GOP health bill would create ‘useless’ insurance plans

WASHINGTON >> President Donald Trump doesn’t like high deductibles, and he’s not alone. High deductibles, provisions of health insurance plans that leave people on the hook for thousands of dollars of medical costs before insurance coverage truly kicks in, are an unpopular part of health insurance.

But if Republicans’ health care bill becomes law, more people would land in insurance plans with high deductibles, according to the Congressional Budget Office analysis.

The CBO sees higher deductible plans becoming more common because, under the GOP plan, insurers would no longer have to follow requirements that they sell plans that cover a certain percentage of total health-care costs, as well as because the GOP plan generally provides smaller government tax credits to help people buy insurance.

With this new flexibility for insurers and smaller tax credits for consumers, CBO expects two things to happen: Insurers will be motivated to sell cheaper plans with lower premiums but higher deductibles, and many people - receiving less government help to pay their premiums - will prefer those lower-premium, higher-deductible plans. That problem would be particularly acute for lower-income people whose outof-pocket costs are now defrayed by cost-sharing subsidies, which will expire in 2020 - leaving those people to face their full deductibles for the first time.

“Under CBO’s projections, they believe people will choose higher deductible plans. How much of a choice that is when you’re getting a smaller tax credit and that’s all you can afford is kind of a matter of judgment; it depends on how you look at it,” said Larry Levitt, a senior vice president at the Kaiser Family Foundation, which has found that an increasing share of Americans report problems in paying for their deductible. “Particularly for lower income people who have very little in savings, a high deductible plan is essentially no insurance.”

In January, Trump critiqued the high deductible plans in the Affordable Care Act as a sign of the law’s failure, arguing that in addition to giant premium increases, “deductibles are so high that it is practically useless.”

The proposed legislation doesn’t touch the upper limit on out-of-pocket costs, so the worst-case scenario for a deductible wouldn’t change - that’s a $7,150 cap for an individual and double that for a family plan in 2017. But, as noted above, more people are projected to pick plans with high deductibles.

So why is Trump’s party pushing a bill likely to make such plans more common?

“Never underestimate the ability of officeholders to say totally contradictory things. ‘It’s wonderful, we have all these high deductible plans where people can better control their own spending. But, isn’t it terrible that under Obamacare all this cost-sharing has gone up and we’ve got to do something about it,’” said Tom Miller, a resident fellow at the conservative American Enterprise Institute. “That’s an ingrained contradiction in the message of some Republicans.”

Miller pointed out that while the plans sold to individuals may be less generous, that doesn’t mean that an individual’s spending will actually increase, as people might forego care. That raises the murky question of whether people skip care because they don’t need it or will delay essential care, resulting in worse health or bigger costs later on.

He also argued that one factor that was encouraging the use of high-deductible plans in the broader insurance market was the Cadillac tax, a pending excise tax on the most luxurious employer-sponsored health plans, which had incentivized employers to shift toward high-deductible plans. With that tax pushed out until at least 2025 and with many believing it’s effectively dead, that incentive could be gone, decreasing the drive toward high-deductible plans in the employer market - which might influence plan design in the individual market, too.

Mark Fendrick, director of the University of Michigan’s Center for ValueBased Insurance Design, is working on ways to design high-deductible plans more effectively, but said that in their current form the plans take a toll on sick people with diseases that need to be carefully managed.

“In their existing form, we have shown that people with high-deductible health plans actually buy less essential medical services and have been shown to be particularly problematic in people with chronic diseases - who are socioeconomically vulnerable,” Fendrick said. “Improvements need to be made to these plans to make sure these limitations are being addressed.”

But Jonathan Gruber, an economist at the Massachusetts Institute of Technology and an architect of the ACA, argued that what would happen under the Republican plan would be not only that people choose plans with cheaper premiums and higher deductibles, but also that insurers would stop offering more generous plans altogether because the people who signed up for them were likelier to be sick.

“The generous insurance is going to disappear,” Gruber said.

“Under CBO’s projections, they believe people will choose higher deductible plans. How much of a choice that is when you’re getting a smaller tax credit and that’s all you can afford is kind of a matter of judgment; it depends on how you look at it.”