High-Deductible Health Insurance Plans

TASA ID: 2099

Do high deductible health plans accomplish the desired goal of reducing premiums, limiting expenses and costs for the insurer and still provide valuable coverage to the insured?  While the answer to the question has many factors and is debated within the insurance industry, several issues are clear.

Insurance companies write high-deductible plans in an effort to accomplish three objectives:

(1) Limit the exposure to claims insofar as claims are the largest portion of the premium charged to the insured.  The result of excessive claims processing is an increase in premium. It costs as much to process a $5,000.00 claim as it does to process a $500.00 claim. By increasing the deductible, the insurer expects to lower the number of claims it processes and thereby eliminate certain costs.  All claim payments and processing costs are passed on to the public in the form of increased premium.

(2) By having a higher deductible, insurance companies can pass on some, not all, of the savings to try to make more plans affordable and available to the public. If this goal is accomplished and more people get insurance, then less people will seek "free" care.  Charity care and unpaid medical expenses result in premiums being increased because the hospitals, free care clinics or state-run facilities make up the "free" care by increasing the cost of paid- for- care.  As free care increases, so does the cost of medicine to offset the free care.  This offset translates into insurance companies getting higher charges when one of their insureds receives treatment.  The cycle causes the insurance companies to pay higher claims, and thus, the higher expense is passed on to the insured in the form of higher premiums.

(3) It is factual that people with insurance use their health insurance more than those that do not have coverage.  In order to combat this phenomenon, the insurance companies issue high deductible health insurance plans expecting that if the deductible is higher, there will be less utilization of the health insurance coverage for the "common cold" or "skinned knees" since these costs would be borne by the insured.

Once again, by offering higher deductible health insurance plans,  the insurance company is expecting that the smaller claims will be eliminated and the premium savings realized by the insured will be significant enough to still convince the insured to purchase the higher deductible health plan.

The purpose of health insurance, as with all insurance, is for the unexpected and unaffordable.  While the unexpected can never be accounted for, the unaffordable is served when you have a higher deductible, insofar as the financial catastrophe is avoided, and this is a desirable outcome on many levels.  Avoiding a financial catastrophe serves the good of the public in general by avoiding potential bankruptcies, unpaid bills, public assistance and many other ills of society.

DRAWBACKS AND SOLUTIONS

One of the drawbacks to a high deductible health plan is that when the deductible is too high, the insured believe they will ever get any benefit from the coverage and, therefore, the premium is wasted and the plan has no value. 

There needs to be a balance between higher deductibles, premiums and coverages. 

One of the ways to achieve this balance is to offer some coverage benefits that are not subject to the deductible.  An example of one is wellness exams and annual physicals.  A younger insured may only see a physician annually for a physical.  This is a positive step and should be encouraged by the insurance company.  By taking this annual exam out of the deductible category and paying for the exam, the insurance company is providing a benefit even with the higher deductible plans. 

Another such example would be a mammogram and prostate exam.  Each of these as charges covered outside of the high deductibles provides a benefit and possible early detection of a potential problem.  If the problem is diagnosed early, receiving treatment and limiting expenses are positives for both the insured and insurer.  By avoiding what would be an extremely large expense of time and money, the insurance company is afforded a savings, and the insured can receive proper treatment.

Another such opportunity is wellness doctor visits for baby care and shots for children in preventive care.  Flu shots for older insureds are an additional example of items that should be outside the deductible to make the higher deductible health plans more attractive and valuable to the public.

Certain drugs should not be subject to a deductible, such as medicines for diabetes, blood thinners, and high blood pressure medicine or thyroid medication.  I am sure there are many other drugs that would come under this classification. 

The point of all these exceptions is to make the higher deductible health plans attractive to a larger segment of the population so that they can see and receive a benefit from the plans.  The cost of these "extras" will undoubtedly be included and adjusted into the premium, but the differential is small and the benefit is large.  With more of the population insured, the cost for the care of the uninsured is reduced, a savings that is realized by the insurer.  Reducing the number of uninsured people is not only beneficial to the insurer but to society on various levels.

A large segment of the population, especially the younger generation, sees themselves in good health, and a higher deductible health plan does not present any value for the premium charged.  By providing certain coverages outside of the deductible, you attract the younger, usually healthier population into the higher deductible plans, providing additional premium to the insurer, while premiums can be maintained at a more reasonable level. 

The older generation living on fixed or limited incomes sees the need for coverage, but not the affordability of the coverage.  By including the items mentioned above, you eliminate the daily expenses of some items, leaving this segment of the population with the ability to purchase the higher deductible health plans.

Unfortunately, the general population does not realize that major illnesses and catastrophic accidents can happen at any time, and the costs associated with these types of events are financially unmanageable.   Afterwards, insurance is not available at any price.  In this scenario, the insured becomes a health insurance ward of the state.

CONCLUSIONS

While there is no magic wand or perfect solution, the health insurance industry, as well as medical professionals and the general public, need to work towards the overall common good for the majority of the population; otherwise we are headed to either socialized medicine or selective treatment for the wealthy. There is a reason why people from all over the world come to the United States for their medical problems, and if we prevent our own citizens from receiving this exceptional care due to cost or no insurance, then we have failed terribly. 

Health insurance plans have evolved over the years, as has coverage, but the current outlook for the foreseeable future is higher deductible health insurance plans.

This article discusses issues of general interest and does not give any specific legal or business advice pertaining to any specific circumstances.  Before acting upon any of its information, you should obtain appropriate advice from a lawyer or other qualified professional.

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