As the cost of health insurance and care continues to go up with little restraint by the Affordable Care Act (ACA), the insurance industry is getting ever more creative in finding new revenue streams to cover gaps in coverage. The latest new market is to offer insurance to cover the cost of insurance. High deductibles have become a growing burden of out-of-pocket expenses for individuals, families, and employers. As one marker, deductibles for employer-sponsored health insurance have gone up by 255 percent over the last ten years. (1)
The ACA was intended to rein in insurers' abuses by regulating the industry. However, large and self-insured employers were exempted from its requirements. Another provision outlawed "mini-med" plans that would cap annual benefits at, say $2,000. About 2 million people were covered in 2013 by limited benefit mini-med plans, marketed mostly by Aetna and Cigna. New ACA rules were enacted in 2013 that allow a number of limited-benefit plans to be offered as supplementary insurance. A variety of such plans are now being marketed, including critical illness plans (e.g. for cancer), indemnity plans (that pay only a pre-determined amount regardless of the total charges), "hospital cash" policies," and short-term plans that less than 12 months. (2). These kinds of plans provide relatively small, one-time lump sum payments toward the generally much higher costs incurred by patients if they experience a major illness or hospitalization. These skimpy plans can be offered at low premiums, at least for younger healthier people, with high profits for insurers. As bare-bones policies, they have been called "junk insurance" by Consumer Reports. (3)
Since these gap plans are not major health insurance, they escape scrutiny and regulation by the ACA. Insurers can ask potential enrollees about their health status and deny coverage for pre-existing conditions. More than 90 percent of people purchasing insurance through the ACA's exchanges in 2016 chose plans with an average annual deductible of $3,000 or more. As one example, a 26 year-old healthy person with a $6,000 deductible can expect to pay $600 a year for a gap policy for deductibles. (4)
Gap policies call into question whether or not they are worth it. They are just another way to evade the ACA's requirements and another grab for profits in a failing health insurance industry. They also represent another failure of the ACA to rein in health insurers in the public interest. These latest gap policies for high deductibles are losers for patients and families and unearned winners for health insurers.
It is beyond time to abandon cost-sharing as a means to control health care spending. As a main premise of consumer-directed health care (CDHC), the "more skin in the game" concept has been discredited as a cost containment mechanism by more than 25 years of experience. It is now obvious that the more cost-sharing increases with patients and families, the more they delay or forgo necessary care and have worse outcomes. (5) Yet it persists and grows into even new forms, such as now "insuring" us against high deductibles, all in insurers' interest and not in ours as patients. As Dr. Don McCanne, senior health policy fellow for Physicians for a National Health Program, observes:
We don't need insurance to insure our insurance. We need a national health program that would ensure that everyone has affordable access to all essential health care services. This will never happen with our current system; ACA patches cannot possibly accomplish that. Single-payer Medicare for All, without gaps, is what we need. (6)
John Geyman, M.D. is the author of The Human Face of ObamaCare: Promises vs. Reality and What Comes Next and How Obamacare is Unsustainable: Why We Need a Single-Payer Solution For All Americans
1. Woolhandler, S, Himmelstein, DU. Healthcare inequality on the rise. The Hill, August 2, 2016.
2. Andrews, M. Short-term plans can skirt health law requirements. Kaiser Health News, October 28, 2013.
3. Appleby, J, Hancock, J. Bare bones health plans expected to survive health law. Kaiser Health News, August 25, 2013.
4. Sable-Smith, B. Would you like some insurance with your insurance? Kaiser Health News, September 21, 2016.
5. Geyman, JP. Moral hazard and consumer-directed health care: A fundamentally flawed concept. Intl. J Health Services 37 (2): 333-346, 2007.
6. McCanne, D. Doubling down by insuring against losses from insurance gaps. Quote of the Day, September 22, 2016. (firstname.lastname@example.org)