Americans seeking cheap insurance on the Obamacare health exchanges may be in for sticker shock if they get sick next year, as consumers trade lower premiums for out-of-pocket costs that can top $6,000 a person.
Expenses for some policies can reach $6,350 for a single person and $12,700 per family, the most allowed by the health-care law, according to a survey by HealthPocket Inc. of seven states, including California and Ohio. That’s 26 percent higher than the average deductible in the seven states, and a scenario likely repeated across the country, said Kev Coleman, head of research and data at Sunnyvale, California-based HealthPocket.
Private employers have been raising deductibles and co-pays for years to help control costs on health coverage for their workers. Now insurers are using the tactic to lower premiums on the government-run exchanges. While that has allowed President Barack Obama to tout the affordability of plans, it poses a choice: Do consumers gamble they won’t face a major medical bill, or boost monthly premiums just in case?
“If you have to pay $5,000 upfront” when illness hits, “you might as well not have any insurance at all,” said Larry Saphire, 82, of West Orange, New Jersey, who shopped for coverage for his wife and two children, ages 16 and 21. “That’s not insurance.”
On California’s state-run exchange site, the standard low-premium “bronze” plan carries a $5,000 deductible per person, a $60 co-pay to see a doctor and a 30 percent fee, known as coinsurance, on hospital care. In Rhode Island, Blue Cross Blue Shield’s bronze plan has a $5,800 deductible while Missouri’s U.S.-run exchange offers plans by Anthem Blue Cross with the maximum-allowable $6,350 in out-of-pocket costs.
The higher deductibles are one way insurers are trying to compensate for added costs under the Patient Protection and Affordable Care Act of 2010.
The health law, known as Obamacare, forbids insurers from dropping coverage or raising rates based on a customer’s illness, adding security that doesn’t exist today for individual policyholders. It also requires insurers to cover “essential benefits” sometimes not provided now, including prescription drugs, wellness visits and hospitalization.
Still, high deductibles have the potential to become the next political land mine for an administration already struggling with website outages, customer confusion over eligibility and the cancellation of existing policies after Obama pledged that people who like their coverage could keep it. The president yesterday tried to minimize the damage of cancellations by saying insurers would be given the option of extending those policies through next year.
Insurance plans purchased through the exchanges give people more choices and better coverage of essential services, said White House Press Secretary Jay Carney.
“Every individual who might apply for or enroll in insurance on the individual market has available to him subsidies and also a vast array of choices,” Carney said at a briefing last week. “The basic level of insurance might have a higher deductible; a higher level of insurance might have a lower deductible, as is true today.”
Ariel Climer, 28, of Los Angeles, said she was hoping to afford health insurance for the first time since she graduated from college. While she has found coverage options on California’s state exchange that fit her budget of $60 to $90 a month, the high annual deductibles have given her pause.
Climer works part-time for the Los Angeles Unified School District, at a bicycle shop and as a freelance personal assistant. While she rarely goes to the doctor, she said she worries about how she’d afford her share of the bill if an accident landed her in the emergency room.
“It is a balance between picking something that is going to be cheaper and something that won’t have a huge deductible or cost too much down the road,” Climer said. Paying more to lower her deductible, “is just going to mean I have no money to save at the end of the month.”
Prior to Obamacare, $10,000 to $20,000 deductibles were common in the individual market, said Timothy Jost, a law professor at Washington and Lee University in Lexington, Virginia, who supports the act. Republicans now criticizing the law have long argued the health-care system would benefit from consumers having “more skin in the game,” he said.
“This is essentially Republican health policy, where you have higher cost sharing,” Jost said in an interview. “Now that it’s individuals who have actual bills they have to pay, it’s a problem.”
The insurance exchanges that opened Oct. 1 as part of the 2010 health law are run by the federal government in 36 U.S. states, with the 14 remaining states and Washington, D.C., operating their own marketplaces. They are open to people who don’t have coverage through work or a government program like Medicare or Medicaid.
The law subsidizes out-of-pocket costs for people with incomes below 250 percent of the U.S. poverty line who buy on an exchange. That’s about $29,000 per year for a single person or $59,000 for a family of four. A separate subsidy to pay for premiums is available to anyone making as much as $46,000 a person and $94,000 for a family of four.
“The sweet spot is the people that are low-income and the people that don’t have a lot of health conditions,” said Andrea Croley, a Springfield, Missouri, insurance broker, in a telephone interview. “They can get a pretty good deal.”
Consumers who make more than that or have high medical bills face a tougher situation, said Coleman, the author of HealthPocket’s survey.
“Somebody who’s above 250 percent of the federal poverty level and who uses medical services frequently -- just do the math, they are going to pay more,” Coleman said by telephone.
There are four levels of coverage on the exchanges -- bronze, silver, gold and platinum. Bronze plans, the cheapest and least generous, are designed to cover about 60 percent of medical costs and carry higher deductibles. Platinum plans, the most expensive, cover about 90 percent of costs, yet charge higher monthly premiums.
“In the current individual marketplace, consumers can face unlimited out-of-pocket expenses for plans with limited benefits and high deductibles, if they can even get coverage without being denied for a pre-existing condition,” Joanne Peters, a spokeswoman for the U.S. Department of Health and Human Services, said in an e-mail.
The HealthPocket analysis found deductibles in the seven states averaged $4,500.
The company compared high-deductible bronze plans with all policies on the existing market, including more generous ones. Coleman said that was a fair comparison because bronze plans, as the cheapest, are likely to be the most popular with consumers. The pre-Affordable Care Act average also includes some with very high expenses, such as a plan sold in Vermont with a $100,000 deductible, he said.
In addition to more expensive deductibles for bronze plans, the survey found that other costs not included in monthly premiums will be higher as well. Doctor co-pays average $41 per office visit, 46 percent more than today’s standard. Generic-drug co-pays are 73 percent higher.
Bronze policies also keep premiums low by restricting coverage to a narrow network of providers. That means a patient’s costs may be even higher if that person needs to visit an out-of-network specialist or hospital.
“It’s a challenge we are seeing for some folks, how to afford that,” said Samuel Chu, the chairman of OneLA, a Los Angeles-based community group seeking to enroll people in California’s health exchange. “Their initial reaction is going to be, ‘How come my insurance coverage is getting worse?’”
Consumers should view the health-care overhaul as an unfinished project, he said.
“I’ve always thought of the Affordable Care Act as being a first step,” Chu said in a telephone interview. “It’s not going to finish the job. If the goal is we ultimately want everyone to have accessible and affordable coverage, then we need to somehow find another way of getting there.”
In the first month of operation, 106,185 people enrolled in private insurance plans through the new marketplaces, with 369,261 more qualifying for the state-federal Medicaid program for the poor, the administration said on Nov. 13. The early sign-ups were less than anticipated as about 7 million people are projected to buy insurance on the exchanges for 2014.
Response times when people navigate from page to page on the federal website have improved, falling to less than 1 second on average from as high as 8 seconds when healthcare.gov opened, Jeffrey Zients, a management consultant assigned by Obama to help repair the site, told reporters today on a conference call. Error rates have declined and a punchlist of hundreds of issues to correct has been reduced to 50 priority items, he said.
“The system is more stable and users are having a better user experience on the site,” Zients said.