Higher Deductibles and Co-Insurance Costs Squeezing Healthcare Consumers’ Wallets
Two new studies show patients are being increasingly burdened with a greater share of healthcare costs, which requires providers, including medical labs, to collect more money from patients at time of service Although wage increases remain stagnant, consumers now pay a steadily increasing share of their healthcare costs.
That’s because of rising deductibles, co-insurance, and other out-of-pocket costs. Not only will this cost-sharing trend continue to stretch patients’ budgets, it also will apply more pressure on clinical laboratories and pathology groups to increase price transparency for patients.
A recent study at the University of Michigan (UM), published in the Journal of the American Medical Association (JAMA), highlighted the growth in out-of-pocket insurance costs for hospitalized patients. For the average consumer with private health insurance, costs rose from $738 in 2009 to $1,013 in 2013—a 37% increase. During that same 4-year period, overall healthcare spending grew at 2.9% per year and health insurance premiums went up 5.1% annually.
Two types of health insurance plan charges were responsible for the biggest change in out-of-pocket spending: deductibles and co-insurance. During the same period, deductibles rose by 86%! Co-insurance costs increased 33% over the same period. Co-payments (a flat fee) were used in fewer hospitalizations.
Study Reveals ‘Hidden Costs’ in Private Healthcare
“These results open up the ‘black box’ of healthcare, and show all the costs of hospitalization that are billed to people with private insurance. For many, these may appear to be ‘hidden costs’ that they didn’t realize they would owe,” observed Emily Adrion, PhD, MSc., a UM Research Fellow with the Center for Healthcare Outcomes and Policy and lead author of the study. She was quoted in a news release. “It shows that even people with the most comprehensive insurance are paying thousands of dollars, at a time when they need hospital care and may not have time to shop around.”
Adrion’s team looked at data from more than 50 million Americans over a 4-year period. All of them had insurance plans from Aetna, UnitedHealthcare, or Humana, which pool their data via the Health Care Cost Institute. The study period didn’t include private individual and family plans bought on the Affordable Care Act insurance exchanges. Those plans began covering people in January 2014.
University of Michigan Research Fellow Emily Adrion, PhD, MSc., is the lead author of a study published in JAMA Internal Medicine showing the impact rising deductibles and co-insurance have had on the out-of-pocket costs paid by hospital patients with private insurance. “It shows that even people with the most comprehensive insurance are paying thousands of dollars, at a time when they need hospital care and may not have time to shop around,” Adrion says. (Photo Copyright: University of Michigan.)
The University of Michigan findings were echoed by a Kaiser Family Foundation analysis of health benefit claims from a Truven Health MarketScan Commercial Claims and Encounters Database. Deductibles accounted for less than a quarter of cost-sharing payments in 2004, but rose to 47% by 2014.
Healthcare Consumers Not Price Shopping for Plans as Expected
“I think the increases are very significant given this is a period of low healthcare inflation and stagnant wages,” Larry Levitt, a Senior Vice President at the Kaiser Family Foundation, told the Washington Post. “It’s really about finding the right balance between out-of-pocket costs that don’t discourage people from getting care they need, but also don’t encourage people to use care that is maybe wasteful. I think we are … as a society we’re struggling to find the right balance.”
Transferring patients to high-deductible health plans is viewed as a way to make patients smarter healthcare consumers by incentivizing them to shop for lower cost health services. However, a 2015 study published by the National Bureau of Economic Research (NBER) found that that did not always happen. The researchers looked at healthcare spending among 75,000 workers in a single company who were forced to move to high-deductible plans. Despite having their deductibles offset by a $3,370 health savings account (HSA) subsidy, along with access to online tools to look up prices for doctor visits, tests, and other services, the workers did not price shop for lower cost healthcare. They simply used less healthcare.
“I am a little bit surprised at just how poorly patients were able to do when looking at very similar products, like MRI scans, and with a shopping tool,” noted Jonathan Kolstad, PhD, in an article on VOX. Kolstad is an economist at University of California Berkeley and one of the study’s co-authors. “Two years in, and there’s still no evidence they’re price shopping,” he concluded.
Barbara Gniewek, a principal in PwC’s Global Human Resource Services Group, does not expect consumers to experience relief in healthcare spending any time soon.
“The good news is that healthcare cost trends are staying at a more moderate level. They’re not the double-digit trend that we had years ago,” Gniewek stated in an article published in Fortune magazine. “The bad news is healthcare does cost employers a lot of money, and the idea that they are just going to absorb a 6.5% increase when Consumer Price Index is at a much lower rate is unlikely, so they will continue to cost shift.”
Clinical laboratory managers and pathologists should take notice of the speed with which employers have raised the amount of deductibles and co-pays required by their health benefit plans in recent years. Employers are doing this to encourage patients to price shop when they are selecting providers, including medical laboratories. This trend is a reminder that the need for price transparency is only growing greater, as more patients want to know that their hospitalization, doctor visit, or lab test will cost before receiving those services. —Andrea Downing Peck.