How Health Insurers and Policy Makers Can Lower Upfront Out-of-Pocket Costs

Thanks to the Affordable Care Act, we’ve made tremendous progress in expanding access to affordable health insurance. However, the findings of our new report show that there is still work to be done to help consumers with their out-of-pocket costs so they can get the care they need. The good news is that there are steps that health insurers and state and federal policy makers can take to address this issue.

Many adults still go without some needed health care because they can’t afford it

Since implementation of the Affordable Care Act began in 2013, nearly 17 million people have gained health insurance. However, having health insurance is no guarantee that consumers can afford the care they need. We have previously discussed how high out-of-pocket costs, like high deductibles or co-insurance, can prevent people from getting needed health care.

Building on that work, we’ve released a new report, Non-Group Health Insurance: Many Insured Americans with High Out-of-Pocket Costs Go without Needed Care. Using data from the Urban Institute’s Health Reform Monitoring Survey, this report takes a closer look at the experiences of adults who bought non-group health insurance in 2014, including how high their deductibles were and problems they had affording needed care.

We found that one in four adults with non-group coverage who were insured the whole year still reported going without needed health care because they could not afford the cost. The most common types of medical services adults went without included prescription drugs and follow-up tests—services that are essential for people to be able to maintain good health or manage chronic conditions.

Adults in families making below 250 percent of the federal poverty level ($49,499 a year for a family of three in 2014) were the most likely to report having gone without needed care due to affordability: Nearly one in three reported not getting some needed medical service because they couldn’t afford it.

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

Our report findings add to the growing body of research on the prevalence and potential problems posed by high deductibles: We found that half of adults with non-group coverage had high deductibles of $1,500 or more per person. Among adults with incomes below 250 percent of poverty, nearly two in five had deductibles of $1,500 or more.

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. Other 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 plans on the marketplace, which are plans at the silver level. And some silver plans do not even exempt doctor visits from the deductible, meaning that families have to the pay the full cost of routine, non-preventive care until they pay the whole 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 poverty. However, for consumers who are not eligible for this assistance, silver plans can still have out-of-pocket costs that make care difficult to afford.

Health insurers and policy makers should take action to make upfront out-of-pocket costs more affordable

It is clear that we must find ways to make upfront cost-sharing more affordable for consumers. This is particularly important for plans at the silver level, given their popularity and the fact that financial assistance is tied to the cost of silver plans.

Health insurers and state and federal policy makers can take these steps to address this problem:

• Health insurers should offer more health plans at the silver level that have lower cost-sharing for primary and outpatient care: Insurers are able to design silver plans that have lower copayments for basic primary and outpatient care, like primary care visits, mental health visits, some prescription drugs, secondary preventive services (services that help manage chronic conditions like asthma or diabetes), and medical tests.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 the basic care they need to avoid more serious health problems down the line makes sense for insurers and consumers.
• State and federal policy makers 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 secondary preventive services from its deductible. This would ensure that consumers have multiple plan options from 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 for care: Standardized plan designs are plan designs that insurers are required to sell in a state’s marketplace. Six state-based marketplaces already have standardized plans, and the District of Columbia will follow suit in 2016. Many of these states have designed standardized silver plans with lower copayments for basic care that can serve as models for other state-based marketplaces.
• State and federal policy makers 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 was made available by the Affordable Care Act, allows states to use federal funds to establish an alternate public coverage program for residents with incomes up to 200 percent of poverty 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.

Moving forward, we must build on the immense gains made by the Affordable Care Act and take additional steps to improve the affordability of out-of-pocket costs. This work is critical to ensuring that health coverage truly provides all consumers with both access to needed care and adequate financial protection from health care costs.