Employers Stuck Between A Rock And A High Deductible Health Plan
Tuesday October 20th, 2015
Health insurance deductibles are a fairly common practice in the world that we live in. An employer offers a specific health care plan to employees, in which the employee will pay a certain amount of money out of pocket for health care before their coverage can officially begin. However, the recent spike in individual and family deductibles has employers and employees wondering if health insurance is truly “worth it”.
With insurance deductibles climbing faster than inflation and wage rates, many employees who have insurance coverage are opting to skip needed healthcare in an attempt to save money. What is causing these deductibles to climb so high? And what does it mean for employers?
Traditionally, high deductible healthcare plans allowed employers to keep premiums low, while allowing employees to receive coverage. In 2010, the average deductible for an individual healthcare plan hovered around $900, while the current average rate is now $1,300. However, in small businesses, the deductibles are even higher, ranging anywhere between $1,500 to $2,000 or higher.
These high deductibles mean that an individual would need to pay the specified amount out of pocket before the employer’s insurance begins covering any additional medical care. In theory, these deductibles are a protection to the employer, allowing the employee to make informed and intelligent decisions about the health care that he or she receives. This prevents the employer from taking on additional insurance costs for frivolous medical procedures a dishonest individual may take advantage of.
It can be surmised that high deductibles are the result of employers and insurance agencies looking to provide employees with coverage options, but also keep the bottom line in balance. The Affordable Care Act (ACA) has also put pressure on employers to provide employees with coverage options, but many employers simply can’t afford to provide options that are actually “affordable.”
The controversial “Cadillac Tax” associated with the ACA can also be named as a new cause of increasing health deductibles. The Cadillac Tax is a tax that will be implemented in 2018. The purpose of this tax is to prevent employers from touting lavish and costly health insurance coverage to employees. The goal is to protect employees from paying into insurance plans they may not be able to afford.
But the Cadillac Tax may have caused more harm than good, as employers attempt to avoid the Cadillac Tax, they are removing coverage and increasing deductibles to provide equivalent coverage. In a perfect world, the employee would receive the same health care that they would under the Cadillac options, but without the high premiums. However, the opposite has occurred. They’re receiving less coverage, for lower premiums, and higher out of pocket costs.
Most employees are okay with paying a reasonable deductible in addition to monthly insurance premiums. However, the high deductibles that are trending now seem to be deterring insured individuals from seeking the care they need.
Even though monthly insurance premiums are low, high deductibles mean that employees are not able to afford the health care coverage that is provided to them, resulting in decreased accessibility to treatment, medications, and programs that allow them to be healthy.
For example, an employee of Bagel Grove in Utica, NY, Shannon Blount says that for her to enroll in her company’s insurance plan, it cost would her $20 per paycheck (weekly), and an additional $200 per month to enroll her son in the plan. Even if she did enroll in the company insurance plan, Blount would still be responsible for paying out of pocket for most of the expenses, due to a high deductible. Blount also mentions that for her to qualify for state exchange programs, she would have to make less than she does now, which is between $250-$350 per week.
Blount states that she has considered relinquishing her employment in order to continue qualifying for Medicaid. Despite the ability to remain enrolled if she were to take a drastic pay cut, or stop working all together, Blount feels that it is against her morals to quit her job and rely solely on state aid, stating, “I don’t like the way you feel, and the way people look at you when you say ‘Oh, yeah, no, I’m not working.’”
Another example involves LaRita Jacobs, who is insured under her husband’s insurance plan through his employer. Under this health insurance plan, Jacobs is subject to a $7,500 annual deductible, which has prevented her from getting a much needed surgery for her rheumatoid arthritis. The high deductible has prevented her from receiving surgery on her shoulder, and instead, Jacobs has opted for physical therapy and struggles with pain on a daily basis.
To sum up, higher deductibles mean employees are being stringent with their healthcare choices. With wages that fail to keep up with rising deductibles, employees are unable to afford medical care that they truly need. In the long run, this could lead to more emergency room visits from patients who have failed to seek the medical treatment they need on a daily basis, such as medications, therapies, and counseling.
Unfortunately, there appears to be no sign of the high deductible health plan going extinct anytime soon. The truth of the matter is that high deductibles help many companies to secure greater profits through less spending in employee benefits. And it allows companies to remain ACA compliant. While the ACA may or may not have had an adverse affect on these rising deductibles, the truth is that high deductibles are here to stay.