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Our Biggest Health Insurance Concern Isn’t What You Think

Only 8.3% of Americans were uninsured in 2021, a drop of more than 37% from 2013 (13.4%) — the year before the marketplace and Medicaid expansion created by the Affordable Care Act began . So why do nearly half of working-age adults (46%) still skip care or medication? Being uninsured is no longer our biggest problem, be underinsured is — when you have insurance, but the out-of-pocket costs are still so high that you can’t afford to use it.

What has been done to address this?

President Biden and his administration have made significant strides in improving the affordability of health insurance and health care for millions of Americans in his first 2 years. The American Rescue Plan Act of 2021 increased premium subsidies for purchasing health insurance through HealthCare.gov and state-based marketplaces until the end of 2022, which the Inflation Reduction Act (IRA) passed earlier this year extended until the end of 2025. The IRA also Included a cap on insulin costs of $35 a month for those on Medicare starting next year, a $2,000 annual out-of-pocket limit on all prescriptions starting in 2025, and a framework for the program to negotiate drug prices — opposed by the pharmaceutical industry, but popular among Americans.

An amendment offered by Sen. Raphael Warnock (D-Ga.) to cap insulin costs in all commercial health insurance plans, including employer-sponsored health insurance and marketplace plans, was stripped from the bill, but reflected how far the conversation had come. During the last presidential election cycle, Pete Buttigieg, the transportation minister, pushed for monthly caps on seniors’ prescription costs.

These proposals reflect the larger realities that health care is increasingly unaffordable even for those with “good” insurance—a majority of households below 400% of the federal poverty level cannot afford their deductibles.

What are potential solutions?

While health savings accounts (HSA) are often touted as an option to improve health care affordability, the reality is that they are not—they serve primarily as a tax shelter for already wealthy Americans. Although their use has increased over the years, we found significant disparities by race, ethnicity, and income in participation in HSAs—reflecting those who lack insurance and have trouble affording care—so they are not a systemic solution for this problem.

Two years ago, my colleagues and I started thinking about the pros and cons of an alternative solution to underinsurance: monthly limits. Monthly out-of-pocket health care cost limits could potentially simplify our more complex current approach to cost-sharing, which typically starts with a deductible and then a period of coinsurance before reaching an out-of-pocket maximum based around a calendar year. Instead, monthly limits would give patients a smaller monthly deductible, after which every cost would be covered in full. We can still leave cost-sharing exemptions in place, such as for preventive care, and copayments for doctor’s visits, which only change how often and how much people are required to pay upfront before getting help from their plan. About a third of American families can’t afford an unexpected expense of $400, so the trend of higher and higher deductibles is just more than they can cover.

Monthly limits would smooth out expenses for those with chronic conditions, leaving some out-of-pocket costs each month but preventing a large upfront cost each year. And for people who are young and healthy, this alternative design will still help whenever they go for care, in case they need some tests or an MRI that can run into the thousands. Plus, if deductions reset monthly, people don’t have to worry about losing their progress if they change jobs mid-year.

We took it a step further and recently published a study in JAMA Network Open, puts the idea to real data from health insurance claims. We found that a hypothetical $500 monthly limit on out-of-pocket costs for in-network care would lower costs for nearly a quarter (24.1%) of those commercially insured in the US, which is the median out-of-pocket cost for that group reduced by almost half (-45.5%) over a calendar year. The benefits were even greater with a $250 monthly limit on in-network care, where 36.8% of participants benefited and median annual out-of-pocket costs dropped by more than half (-50.8%) among those which is favored. The cost drops were even greater for those enrolled in high-deductible health plans.

Of course the money has to come from somewhere. With the cost shifted back to plans, we projected that premiums would have to increase by 5.6% for the $500 monthly limit and 7.9% for the $250 monthly limit. That’s not nothing, but it’s helped by the fact that most Americans don’t pay the full premium cost of their insurance alone—usually an employer picks up most of the tab or people get financial help in the market. A key point is that our study assumes that people won’t start using a lot more care just because of the monthly cap, which feels reasonable because there’s only so much care you can use in a month before the cap resets.

What are the limitations of monthly caps?

Any policies, including monthly limits on insulin or out-of-pocket costs, that only address how much patients pay will not solve the more systemic problem of rising health care costs. In the oft-quoted words of the late economist Uwe Reinhardt, “It’s the prices, stupid.” Nor will it solve the problem of uninsurance, with millions still without coverage — and which is expected to rise dramatically with the looming end of the COVID-19 public health emergency, now pushed into early next year .

Of course, we also don’t know exactly what monthly limits on out-of-pocket costs look like in practice. No one had actually tried them on a large scale before. The insulin cap in Medicare won’t begin until next year, but we’ll learn how patients respond to it and how rates of diabetic complications change as a result. On a broader scale, getting commercial insurers to move away from an annual cost-sharing model, which has basically been used since health insurance began in the US, will not be a trivial endeavor.

Our hope is that an employer or insurer will be willing to pilot this model, see how patients respond to it, and then make it available as an option in their plan offerings. Who knows, maybe they will even end up being the insurer to truly ensure that patients can seek care when they need it.

Paul Shafer, PhD, is an assistant professor in the Department of Health Law, Policy and Management at Boston University.

Disclosures

Research for this piece was supported by Arnold Ventures. Shafer has received research funding from the Robert Wood Johnson Foundation, Commonwealth Fund, Arnold Ventures and Renova Health in the past 12 months. He is also an investigator at the VA Boston Healthcare System under contract to the Boston University School of Public Health.

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