Many Americans shopping for health insurance for the first time will choose a plan based on its monthly premium. This is how we budget – how much can we afford to spend per month? But as pointed out in a recent article from Kaiser Health News and NBC, money-conscious insurance shoppers should also be aware of an insurance plan’s deductible. Despite a low premium, a high deductible could mean spending over $5,000 out of pocket before being able to visit the doctor cost-free.
A premium represents the monthly cost of holding a health insurance policy, whereas a deductible is the money that a customer must contribute toward their care before their insurer will contribute funds as well. On the federally created health exchange healthcare.gov, many plans that offer a low premium come with a high deductible: one bronze plan from Blue Cross Blue Shield costs just $156 per month, but comes with a $6,000 deductible per year – which means that before that $6,000 is spent, policyholders must cover their own prescription medications, visits to a primary doctor and emergency room services.
Deductibles can be confusing or unexpected for first time insurance shoppers. In its summary of benefits and coverage, the Blue Cross Blue Shield Blue Advantage Bronze plan provides a three-page chart informing customers about the cost of health services such as visiting a specialist physician for an injury; using outpatient services for a substance abuse disorder; and delivering a baby. Each of these services are designated as “No Charge” to the policyholder – but insurance shoppers are expected to have noted the addendum one page earlier that this cost chart is based on expected patient spending after the deductible ($6,000) has already been met.
Of course like any plan on the health insurance market, this particular Blue Cross Blue Shield policy is required to meet the Affordable Care Act’s minimum coverage requirements. Meeting those requirements means providing free, preventative services to policyholders – whether or not a deductible has been met. Therefore, a policyholder who hasn’t yet paid her $6,000 deductible can still receive annual physical exams, contraceptive care, vaccinations and a range of disease screenings – all for no cost to the patient.
Although some shoppers balk at a $6,000 deductible, insurance companies argue that such a low premium (along with free preventative services) is a good price to pay for what amounts to catastrophic health insurance; and because Obamacare mandated yearly out-of-pocket limits, even customers on a high deductible plan are protected from the huge costs of a sudden illness or injury. On the Blue Cross Blue Shield plan mentioned above, the out-of-pocket limit is the same as the deductible: $6,000. As soon as that deductible is covered, all other care (assuming it is provided within the coverage network) is free. Low premium, high deductible plans could be appealing to younger health insurance buyers who don’t need prescription drugs or extensive visits to the doctor, but would like to have occasional health care screenings as well as protection against an unexpected car accident that leads to a broken bone, and hospital bills well over $6,000.
The Kaiser/NBC news story about the insurance marketplace and high deductibles also points out that some patients might forgo a visit to the doctor if it means having to cover the entire cost themselves. Patients who are used to spending a small co-pay may be reluctant to pay up to $100 to see their physician. Then again, some people think that’s a good thing. Minimum coverage requirements already take care of annual physicals and cancer, cholesterol, HIV and diabetes screenings. Even alcohol, tobacco and obesity screening and counseling is fully paid for by insurance. In that case, some say, asking patients to pay the full price of their visit to the doctor will make the patient consider whether the care they seek is necessary and could help lower costs for everyone.
In its recent coverage on high deductibles on the health insurance marketplace, Kaiser News also featured an interview with one woman in Texas who is struggling with low premiums versus high deductibles. Tammy Boudreaux lives with her partner and works as a freelance social worker, and has no health insurance through either her own job or her partner’s. Boudreaux told Kaiser Health News that she is uncomfortable paying a premium of nearly $200 per month if it still means that in the case of a health care need, she will have to meet a $5,000 deductible before receiving help from the insurer. Typical employer-sponsored health insurance has a much lower deductible, normally less than $1,200 according to Kaiser.
A health insurance customer like Tammy Boudreaux may be tempted to forgo health insurance altogether: she is in her early 40s, in good health and without a huge amount of expendable income. Rather than paying a monthly premium and worrying about a big deductible, Tammy could simply pay the $95 annual tax fine of having no insurance. Then again, that penalty will increase by the year, and should a catastrophic illness or injury occur, she would be without any financial protection. Five thousand dollars is indeed a big annual deductible, but considering the price of health care services in the United States – $1,377 for a cut finger, $25,646.88 for gall bladder removal, and $43,679 for hospitalization to treat pneumonia, according to the New York Times – many new coverage shoppers agree that health insurance is worth the cost.