The majority of Californians rely on their employers for health insurance, but these benefits continue to shrink as the cost to workers continues to rise.
Since 2000, the percentage of employers offering health benefits has declined in California and nationwide, although coverage rates among offering firms have remained stable. Only 55% of California firms reported providing health insurance to employees in 2016, down from 69% in 2000. Implementation of the Affordable Care Act (ACA) in 2014 does not appear to have impacted the overall trend in employer offer rates.
Nineteen percent of California firms reported that they increased cost sharing in the past year, and 27% of firms reported that they were very or somewhat likely to increase employees’ premium contribution in the next year. The prevalence of plans with large deductibles also continues to increase.
This issue brief, released in collaboration with United Health Foundation and the Alliance for Aging Research, examines current and future seniors’ readiness for health care costs in retirement. Based on analysis of a recently conducted survey of retired seniors (age 65+) and non-retired adults (age 50-64), as well as data from studies on recommended health care savings targets in retirement, key findings include:
Many current and future retirees are at risk of not being able to afford the high costs of health care in retirement;
A high percentage of current and future retirees are unsure about how much to save to cover both anticipated as well as unexpected health care costs; and
Current and future retirees with retirement savings of $20,000 or less are more likely to be in poor health, have chronic disease, and have lower incomes than those with higher rates of retirement savings.
Many studies have demonstrated what economics theory tells us must be true: When consumers have to pay more for their prescriptions, they take fewer drugs. That can be a big problem.
For some conditions — diabetes and asthma, to name a few — certain drugs are necessary to avoid more costly care, like hospitalizations. This simple principle gives rise to a little-recognized problem with Medicare’s prescription drug benefit.
For sicker Medicare beneficiaries, the Harvard economist Amitabh Chandra and colleagues found, increased Medicare hospital spending exceeded any savings from reduced drug prescriptions and doctor’s visits. Consider patients who need a drug but skip it because they feel the co-payment is too high. This could increase hospitalizations and their costs, which would make them worse off than if they’d selected a higher-premium plan with a lower co-payment.
Though just a simplified example, this is analogous to what Medicare stand-alone prescription drug plans do. They achieve lower premiums by raising co-payments. This acts to discourage the use of drugs that would help protect against other, more disruptive and serious health care use, like hospitalization.
Studies show that insurers, many of which are for-profit companies after all, are using such incentives to dissuade high-cost patients from enrolling or using the benefit. There’s evidence this occurs for Medicare’s drug benefit, as well as in the Affordable Care Act’s marketplaces.
The most popular type of Medicare drug coverage is through a stand-alone prescription drug plan. A stand-alone plan never has to pay for hospital or physician visits — those are covered by traditional Medicare. Another way to get drug benefits from Medicare is through a Medicare Advantage plan that also covers those other forms of health care and is subsidized by the government to do so.
Because of this difference, stand-alone drug plans are less invested than Medicare Advantage plans in keeping people healthy enough to avoid some hospital visits.
A study by the economists Kurt Lavetti, of Ohio State University, and Kosali Simon, of Indiana University, quantifies the cost. Compared with Medicare Advantage plans, stand-alone drug plans charge enrollees about 13 percent more in cost sharing for drugs that are highly likely to help patients avoid an adverse health event within two months. They charge up to 6 percent more for drugs that help avoid adverse health events within a year.
The Upshot
It’s not as if stingier insurers are more likely to offer stand-alone plans than Medicare Advantage plans. Even among plans owned by the same insurer, Medicare Advantage plans are more generous in covering these kinds of drugs than stand-alone drug plans. (These differences are apparent only on average. In some instances, stand-alone drug plans offer better deals.)
Of course, people have choices about plans. Those who have selected a stand-alone drug plan, as opposed to a Medicare Advantage plan, have done so voluntarily. Why do some make this choice?
One answer is that some people are not comfortable with the more narrow networks Medicare Advantage plans offer, with their fewer choices of doctors and hospitals. By choosing a stand-alone drug plan, they can remain in traditional Medicare, which has an open network.
In addition, consumers are generally more attracted to lower-premium plans than higher ones, even if the difference is exactly made up in co-payments. This may be because premiums are easier to understand than cost sharing. Moreover, premiums reflect a sure loss — you must pay the premium to remain in the plan. A higher co-payment, on the other hand, won’t necessarily lead to a loss because you may not use a service.
The appeal of lower premiums is an incentive for stand-alone drug plans to reduce them and increase co-payments. But that can dissuade those who need medications from filling prescriptions and taking them.
Part of the purpose of Medicare’s drug benefit is to encourage enrollees to take prescription drugs that can keep them out of the hospital. In July 2003, promoting the legislation that created Medicare’s drug benefit, President George W. Bush articulated this point. “Drug coverage under Medicare will allow seniors to replace more expensive surgeries and hospitalizations with less expensive prescription medicine,” he said.
But the design of Medicare’s drug benefit includes stand-alone plans that aren’t liable for hospital costs, so they don’t work as hard to avoid them. Encouraging more beneficiaries into comprehensive plans — through Medicare Advantage — or offering a drug plan as part of traditional Medicare itself would address this limitation.
The Republican plan to repeal and replace the the Affordable Care Act (ACA), which narrowly passed a vote in the House today, rolls back protections for people with pre-existing conditions, which could increase health care costs for an estimated 130 million Americans.
The American Health Care Act stipulates that states can allow insurers to charge people with pre-existing conditions more for health insurance (which is banned under the ACA) if the states meet certain conditions, such as setting up high-risk insurance pools. Insurers still cannot deny people coverage outright, as was a common practice before the ACA’s passage, but they can hike up premiums to an unaffordable amount, effectively pricing people out of the market.
In fact, premiums could reach as high as $25,700 per year for people in high-risk pools, according to a report from AARP. People who receive insurance through their employer would not be affected, unless they lost their job or moved to the individual insurance market for some other reason.
But what counts as a pre-existing condition? While it depends on the insurer—they have the right to choose what counts as “pre-existing”—these ailments and conditions were universally used to deny people coverage, according to the Kaiser Family Foundation, a nonprofit focusing on health care research.
But Cynthia Cox, Kaiser’s associate director, notes that the above list is a conservative sampling of all of the issues and maladies that insurers could count as pre-existing conditions. ” There are plenty of other conditions, even acne or high blood pressure, that could have gotten people denied from some insurers but accepted and charged a higher premium by other insurers” says Cox.
Here are some examples of those other conditions that experts have noted could hike premiums:
Acid Reflux
Acne
Asthma
C-Section
Celiac Disease
Heart burn
High cholesterol
Hysterectomy
Kidney Stones
Knee surgery
Lyme Disease
Migraines
Narcolepsy
Pacemaker
Postpartum depression
Seasonal Affective Disorder
Seizures
“Sexual deviation or disorder”
Ulcers
The left-leaning Center for American Progress notes that high blood pressure, behavioral health disorders, high cholesterol, asthma and chronic lung disease, and osteoarthritis and other joint disorders are the most common types of pre-existing conditions.
Just how expensive are pre-existing conditions? A recent report from the Center for American Progress found that insurers could charge people with metastatic cancer as much as $142,650 more for their coverage, a 3,500% increase.
Important background for understanding what happened today in the House:
America has the only healthcare system in the world designed to avoid sick people. Private for-profit health insurers do whatever they can to insure groups of healthy people, because that’s where the profits are. They also make every effort to avoid sick people, because that’s where the costs are.
The Affordable Care Act puts healthy and sick people into the same insurance pool. But under the Republican bill that just passed the House, healthy people will no longer be subsidizing sick people.
Healthy people will be in their own insurance pool. Sick people will be grouped with other sick people in their own high-risk pool – which will result in such high premiums, co-payments, and deductibles that many if not most won’t be able to afford the cost.
Republicans say their bill creates a pool of money that will pay insurance companies to cover the higher costs of insuring sick people. Rubbish. Insurers will take the money and still charge sick people much higher premiums. Or avoid sick people altogether.
The only real alternative here is a single-payer system, such as Medicare for all, which would put all Americans into the same giant insurance pool. Not only would this be fairer, but it would also be far more efficient, because money wouldn’t be spent marketing and advertising to attract healthy people and avoid sick people.
Among the most important — and little understood — new insurance rules put in place by the Affordable Care Act was a requirement that health plans cover a basic set of benefits.
The requirement was part of a package of new consumer protections in the healthcare law, including a prohibition on insurers denying coverage to people with preexisting medical conditions and bans on annual- or lifetime-limits on coverage, which were once common.
Conservative House Republicans have been demanding the so-called essential benefit requirements be scrapped.
Here’s a rundown of what this debate is about.
What are the essential health benefits?
The 10 benefits include:
— Ambulatory patient services, which include outpatient care such as doctor visits and surgeries that don’t require hospitalizations;
— Emergency services, including ambulance transportation;
— Hospital care;
— Maternity and newborn care;
— Mental health and substance abuse treatment;
— Prescription drugs;
— Rehabilitative services, including physical therapy and other care such as speech and occupational therapies;
— Lab services;
— Preventive care, some of which must currently be covered without any co-pay or other cost sharing;
— Pediatric care, including dental and vision care for children.
Why were essential health benefits included in the Affordable Care Act?
Before Obamacare was enacted, health plans routinely had holes in coverage that consumers often learned about only after they sought care.
Nearly one in five did not cover mental health. And nearly one in 10 plans did not include coverage for prescription drugs.
Why do conservative Republicans say they want them out?
Many Republicans say the essential benefits push up the cost of health insurance and force people to buy health plans with more coverage than they need.
They often point to maternity coverage, which they say men and older women do not need and therefore should not be forced to pay for.
The House Republican bill to roll back Obamacare already would remove these requirements benefits from Medicaid plans.
What impact would removing the requirements have?
Allowing for skimpier plans would likely be a boon for healthy people who don’t need much medical care. They would be able to get cheaper plans.
But many experts warn that the consequences of scrapping the benefit requirements could be serious.
For one, consumers could once again find themselves in health plans that do not cover things they did not anticipate they might one day need. .
For example, a health plan without prescription drug coverage might sound good when someone is healthy, but would be catastrophic if that same consumer were diagnosed with an unexpected cancer.
Secondly, making consumers pay only for the benefits they need might lower the cost of skimpier plans, but it would make plans that cover extra benefits like mental health or maternity care much more expensive. That would effectively penalize people who are sick or need medical care.
Some insurers might decide they simply don’t want to offer plans with the extra benefits because insurers would not want customers who incurred higher medical costs they might have to cover.
Finally, the elimination of essential health benefits threatens other popular consumer protections.
The bans on annual and lifetime caps on health coverage, for example, are linked to the mandated benefits. If there are no more mandated benefits, the caps become meaningless.
No matter what happens to Obamacare, one health care trend is fairly certain to continue: A growing number of you will have high-deductible health plans, whether you’re insured through your employer or buy on the private market.
A high-deductible health plan is just what it sounds like: In exchange for a lower premium, you pay more of your own money for medical care until your insurance coverage kicks in.
The IRS defines a high-deductible plan as one with a deductible of at least $1,300 a year for an individual or $2,600 for a family.
Many deductibles are higher. For instance, Covered California, the state health insurance exchange, offers bronze-level plans this year with a $6,300 individual and $12,600 family deductible, plus a separate deductible for prescription medications.
How many of you have that kind of money lying around?
A series of columns answering consumers’ questions about California’s changing medical landscape.
The most important thing you can do to lower your costs is to choose the right plan for yourself and your family during open enrollment (assuming you have a choice).
“A high-deductible plan will work better for younger, healthier people who don’t expect to have a lot of medical expenses,” says Walter Zelman, a health policy professor at California State University-Los Angeles. “If you know you’re going to use a reasonable amount of health care in a given year, the high-deductible plan is to be avoided.”
But since most of you are stuck with your plans until the next open enrollment period, here are some simple steps you can take now to control costs.
The Basics
Under the Affordable Care Act, most health plans must offer certain preventive services for free, including mammograms, colonoscopies and routine vaccinations.
Taking advantage of them can prevent more expensive coverage down the line, says Elizabeth Abbott, director of the state’s Office of the Patient Advocate.
“Get your flu shot,” she says. “If you keep up with all of your preventive services, you will save yourselves a fair amount of money because you’re less likely to get sick and won’t have to get invasive procedures.”
No matter what kind of appointment or procedure you’re scheduling, choose in-network providers whenever possible, says Betsy Imholz, special projects director for Consumers Union. “If you stay in network, your costs are going to be lower,” she says.
Cross-check with both your provider and your insurer to confirm network status.
And don’t forget — as I often do — that you may be able to avoid a doctor’s visit by calling your insurance company’s nurse advice line, Zelman says.
Prescription Drugs
Unless you take only specialty drugs to treat serious or rare conditions, these steps can probably save you money:
— Over-the-counter and generic drugs: If your doctor prescribes a brand-name drug, ask if there’s an over-the-counter or generic option you can try first. Generics cost a fraction of the brand-name version, says David Collum, assistant clinical professor for the Department of Pharmacy Practice at University of the Pacific in Stockton, Calif.
— Shop around: Many pharmacies (both chains and independents) offer discount programs for common generic drugs, charging $4 for a 30-day supply and $10 for a 90-day supply.
Don’t be afraid to switch pharmacies or buy drugs from different places, Abbott says. “If you’re taking five drugs, price those all out,” she says. “Don’t assume a particular pharmacy offers the best price for every drug.”
Consumers Union generally finds the best drug prices at Costco or by using GoodRx’s online search tool, Imholz says.
— Patient-assistance programs: Ask your pharmacist or doctor if they know of programs that can help you afford your prescription.
Groups such as the Patient Advocate Foundation and NeedyMeds also have compiled links to organizations — and even drug companies — that provide financial aid.
— Shorter initial prescription: If your doctor prescribes a pricey drug you haven’t taken before, ask her to write the prescription for a few days or a week and monitor the results, Collum suggests.
If the drug works for you, request a new prescription for a longer period. If it’s ineffective, at least you won’t be out for the cost of a full month of medication.
Comparison Shopping
Most of us wouldn’t buy a car or plane tickets without comparison shopping. So why not shop around for medical care, whose prices can vary wildly from provider to provider?
First, ask your doctor for the specific medical code, called a CPT code, for the procedure or test that you need, says Jeanne Pinder, CEO of ClearHealthCosts, which aims to make medical prices more transparent.
Simply asking about the cost of a lower-back MRI won’t be sufficient. “You’ll want to call and say ‘How much does an MRI of the lower back, without contrast, CPT code 72148, cost?’” she says.
Armed with the code, reach out to different providers and your insurance company. Ask both how much the procedure would cost you, and whether the provider is in your plan’s network.
Along the way, consider bypassing your insurance for a particular treatment or prescription.
“You might be better off, as an insured person, paying cash,” Pinder says. “Many people don’t reach their deductible by the end of the year, anyway.”
If you go this route, don’t call your insurance plan. Just call providers (who don’t have to be in your network) and ask them “How much will this cost me?” and “What’s your cash price?” Pinder counsels.
If the provider asks whether you have insurance, repeat that you want to be a cash customer.
“Just keep saying, ‘I’m looking for the cash price. I’m a cash customer.’ If they ask if you have insurance, repeat that you’d like to pay cash,” Pinder says.
Take detailed notes, including the name of the person who gives you the quote, Pinder adds. Better yet, get it in writing.
Pinder took her own advice recently when a family member needed an MRI, which can cost thousands of dollars. She found one for $450 cash.
“We need to get used to having this conversation and asking those questions in that fashion,” she says. “By the time you start doing it, it doesn’t hurt anymore.”
Americans with low or moderate incomes can get their out-of-pocket health care expenses reduced if they have purchased a silver plan in the Affordable Care Act’s (ACA) health insurance marketplaces. The ACA’s cost-sharing reductions (CSRs) mean lower copayments and deductibles for people in households earning between 100 percent and 250 percent of the federal poverty level (about $12,000 to $30,000 for an individual, and about $24,000 to $60,750 for a family of four).1 The federal government reimburses insurers for providing the subsidies, which in 2016 totaled $7 billion.2
Those who use health care the most see the largest savings. A 2016 Commonwealth Fund analysis of marketplace plans in 38 big-city markets found that without CSRs, a 40-year-old man with a silver plan who is a high health care user and earns $35,000 a year—too much to qualify—might face up to $6,500 in out-of-pocket expenses.3 But for someone earning $17,000 who is also a high user of care, projected out-of-pocket spending would be no higher than $650—a savings of nearly $6,000 compared to the average silver plan. In other words, instead of potentially spending more than a third of his income on health care expenses, he spends no more than 3.8 percent of his income with CSRs.
What’s the backstory?
In 2017, 7 million people qualified for CSRs—58 percent of all marketplace enrollees.4 But the subsidies face challenges on several fronts. In 2014, Republicans in the U.S. House of Representatives sued the Obama administration, alleging that the U.S. Department of Health and Human Services’ payments to insurers were unlawful because Congress had not appropriated funds to pay for them.5 A May 2016 ruling by a federal judge in favor of the GOP would have stopped payment of the subsidies, but the Obama administration appealed. The case, now known as House v. Price, has been paused since the November election.
The Trump administration has indicated that, at least for now, it will continue making payments to insurers.6 And some congressional Republicans, wishing to preserve the subsidies, are willing to appropriate the necessary funds.7 However, the GOP’s recent health care reform proposal—the American Health Care Act—would eliminate cost-sharing reductions entirely.
How would eliminating cost-sharing reductions affect consumers?
If the Trump administration decides at some point to stop defending the lawsuit to end cost-sharing reductions and Congress fails to appropriate funds for them, payments to insurers would end. While insurers have signed contracts with federal and state regulators to offer health coverage, some might seek to terminate them early because of the loss of payments. Doing so would throw consumers off their coverage midyear.8
Insurance costs would rise as well, as companies opting to remain in the market would be forced to increase premiums to make up for the lost government payments. Analysts say that marketplace insurers across the country would likely raise premiums for silver plans by anywhere from 9 percent to 27 percent.9 This also would increase federal spending above what the CSRs cost, since higher premiums mean larger premium tax credits.10
How would eliminating cost-sharing reductions affect insurance markets?
Eliminating cost-sharing reductions could destabilize insurance markets. The insurers relying most heavily on cost-sharing reduction payments could see their current 7 percent profit margins turn into 25 percent losses, on average.11 Since marketplace insurers would need to substantially raise premiums, there is a risk of further market instability as healthy individuals earning too much to be eligible for the ACA’s tax credits decide to drop out of the market entirely.12
Given the magnitude of their prospective losses, many insurance companies may opt to exit the ACA marketplaces altogether. Ending the cost-sharing reductions also would discourage insurers from participating in future years. Carriers must decide before June 21, 2017, whether they will sell plans on the marketplaces in 2018. Uncertainty surrounding the payment of cost-sharing reductions is already dissuading some insurers from participating.13
Ultimately, insurers might sue the federal government to recover cost-sharing reduction payments promised under the ACA. Such litigation would be expensive and time-consuming, with the legal costs likely passed on to consumers in the form of higher premiums and out-of-pocket costs.14
Controversy has emerged recently over federal payments to insurers under the Affordable Care Act (ACA) related to cost-sharing reductions for low-income enrollees in the ACA’s marketplaces.
The ACA requires insurers to offer plans with reduced patient cost-sharing (e.g., deductibles and copays) to marketplace enrollees with incomes 100-250% of the poverty level. The reduced cost-sharing is only available in silver-level plans, and the premiums are the same as standard silver plans.
To compensate for the added cost to insurers of the reduced cost-sharing, the federal governments makes payments directly to insurance companies. The Congressional Budget Office (CBO) estimates the cost of these payments at $7 billion in fiscal year 2017, rising to $10 billion in 2018 and $16 billion by 2027.
The U.S. House of Representatives sued the Secretary of the U.S. Department of Health and Human Services under the Obama Administration, challenging the legality of making the cost-sharing reduction (CSR) payments without an explicit appropriation. A district court judge has ruled in favor of the House, but the ruling was appealed by the Secretary and the payments were permitted to continue pending the appeal. The case is currently in abeyance, with status reports required every three months, starting May 22, 2017.
If the CSR payments end – either through a court order or through a unilateral decision by the Trump Administration, assuming the payments are not explicitly authorized in an appropriation by Congress – insurers would face significant revenue shortfalls this year and next.
Many insurers might react to the end of subsidy payments by exiting the ACA marketplaces. If insurers choose to remain in the marketplaces, they would need to raise premiums to offset the loss of the payments.
We have previously estimated that insurers would need to raise silver premiums by about 19% on average to compensate for the loss of CSR payments. Our assumption is that insurers would only increase silver premiums (if allowed to do so by regulators), since those are the only plans where cost-sharing reductions are available. The premium increases would be higher in states that have not expanded Medicaid (and lower in states that have), since there are a large number of marketplace enrollees in those states with incomes 100-138% of poverty who qualify for the largest cost-sharing reductions.
There would be a significant amount of uncertainty for insurers in setting premiums to offset the cost of cost-sharing reductions. For example, they would need to anticipate what share of enrollees in silver plans would be receiving reduced cost-sharing and at what level. Under a worst case scenario – where only people eligible for sharing reductions enrolled in silver plans – the required premium increase would be higher than 19%, and many insurers might request bigger rate hikes.
HENRY KOTULA 