Dale Seng of Charlotte thought he understood his risk when he bought high-deductible health coverage on the Affordable Care Act exchange. It seemed like a smart choice to hold down premiums for his healthy family of four.
But when his daughter was hospitalized, he was furious to learn that he was on the hook for $11,000, rather than the $5,500 individual limit he thought he’d purchased.
As the 2015 health insurance enrollment season begins, Seng’s story highlights a growing challenge. To cut monthly premium costs, more people are choosing high-deductible plans, gambling that they can stay healthy. More employers are pushing that option; some are giving employees no choice.
The plans are so complex that even Seng, a computer programmer who did his homework, could get sandbagged by fine print that he says wasn’t disclosed when he shopped. “That’s one of the reasons why I’m so disturbed,” he said.
Out-of-pocket costs, which have been growing for years, are expected to keep rising in 2015. The trend is driven partly by the ACA and partly by the burgeoning health care costs the act was created to cope with.
Proponents say consumers grow savvier about care when they pay their own bills. Patients might compare costs for a medical test or visit an urgent care center instead of a hospital emergency room. Ideally, that free-market pressure will spur systemic cost reform.
Skeptics say many Americans can’t save enough to pay thousands of dollars when someone gets sick. As a result they may skip treatment they need.
“People who say, ‘It’s just $3,000 or $4,000’ are people who are making $100,000,” says Clint Medlock, a Charlotte small-business owner who reluctantly bumped his employees’ out-of-pocket limit from $4,000 to $6,000 – and still saw his company’s premiums rise 37 percent.
Most of his 60 employees at Stafford Cutting Dies make $10 to $20 an hour. “They don’t have the savings,” Medlock says.
One point brings widespread agreement: Information and support are vital to help consumers make wise choices.
Insurers are beefing up online tools to help consumers estimate their costs and understand their options. They’re also promising more data to help people choose doctors and compare costs once they’ve picked a plan.
“If there’s ever a time to focus on your enrollment material, this is the year,” said Brian Marcotte, CEO of the National Business Group on Health, a nonprofit that represents employers on health care issues.
Whether they’re looking at workplace options or buying individually, many consumers must decide: Should I pay more upfront to get better benefits or lower my premium and take on the risk of paying thousands out-of-pocket if I get sick?
The average deductible for workplace plans doubled from $616 in 2007 to $1,217 in 2014, a recent Kaiser Family Foundation survey found. Several employer polls and insurance industry forecasts call for that trend to continue. A survey by the National Business Group on Health found that 32 percent of large employers plan to offer only high-deductible plans in 2015, up from 22 percent this year.
For people with known health problems, the value of a more expensive policy might be clear. For those who tend to stay healthy, the question is whether money saved on monthly premiums can be socked away to cover unexpected medical costs. The stakes get higher and the calculations more complex for covering a family.
High-deductible plans save money for employers. Some share those savings with employees.
When an employer puts money into an employee savings account for those expenses, that approach is “a no-brainer” for employees who can add their own contributions and save for emergencies, says Peter Moore, employee benefits practice leader with Wells Fargo. But many companies don’t contribute – and low-wage employees may choose a high-deductible plan because it’s all they can afford, he said.
Because the ACA brought new customers who hadn’t been familiar with health insurance, one fear was that consumers simply wouldn’t understand the tradeoff.
But Seng says that wasn’t his problem. An engineer by training, he had been covered by a high-deductible workplace policy that included employer reimbursements for up to $2,000 a year. Seng says his family rarely hit that limit.
When he lost his job in January, Seng shopped the ACA exchange. There were only two providers, Coventry and Blue Cross and Blue Shield of North Carolina. The Sengs’ doctors weren’t part of Coventry’s networks so he focused on Blue Cross options, going to a 20-page company brochure that was linked to the federal website. He says he created spreadsheets comparing plans and talked with an insurance agent.
Seng thought a high-deductible plan with a health savings account, which listed out-of-pocket limits as $5,500 for an individual and $11,000 for a family, looked promising. Before he bought, Seng says he called Blue Cross and asked about a specific example: If he racked up $7,000 in costs and his wife spent nothing, how much would the policy cover?
“The rep said that insurance would kick in for the $1,500” above the $5,500 individual limit, Seng said. He says he was told he’d pay $11,000 only if other family members also had out-of-pocket costs.
But that’s not how it works. The health savings account attached to his policy is different from his old reimbursement plan. The HSA, which acts like a 401(k) for medical bills, is authorized by the Internal Revenue Service. That means Seng’s deposits aren’t taxed (employer contributions also aren’t taxed when HSAs are part of workplace plans). Another plus: Money that’s not spent by year’s end remains in the account for him to use in the future.
But while many policies have spending limits that apply to individuals within a family plan, the plans like the one Seng chose, which include HSAs, do not. The Blue Cross chart listed a $5,500 individual limit for the plan Seng chose, but that applies only to a one-person policy, not family coverage.
Seng found that out after his daughter, a college student, was hospitalized in April. When Blue Cross declined to honor the $5,500 individual cap for her, Seng appealed to the company, the state insurance department and the federal exchange. He got nowhere.
While the brochure Seng saw didn’t explain that individual limits don’t apply, Blue Cross officials say that’s made clear in other material, including a packet sent to Seng after he enrolled. The company’s records show he called customer service in March but do not indicate a discussion about “the policy and its structure,” Blue Cross said in a letter to the state.
“Eleven thousand dollars is a high amount; I’m not going to argue,” Blue Cross sales manager Alec Hoffman said in an interview. But he said hospitals will usually work with someone on a payment plan for large bills. “There’s always that tradeoff,” Hoffman said. “In most cases, (a high-deductible plan) is a fine way to go.”
Seng has gone to small claims court to contest the charge, saying he shouldn’t be held to rules that weren’t disclosed upfront. For 2015, he says, he’s switching insurance companies, even if that means changing doctors.
Shop with care
The lesson is clear: Consumers must shop carefully. For Seng, the $5,500 difference was a footnote in the 90-page policy he received after buying.
While Blue Cross officials disagree with Seng’s contention that their material misled him, they and other insurance leaders say their companies must do more this year to help customers understand the tradeoffs of lower premiums, whether that’s taking a bigger out-of-pocket risk or accepting a limited network of doctors.
During the 2015 season, companies will roll out more tools to help people calculate how different types of plans might play out for them. It’s vital to have a savings plan and to understand options that come with tax benefits and/or employer support, experts say.
The push for consumer responsibility won’t end when enrollment closes; there will also be expanded data to help patients compare costs and quality of care.
“It’s time to double down on communication efforts,” said Wells Fargo’s Moore. That has to include people who don’t use home or office computers, which is why there’s a focus on mobile apps.
“Everyone’s got a smartphone,” he said. “You’ve given them power to access that right in their hands.”