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Patients lack enough assets to pay insurance cost sharing

Consumer Assets and Patient Cost Sharing

By Gary Claxton, Matthew Rae, and Nirmita Panchal
Kaiser Family Foundation,  March 11, 2015

While concerns about cost sharing are not new, the recent coverage expansions under the ACA put a new focus on what it means for coverage to be affordable. The goal of the law was to cover more of the uninsured, many of whom have limited means. The law requires most people to have health insurance, if they can afford to pay the premium, or to pay a penalty. The issue for some families, however, is that the policies with affordable premiums may have cost sharing requirements that would be difficult for them to meet when they access services. Many of the policies in the state and federal marketplaces have significant cost sharing, as do many policies provided to people at work. The ACA provides cost-sharing assistance to some, primarily to those with incomes below 200 percent of poverty purchasing through a state or the federal marketplace. Others potentially face much higher out-of-pocket expenses.

Deductibles

Overall, three in five (63%) households have enough liquid financial assets to meet the lower deductible amounts ($1,200 single/$2,400 family) while one-half (51%) can meet the higher deductible amounts ($2,500 single/$5,000 family). These percentages are similar for single-member and multi-member households, but vary significantly by family income. Only 32% of households with incomes between 100% and 250% of poverty can meet the lower deductible amounts, while one-in-five can meet the higher deductible amounts. In contrast, 88% of households with incomes over 400% of poverty can meet the lower deductible amounts and three-in-four (79%) can meet the higher amounts.

Out-of-Pocket Limits

Out-of-pocket limits are higher than deductibles and meeting them is more difficult for many families. Forty-eight percent of households have enough liquid financial assets to meet the lower out-of-pocket limits ($3,000 single/$6,000 family) and 37% can meet the higher limits ($6,000 single/$12,000 family). The percentages are quite low for households with incomes between 100% and 250% of poverty, with 18% having enough liquid financial assets to meet the lower out-of-pocket limits and 11% being able to meet the higher limits. Among households with incomes over 400% of poverty, 75% have enough liquid financial assets to meet the lower out-of-pocket limits while just 62% can meet the higher limits.

Discussion

Many non-elderly, non-poor households lack the resources to meet the deductibles and out-of-pocket limits that they may encounter in the private insurance market. Many households have insufficient liquid financial assets to meet the specified cost sharing measures, and the situation for net financial assets is no better. Not surprisingly, the difficulties are greater in households with lower incomes and with someone who lacked health insurance.

While the ACA provides for reduced cost sharing for some people with incomes below 250% of poverty that purchase coverage in a state or the federal marketplace, there is no assistance with cost sharing for those with higher incomes or for those obtaining coverage through a job. Substantial shares of households with incomes between 250% and 400% of poverty would be unable to meet even the lower out-of-pocket limits with their current resources, and meaningful shares of households with incomes over 400% of poverty would have problems as well.

http://kff.org/health-costs/issue-brief/consumer-assets-and-patient-cost-sharing/

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Comment:

By Don McCanne, M.D.

This important study demonstrates one of the most serious deficiencies in our dysfunctional system of health care financing: the mismatch between the personal financial assets that most Americans have and the cost sharing in the form of deductibles and out-of-pocket limits required by their insurance plans. Far too many individuals, should they have significant medical needs, do not have adequate liquid assets to cover the level of cost sharing required by most plans today.

Look at the most favorable example above: 25% of higher-income families (families with incomes over 400% of poverty) do not have enough liquid financial assets to pay lower out-of-pocket limits of $3,000 single/$6,000 family. Worse, 38% of these higher-income families do not have enough liquid assets to pay higher out-of-pocket limits of $6,000 single/$12,000 family (the 2015 out-of-pocket limits for plans in the ACA exchanges are even higher: $6,600 individual/$13,200 family). Further, net financial assets are usually lower than liquid financial assets because of family debt; families are even more broke than their cash on hand would indicate.

Except for those with the very highest incomes, our current flawed system of financing health care through private plans creates financial hardship for far too many of us who require significant amounts of health care. Today’s private insurance products are inadequate.

What is the source of support for this deficient coverage? Private insurers want to maintain access to markets by keeping their premiums competitive. They do this partly by shifting costs to patients’ pockets. Neoliberal and conservative politicians want to keep spending on government premium subsidies to a minimum, so they support cost sharing policies that reduce premiums. Libertarian and conservative ideologues want to place health care consumers in charge of spending their own money. If they don’t have enough funds, well, that’s too bad. They should have had enough personal responsibility to establish their own health savings accounts and fully fund them before medical needs arose. Sure.

Private insurers we can certainly do without. But what about the ideologues? Is there no place in this country for egalitarianism and social solidarity? I cringe when I think about current trends advancing income and wealth inequality as the social fiber continues to shred.

We desperately need a single-payer, improved Medicare for all, with first dollar coverage. Let's harness the forces of social solidarity so we can achieve that goal.