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High Deductibles Could Backfire on Insurers, Employers

Analysis  |  By Gregory A. Freeman  
   October 12, 2016

More people are turning down services recommended by their physicians because they can't afford the out-of-pocket costs.

The high deductible health insurance plans that are plaguing consumers could end up biting the insurers and employers too, if people are dissuaded from seeking necessary medical care.

That's the prediction of one analyst who says high deductible plans may have been the insurers' best attempt at making Obamacare work, but they could turn out to be one more threat to the viability of the industry.

High Deductibles are Here to Stay. Here's Why That's OK.

Consumers who have not met their deductibles for the year, and at any time that's a large proportion of the insured, are looking for ways to save money on healthcare expenses, says Mike Ducote, chief operating officer of CirraGroup, a company that assists consumers with healthcare debt resolution.

More people are turning down services recommended by their physicians because they can't afford the out-of-pocket costs, services that they would have automatically accepted years ago when their plans were more likely to pay all or most of the cost.

Ducote had that experience himself when his son injured his arm playing baseball. The physician ordered an MRI, but Ducote balked because it would cost him $1,000 out-of-pocket. He decided to wait a couple of days in hopes that the injury wasn't serious and would heal without further care. It did.

'Not Everyone Knows to Question' Providers' Orders
"But I'm not the norm. I understood my benefits and knew what questions to ask," he says. "I would have done whatever they said was right for my son, but when I asked if the MRI was really necessary, they said it was fine to wait a couple of days. Not everyone knows to question those orders, and the healthcare providers are focused on taking care of your needs and moving to the next one."

The result is that some consumers end up paying large sums out-of-pocket for healthcare that may not have been entirely necessary, Ducote says.

How Real is Healthcare Consumerism?

But at the same time, the pendulum may swing too far the other way and some consumers forgo necessary care and prescriptions because of the cost, he says. Too much of that behavior could hurt already struggling insurance plans and employers, he suggests.

"The problem with high deductible health plans is you are shifting the decision making to the least informed, which is the consumer," he says. "We're having to make these calls purely based on the dollars. I don't think that's a good recipe for success."

Not only can consumers be harmed by avoiding expensive healthcare, but so can the insurers and employers. Health plans try to encourage preventative care by making much of it covered in full regardless of the deductible, but research has shown that consumers typically have a poor understanding of their insurance policies and many are forgoing covered preventative care because they assume they will have to pay.

Patient Engagement of the Financial Kind

That could result in higher utilization, already a problem for many insurers, if consumers avoid preventative care and end up in the emergency room or admitted to a hospital for ailments that could have been avoided, Ducote says.

Continued use of high deductibles also could have the effect of making the insurance companies less and less relevant, he says.

"If people are going to pay for healthcare out-of-pocket most of the time, you may see insurers lose their position as providers begin pricing their services at a more realistic rate," Ducote says.

"What if the services were priced closer to what they actually cost to provide, and you had catastrophic insurance on the back end? That's something we had once upon a time, before we got into this mess that we have."

Gregory A. Freeman is a contributing writer for HealthLeaders.

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