How Health Insurance Companies and Policymakers Can Make Care More Affordable

The Affordable Care Act has helped expand access to affordable health insurance to millions of Americans. But consumers’ out-of-pocket costs are sometimes still too high, preventing them from getting the care they need.

In a new study released last month, NPR, Robert Wood Johnson Foundation, and Harvard found that a quarter of Americans still report experiencing serious financial problems due to medical expenses. In addition, nearly one in five people report not being able to afford to fill needed prescriptions.

This report adds to a growing body of research, including our own, that shows that out-of-pocket costs still prevent many people with private insurance from getting the care they need, and, that a growing number of people with private insurance have high deductibles, which can contribute to problems affording health care.
The good news is that health insurers and state and federal policymakers can take concrete steps to address this issue.

High deductibles are common and are associated with problems obtaining needed care

High deductibles can be particularly problematic for lower-income consumers, who may not be able to afford to pay for a doctor appointment on their own. Research has found that when deductibles consume more than 5 percent of a family’s income, those family members are more likely to go without needed care.

Unfortunately, high deductibles are common in the most popular health plans on the marketplace—silver-level plans. 91 percent of silver plans have deductibles above $1,500. And some silver plans don’t even exempt doctor visits from the deductible. This means that families have to pay the full cost of routine care to treat an illness or any chronic health conditions (like asthma) before they have paid their entire deductible.

The Affordable Care Act provides critical financial assistance to help reduce high out-of-pocket costs in silver plans for people with incomes below 250 percent of the federal poverty level ($50,400 for a family of three). However, for consumers with incomes too high to qualify for this financial assistance, silver plans can still have out-of-pocket costs that make it difficult for those consumers to afford to get care.

Lowering consumers’ costs through the design of health insurance plans and new state and federal policies

Expecting consumers to meet high, unaffordable deductibles before their health insurance starts paying for care is having a significant, harmful effect on whether they actually get the health care they need. We must find ways to lessen this harm, particularly for silver plans, given their popularity and the fact that financial assistance is tied to the cost of silver plans.

Earlier this year, the federal government took an important first step to make care more affordable in plans offered in the 27 states with federally facilitated marketplaces: Starting in 2017, the government will encourage insurers to sell standardized plan designs that the Department of Health and Human Services (HHS) has developed and that exempt a number of services and medications from the deductible. This means that consumers only have to pay a copayment for these services, even if they haven’t yet paid their full deductible. Healthcare.gov’s website will have special tools that help people find these standardized plans.

It is critical that health insurers in all states with federally facilitated marketplaces opt in and offer these new standardized plan designs.

But health insurers and state and federal policymakers can help make care more affordable in a number of other ways too:

• Health insurers in all states should offer more health plans at the silver level that have lower cost-sharing for primary and outpatient care: Insurers can design silver plans that have lower copayments for basic primary and outpatient care, like primary care visits, mental health visits, some prescription drugs, services that help manage chronic conditions like asthma or diabetes, and medical tests. The new standardized plan designs developed by HHS give insurers in federally facilitated marketplaces an easy way to implement this type of plan.Insurers should take advantage of this flexibility so that their enrollees can afford the care they need to maintain good health and effectively manage chronic conditions. Making sure families can afford basic care so they can avoid more serious health problems down the line makes financial sense for insurers and consumers.
• State and federal policymakers should require health plans to exempt outpatient care from plan deductibles: Policymakers could require all health insurers to offer at least one plan at the silver level that exempts primary care, mental health visits, prescription drugs, and services to manage chronic conditions from its deductible. After 2017, the federal government could also require (not just encourage) all insurers in federally facilitated marketplace states to sell their standardized plans. Both policy approaches would ensure that consumers have multiple plan options from several different insurers that have lower upfront out-of-pocket costs for basic care.
•  More state-based marketplaces should design standardized plans that have lower upfront cost-sharing and require insurers to offer these plans: Seven state-based marketplaces already offer standardized plans, and, as mentioned earlier, federally facilitated marketplace states will have standardized plans in 2017. Many of the standardized plans that the marketplaces developed have lower copayments for basic care that can serve as models for other state-based marketplaces.
• State and federal policymakers should strengthen the financial assistance that helps with cost-sharing: One option that states can take advantage of now is to create a Basic Health Program. This option, which the Affordable Care Act introduced, allows states to use federal funds to establish an alternate public coverage program for residents with incomes up to 200 percent of poverty ($40,320 for a family of three) that includes plans with lower cost-sharing.
• Over the long term, Congress should also expand eligibility for federal assistance with cost-sharing to middle-income consumers and increase the generosity of this assistance. This could be accomplished by increasing the amount of premium tax credits families receive to an amount that ensures they can afford more generous, gold- level coverage. Congress could also provide more generous cost-sharing reductions to families and expand eligibility for this program to families with incomes between 250 and 400 percent of poverty who currently are eligible only for premium tax credits.

Moving forward, we must build on the immense progress of the Affordable Care Act and take additional steps to make out-of-pocket costs more affordable. This work is critical to ensuring that health insurance truly gives all consumers access to needed care and the peace of mind that comes from knowing that they won’t face financial devastation if they have a major illness.