Employee Healthcare Deductibles Are Becoming Punitive

by: Michael Steinberg November 17, 2008 | about stocks: DAL / HEW / NSANY / UNH / WLP    

Michael Steinberg

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The momentum toward health insurance reform at the national level will be enhanced during this employee enrollment season. The New York Times, in “Employers Offer Workers Fewer Health Care Plans”, reports that more than 100 large companies are providing only high deductible health plans, and companies still offering traditional plans are asking employees to pay much higher premiums.

"High deductible" is of course a matter of degree. WellPoint (WLP) has complained that typical employer high deductible plans did not exert enough pain to change employee healthcare spending behavior. WellPoint said that employer contributions to health savings accounts made the unfunded gap before insurance kicked in too small. Without additional incentives for employees to reduce healthcare spending, UnitedHealth and WellPoint said they needed to raise premiums on high deductible plans.

The Times is telling us that Nissan (NSANY) and Delta (DAL) have gotten UnitedHealth and WellPoint's message; they are offering only high deductible plans. (I don’t know which insurance providers Nissan and Delta actually use.) One Nissan plan has deductibles of $2500 per individual and $7500 per family; however the premiums are only $35 per single worker and $100 per family. Nissan funds $1600 toward a family’s health savings account. At this level the pain is becoming more severe. Nissan benefits director Marlin Chapman says that high deductible plans get people to focus on good health and watch their healthcare spending.

Delta spokeswoman Betsy Talton’s reasoning paralleled Nissan:

“We felt it was important to offer a plan that encourages participants to manage their health care and maintain their health and enables them to get the most out of their health care dollar. We find that when people get engaged in their health care they generally get healthier.”

The trouble is that in order to manage their own healthcare, patients would have to tell their doctors which services they want to purchase – impossible today.

I previously wrote that medical service providers put up so many impediments to compare prices that it is impossible to shop, and even the health insurers themselves refuse to reveal their negotiated rates. So consumers have to wonder; what is the objective of this conspiracy? The only logical conclusion is to pass healthcare costs into the future, to the next employer or government agency until it eventually lands on Medicare. UnitedHealth learned the meaning of deferred care with first year patients in its Medicare practice.

Hewitt Associates (HEW) benefits design expert Jeffery D. Munn summarized:

“Employers have seen some good initial cost savings from consumer-driven plans, [but] there is a longer-term concern about whether the savings are coming from wiser consumers, or they are just not going to the doctor because they would have to spend more out of pocket.”

An Obama advisor, not unauthorized to speak for the new President, said that shifting healthcare costs to employees is not consistent with their vision. When the employees’ pain is large enough to matter, employees start having to choose between necessities and preventive care, and eventually defer care that is really important. That’s when employers and insurers see real cost savings. The greater the cost savings for employers and insurers, the more employees will call President Obama for help.

Consider the added costs of high deductible plans: health savings account administration, more complicated claims processing for employers and insurers, and more collection costs for doctors and hospitals. And we are not getting the type of behavioral changes for this additional spending that the idealists have predicted. Consumers are either ignoring the deductible in decision making and spending through it, or foregoing care.

All is not bad for employers and private health insurers. We are in the dark phase now with high costs for employers and diminishing membership in the private health insurers. But, an all inclusive healthcare system will reduce everyone’s costs and provide unlimited membership upside potential for private health insurers. Everyone wins and they know it. This time around “Harry and Louise” are supporting change.

Disclosure: Author is long UNH.

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This article has 5 comments:

  •  
    Nov 17 11:07 AM
    So why is it better as an employer to have a vast increase in taxes to support universal healthcare? As a business performer, I prefer to pay $1,500 a month for the best family coverage I can buy and work harder and smarter to be able to afford it. And our family spends time and funds on preventative medicine. Let's face it, one way or the other medicaire is non-sustainable so the quality of care is going down whether employees pay more or the employer pays more. Frankly, I provide full health insurance to all employees. They perform and create sustainable revenue or they wander the market learning the hard way that they are not "OWED" top pay and health benefits with lackluster performance.
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  •  
    Nov 17 11:41 AM
    The can say that employer high deductible plans did not exert enough pain to change employee healthcare spending behavior. In reality the insurance companies are doing everything the can to discourage employees and participants to these plans from going to the doctor and using their insurance. Higher deductibles and copays only releive the insurance company of having to payout anything to health care providers. Its funny how they can twist it around to make it sound like the participant is doing something wrong. The want both the employees and the employers to pay them but want nothing to do with providing the coverage needed and expected by the plan.
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  •  
    Nov 17 12:02 PM
    This article is terrible. According to FBI statistics, the largest category of fraud is false medical claims (which represent roughly half of all convicted fraud cases). Medicare is by far the biggest victim of this fraud, and even by Medicare's own statements, they are only scratching the surface. Between unchecked fraud and the government's propensity to pay billions for a single airplane, it is mind boggling that anyone would even suggest health care costs will be fixed by government programs.

    www.washingtonpost.com...
    www.nytimes.com/2008/0...

    A co-worker of mine who talks a little too loud on the phone was recently speaking with her doctor and checking for drug interactions by listing all the medication she is on. The woman is about 40 years old and yet she is on dozens of medications. And her situation is far from unique.

    Drug companies spend millions advertising directly to consumers-- my TV is filled with ads for everything from Zocor to Prilosac to ambien to who knows what. You may think consumers have no control over health care spending -- but I doubt the greedy profit seeking drug companies are advertising just for fun. They know you are wrong.

    We are a country that takes a pill for absolutely every tiny little pain. We take pills to help keep us awake and vibrant during the day, and more pills to help us sleep. Are kids are doped up on Ritalin, while adults have a wide array of anxiety medications. Cholesterol drugs. Depression drugs. Blood thinner / thickening drugs. Biotech and pharmaceutical company stocks have been winners for years. There isn't enough room on this blog to list all the surgeries Americans insist on having. We are also a nation of couch potatoes who complain endlessly about obesity -- oh wait, we have expensive pills for that too.

    Get off your lazy butt and go exercise outside. You will burn off some energy (no more anxiety pills) making you able to sleep. The sunlight and activity will treat your depression naturally. You won't be as obese, and your eyes won't hurt as much from staring at the TV all day.

    Our healthcare costs are off the charts because of the choices we all make in our daily lives. Short of mandatory morning exercise, there is little the government can do to fix the problem and a lot they are likely to do to make it worse (facilitating fraud). We choose to take dozens of medications when we make life/work choices (stress) and when we make TV / exercise choices.

    Whatever Obama does or doesnt do, he isn't going to get anyone's lazy butt off the couch and away from the TV
    Reply | Link to Comment
  •  
    Nov 18 11:40 AM
    I pay $405 per month for a $3,000 deductible/$3,000 co-insurance plan, $6,000 maximum out-of-pocket. My plan pays for MD visits with my $25 copay, but will not pay for diagnostics until the $3,000 is met. I do not agree with bailing out GM when Fox reported the money is going to fund retiree benefits. Excuse me, but when are GM employees entitled to healthcare at taxpayer expense. GM's employees whined when they had to pay a $10 copay. In reality, the rest of us have been paying that and much higher for years. I believe in exercise, supplements, good diet, and putting effort into my healthcare. I do not want to pay for the epidemic of obesity which involves poor choices leading to diabetes, renal failure, etc. Diseases and accidents happen. Insurance was meant for those situations. If I break my leg, my insurance will kick in and I will negotiate payments to the hospital to meet my deductible and co-insurance. I agree with you, iThinkBig, that insurance is not an entitlement. I only wish that hard work and integrity were rewarded at other businesses. If you're a rude, crude, overbearing, obnoxious, lying, cheating, scumbag, we can't seem to do enough for you. If you work hard, diligently with integrity, your pockets are the ones that keep getting picked to pay for others' misuse of the healthcare and other systems.


    On Nov 17 11:07 AM iThinkBig wrote:

    > So why is it better as an employer to have a vast increase in taxes
    > to support universal healthcare? As a business performer, I prefer
    > to pay $1,500 a month for the best family coverage I can buy and
    > work harder and smarter to be able to afford it. And our family spends
    > time and funds on preventative medicine. Let's face it, one way or
    > the other medicaire is non-sustainable so the quality of care is
    > going down whether employees pay more or the employer pays more.
    > Frankly, I provide full health insurance to all employees. They perform
    > and create sustainable revenue or they wander the market learning
    > the hard way that they are not "OWED" top pay and health benefits
    > with lackluster performance.
    Reply | Link to Comment
  •  
    Nov 21 04:41 AM
    The author is wrong about Delta. Delta's offer of a High Deductible plan is only an additional option to other "regular" plans. Wish someone would check their work.
    Reply | Link to Comment
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