More underinsured as high deductibles proliferate

High deductibles are the reason U.S. households are increasingly underinsured and more likely to struggle with medical debt and unmet medical need, the Commonwealth Fund reports.

Last year, 14 million adults were underinsured because their deductibles amounted to 5% or more of their income, an increase from 11 million two years earlier, results of a new survey by the Commonwealth Fund found. The underinsured are those with insurance coverage but who nonetheless have out-of-pocket medical bills that exceed what they can afford.

The Commonwealth Fund reported another 24 million adults had deductibles below that threshold, but who were also underinsured after combining the cost of deductibles, co-insurance, co-payments, out-of-network providers and medical care not covered by insurance. Adults with total out-of-pocket costs that amounted to 10% or more of their income were considered underinsured. For those with low-incomes (200% of the federal poverty guidelines), adults were underinsured when all out-of-pocket costs exceeded 5% of income.

The results, based on a biennial survey of working age adults, found no change in the percentage of adults who were underinsured in 2014 compared with 2012. Overall, nearly one in four—23%—adults were underinsured last year and in 2012.

But results show that deductibles were increasingly responsible for insured households' financial distress. That strain was particularly acute among the poorest and sickest adults surveyed. The consequences of being underinsured were painful. The underinsured were as likely as the uninsured to report medical debt or problems with a medical bill and were nearly as likely to report they struggled with or could not pay medical bills, the survey found. Underinsured respondents also skipped a trip to the doctor, pharmacy or test more often than those with more comprehensive insurance.

“That suggests that high front-end out-of-pocket costs do deter people's use of healthcare services that they need,” said Sara Collins, vice president for health care coverage and access at the Commonwealth Fund and one of the survey report authors.

Benefit design should encourage use of needed care without fear of financial distress, she said. High deductibles appear to accomplish the opposite. “These are incentives that are not the kind that we would really want to encourage use of timely care,” she said. “Moreover, they are leaving people exposed to costs that are hurting them financially.”

High deductible plans have proliferated in the last decade among those with employer-based insurance and have been popular under the Affordable Care Ace insurance expansion. Last year, nearly two-thirds of workers with benefits provided by their employer had deductibles of at least $1,000, according to the Kaiser Family Foundation.

The Commonwealth Fund reported 11% of privately insured adults had a deductible of $3,000 or more last year compared with 1% in 2003. Another 27% of survey respondents had deductibles between $1,000 and $2,900.

As households pay more of their medical expenses, hospitals have responded with new or expanded efforts to collect more from patients, but not always successfully. Companies to help patients finance medical debt have emerged, as have companies that analyze patient income and credit history to determine who might be most likely to pay and where to target collection efforts. Some hospitals introduced policies that delay elective procedures or services until patients can pay, up front, for care. Doctors report patients have sought advice on how to avoid medical bills or how to delay medical care.

Collins said changes to benefit design could eliminate some barriers to care. She called for innovation in benefit design that would improve access to care that helps prevent illness and manage chronic disease.

One study published earlier this year found the chronically ill were more likely to fill their prescriptions when medication was exempt from deductibles.

The survey did not single out results for those who purchased health plans in 2014 in Affordable Care Act insurance exchanges, where subsidies help low-income households offset the cost of premiums and out-of-pocket costs. That's because the survey was conducted between July and December last year and consumers gained coverage under the exchanges between January and March, so the survey could not poll respondents on a full year of exchange coverage.

Counselors with Pennsylvania Health Access Network saw about 10% of customers who bought exchange plans in 2014 switch to a high-deductible plan in 2015, said Patrick Keenan, who oversees enrollment efforts for the patient advocacy organization. “They want the lowest deductible possible, but it may not be affordable for them,” he said.

High-deductible plans have also thrived in marketplaces created under the Affordable Care Act, where price-conscious consumers may be willing to trade lower monthly premiums for a larger deductible.

Commonwealth Fund officials cautioned the recent plateau in the overall number of underinsured may not last. Healthcare costs have grown at historically slow rates in recent years, for reasons not fully understood by economists, health policy makers and the healthcare industry. A rebound in U.S. healthcare spending could leave more households underinsured, said Dr. David Blumenthal, president of the Commonwealth Fund.

Continued growth in high deductibles could lead to more underinsured, Collins said.