One of the biggest pieces of recent health care news is the slowdown of US spending. We’ve noted that among the biggest factors contributing to this is the rise of high deductible plans, but those plans also have a dark side. The WSJ looks at the high out-of-pocket costs these plans can force on consumers:
At businesses with fewer than 200 workers, for example, employees pay an average of $1,715 a year out-of-pocket to cover their deductibles—the amount the insured pays before coverage kicks in. That is almost double the average outlay by workers with individual coverage offered by larger employers, according to the Kaiser Family Foundation.
About 58% of insured workers at small firms have annual deductibles of $1,000 or more for employee-only plans, according to Kaiser data. For employees opting for family coverage, the typical deductible ranges from $3,000 to $5,000 on average, insurance brokers say.
This combination of factors leads to a paradox: the surest way we’ve yet seen for bringing down overall health care spending often means bringing spending up for individual. Even as costs go down overall, individuals feel like they’re paying more. Of course, this is exactly why these plans create savings: if consuming health care costs you more in a high deductible plan, you use less. But occasionally you really just do have to go to the doctor, and when you do, the out-of-pocket costs can bite.
It’s a tricky problem without a clear solution, but it does suggest that any consumer-directed reform to the system is going to have to offer subsidies to counterbalance the coverage gaps in high deductible plans.
Update: Some readers have noted that in many cases you can ultimately save on a high deductible plan, and that subsidies might both be unnecessary and also counter-productive to discouraging consumption. However, there are still cases in which a struggling family with a high deductible plan could be wiped out by medical expenses that are actually necessary. In those cases, targeted subsidies that allow the family to survive even while still keeping prices high enough to discourage consumption seems appropriate. This is meant to be a general principle, not a detailed policy suggestion.
[Photo of stethoscope and money courtesy of Shutterstock.]