margins, cannot afford to health plans cover less and less of the care their doctors and nurses provide. In fact, the fastest growing component of health systems’ bad debt is not the uninsured population. It is the population that has become underinsured because of ever-rising out-of-pocket requirements.

Don’t take my word for it. Consider this:

  • More than 1 in 4 Americans, many with insurance, had trouble paying a recent medical bill, according to a 2016 Kaiser Family Foundation/New York Times survey,
  • On average, 37% of a U.S. household’s total health spending now goes toward out of pocket expenses, according to a 2019 California Health Care Foundation study.
  • The average deductible in 2019 increased to $4,544, which means that insured Americans now have to pay nearly $5,000 out of their own pockets before insurance will cover any medical expenses or prescription drugs, according to the Kaiser Family Foundation.
  • Many American families face much higher and growing out-of-pocket requirements because the maximum allowed under the Affordable Care Act goes up every year. In 2022, the out-of-pocket maximum will rise to $14,100.

Could you afford $14,000 in medical expenses? If not, you certainly aren’t alone.

I saw this crisis coming. One of the reasons I left Cigna and became a reform advocate was because I could not in good conscience promote high-deductible plans. I knew the industry-wide strategy of moving as many Americans into high-deductible plans as quickly as possible would be great for insurers’ bottom lines but financially ruinous for millions of American families.

We spend more on insurance than we spend on care

In 2019, spending on private health insurance had grown to account for 34%, or $1.2 trillion, of the nearly $4 trillion we spend on health care in the United States, according to National Health Expenditure Data.

Spending on hospital care, in contrast, was 33% in 2019, according to the California Health Care Foundation.

There’s more – even with all that money being spent on health insurance, Americans still spent more than a third of a trillion dollars out of their own pockets on medical expenses.

Patients are spending more and more every year, while getting less and less for their premium dollars.

A push for change

This trend is clearly not sustainable, for either hospitals or the patients they serve, but policymakers and employers have paid scant attention to what has become a quiet but financially crippling health care crisis.

That’s why my team and I at the Center for Health and Democracy this month launched an 18-member coalition, comprising patient, provider, business, public health, and social justice organizations to educate the public and policymakers and advocate for solutions.

The name of the coalition is Lower Out-of-Pockets NOW, and we’re focused on fighting back. Premiums should pay for insurance that actually protects people from ruinous costs. Out-of-pocket costs keep patients from seeking necessary care, particularly Americans with modest incomes, people of color, and those with chronic conditions.

Simply put, eliminating out-of-pocket expenses will improve the country’s health and economic well-being. Check us out at LOOPCoalition.org, and follow along as we work toward achieving a better, more accessible healthcare system.

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