HEALTH ACCESS UPDATE
Thursday, March 16th, 2006

DEBATE ON HIGH DEDUCTIBLE HEALTH PLANS HEATS UP

  • California bills would set standards for out-of-pocket costs and high deductible plans
  • Other bills would encourage such plans & consumer-opposed Health Savings Accounts
  • Assembly Health Committee holds hearings scrutinizing “consumer-directed” plans

The debate over high deductible plans heated up in the last week, as the Assembly Health Committee finished two sessions of hearings on the matter, kicking off a legislative year where multiple bills on the subject will be discussed in the California legislature.

At the same time, the debate over high-deductible plans is getting significant attention at the federal level as well. President George W. Bush, for example, is making a grand push for these so-called “consumer-directed’’ plans in his federal budget, appropriating $11.8 billion in tax incentives (through Health Savings Accounts) per year to encourage their use.

The shift to high-deductible plans are seen to shifting costs onto consumers, cleaving apart the health care market, and forcing consumers to “play doctor’’ and figure out on their own if they should visit a doctor or emergency room.

STATE SOLUTIONS: State legislation that seek to address these problems include:

AB977 (Nava), sponsored by Health Access California, would require regulation of health plans that require high out-of-pocket costs at the state Department of Insurance and Department of Managed Health Care. New health insurance products would be subjected to a public vetting. High-deductible plans could be rejected for reasons such as:

  • Excluding certain services, such as preventive care
  • Imposing too large a cost burden on enrollee

AB2281 (Chan), supported by Health Access California , would require plans with high deductibles to:

  • Cap total out-of-pocket costs to $5,000 for individuals and $10,000 for families
  • Include preventive care as a benefit (some high-deductible plans do not pay for preventive care until after the deductible is met)
  • Limit the copayment or coinsurance that subscribers pay to no more than 30% of the service
  • Include a way for consumers to comparison shop for medical services, via rates and other measures that allow patients to choose high quality providers.

OTHER HSA BILLS: On the flip side, four Republican lawmakers are authoring legislation that would provide tax credits to encourage health savings accounts and high deductible plans.

Consumer groups, including Health Access California , oppose these measures, given the many concerns they have with the impact of high-deductible plans and the rise of underinsurance, both on the individual patient, as well as the health system as a whole. Additionally, the money that would the state would lose in taxes would be more effective in increasing access to care by expanding public insurance programs like Medi-Cal and Healthy Families.

The bills opposed by consumer groups include: SB1584 (Runner), SB1639 (Dutton), AB2010(Plescia), and AB 2737 (Nakanishi). The text of all these bills are available at the State Legislative website, at: http://www.leginfo.ca.gov

REPORT FROM ASSEMBLY HEARINGS

The Assembly Health Committee, chaired by Assemblywoman Wilma Chan (D-Alameda), held two hearings on the topic this past month to examine what the state already does to monitor these plans and how laws could be beefed up to ensure consumers are protected.

OVERVIEW: Larry Levitt from Kaiser Family Foundation and Michele Melden, associate professor at Thomas Jefferson School of Law, provided insight into the high-deductible market. A high-deductible plan is one that requires single enrollees to spend at least $1,050 on health care (families must spend at least between $2,100) before the insurance benefits kick in. Three million enrollees reported having such coverage nationally in January 2006, according to the Kaiser Family Foundation.

A person may think they’re “covered’’ by insurance, but they’d still be on the hook for their deductible and out-of pocket costs. Melden testified that she has seen plans with costs as high as $25,000. That often means that patients are paying – whether they can afford to or not – the full price for preventive care (i.e. doctor visits and prescription drugs) unless their plan says otherwise.

Proponents of high deductible health care plans have suggested that these so called consumer-driven health plans could actually help control the fast-escalating costs of health care by causing consumers to have more “skin in the game.’’ By having to pay higher deductibles and higher portions of their health care costs, consumers would ostensibly ‘shop around’ for lower cost services, or go without unnecessary health care services.

OPPOSITION TO HIGH DEDUCTIBLE PLANS: Testimony, including academics and consumer advocates, including from Health Access, Western Center on Law and Poverty, and the Foundation for Taxpayer and Consumer Rights, indicated that these high deductible plans could actually do the opposite of what proponents intend, and cause health care costs to rise:

  • Consumers have no way to “shop around’’ prices or quality health care
  • Consumers would “play doctor’’ and make their own decisions about which treatments are necessary or not, delaying cost-saving preventive care such as mammograms.
  • Separates the market into the “healthy’’ and “less healthy.’’

While many of the arguments were that these plans harm the overall health system, there was evidence that they weren’t helpful to the consumers who had them, either, who were left underinsured. In one example, Roland Smith, a self-employed videographer in Placer County , would have been better off uninsured, than his high deductible plan from Blue Shield. His policy costed nearly $300 a month, and he still has a bill for over $6,000 for outpatient knee surgery, which has since been sent to collections by Sutter General Hospital .

Insurance Commissioner John Garamendi put out a report earlier in the year on Health Savings Accounts, detailing the problems with high deductible plans. It is available at hi website, at:
http://www.insurance.ca.gov/0400-news/0100-press-releases/0070-2006/release-013-06.cfm

CURRENT STATE OVERSIGHT: Health insurance regulators — Department of Managed Health Care (DMHC) and Department of Insurance (DOI) – both testified that little data is available on such plans.

DMHC testified to changes in the insurance market where HMOs are following PPOs and requiring deductibles and higher out-of-pocket costs for consumers. Current law, however, only allows DMHC to ensure that co-pays aren’t “objectionable;’’ and ensure disclosures clearly advise consumers which services can be applied to their deductible.

At the DOI, current law does not permit the agency to regulate group policies that employers are offering, which becomes a problem as more employers begin offering high deductible plans. With half of the state’s residents getting coverage through employer, this could leave many consumers vulnerable.

The agency does have more authority to regulate individual policies; however, under “file and use” statutes, policies submitted by insurers are automatically approved in 30 days if the agency fails to act. Additionally, there is no minimum package of benefits and no cap on deductibles.

PROVIDER CONCERNS: The growing popularity of high-deductible plans concerns physician groups and hospitals, which are often left footing the bill when patients are unable to pay for medical services.

The California Hospital Association reported that the number of patients defaulting on their debt is increasing. While no comprehensive survey has been conducted, three southern California hospitals have seen a 50 percent increase in the value of unpaid patient bills, which are ultimately written off. Other hospitals are having an even more difficult time collecting on services. “Trying to keep a hospital viable becomes harder,’’ said Martin Gallegos, for the association.

Physician groups believe high-deductible plans will promote a scattershot approach to health care, where patients will be less likely to involve doctors in important health maintenance decisions. That could ultimately cost the system more money as patients forgo routine and preventive care, and wind up sicker, said Bart Asner, CEO of Monarch Healthcare in Orange County , a 1,900-physician group.

The California Medical Association, however, took a different approach. The association’s Dustin Corcoran said they shouldn’t be ruled out as an option for consumers who could benefit.

INDUSTRY DEFENSE: While insurers did defend their high-deductible product lines, “These plans are not for everybody,” admitted Charles Bacchi, vice president for the California Association of Health Plans.

Yet employers testified at the hearing that in some cases, employers are not giving employees any choice but to enroll in a high-deductible plan as businesses continue to scale back and cut benefits. Toni Wynn, chief operating officer with Price Associates, reported a spike in the number of companies interested in this type of coverage for their employees.

Secondly, some politicians and policy makers are pushing high-deductibles as one way to control spiraling medical costs. Their lower cost also lures some into purchasing the plans without understanding the financial implications. Wynn says she asks prospective clients, “How do you plan to be sick this year?’ Since no one plans to be in a car accident, or get cancer, she thus gets interest in these high deductible plans.

For more information on any of these issues, contact Hanh Kim Quach, Policy Coordinator, Health Access, at 916-497-0923, or hquach@health-access.org.

Health Access California promotes quality, affordable health care for all Californians.
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