High-Deductible Plans Driving Rise in Hospital Bad Debt

Hospital bad debt rose in 2018 after several years of decline, and according to Moody’s, high-deductible health insurance is one of the major drivers of that increase.

According to the bond rating agency, non-profit hospitals are seeing growing amounts of bad debt as they struggle, often unsuccessfully, to collect from patients whose high deductibles leave them on the hook for meaningful amounts of care.

Kaiser Health News reports that 28 percent of covered workers, nearly half of them working for companies with fewer than 200 employees, now have health plan deductibles of at least $2000.  That proportion of individuals with such high deductibles has nearly quadrupled in the last decade.

Bad debt can be an especially challenging problem for private safety-net hospitals because they care for so many low-income patients who, even when they have health insurance, often struggle to find the money to pay their share of the costs their plans do not cover.

Learn more about the bad debt challenge facing hospitals in the Healthcare Dive article “Nonprofit bad debt climbs again amid steeper deductibles, Moody’s says.”

High-Deductible Plans Losing Luster Amid Low Unemployment

The competition for employees is leading more businesses to offer more generous health insurance plans in addition to high-deductible plans.

As health insurance premiums rose in recent years, more and more companies were offering their employees more high-deductible insurance options to help keep down the cost of premiums.  Now, however, with some workers clamoring for more conventional plans and businesses finding themselves in competition for workers at a time of low unemployment, more businesses are offering those conventional plans to their workers.

2020, in fact, will mark the third consecutive year during which the percentage of companies offering only high-deductible health insurance plans will fall.

Serving patients with high-deductible health insurance can pose a special challenge for private safety-net hospitals.  Often, patients in the low-income communities these hospitals serve cannot afford to pay their deductibles, leaving such hospitals to absorb the cost of this uncompensated care.

Learn more about how businesses are adjusting their health insurance offerings in response to employee demand and competitive concerns in the Kaiser Health News article “Employers are Scaling Back Their Dependence on High-Deductible Health Plans.”

Background Information on Payment Methodologies and Benefit Design

The Urban Institute has issued two new papers with background information on health care payment methodologies and the design of health care benefits packages.

The first paper, Payment Methods: How They Work, describes nine payment methodologies:

  • fee schedules
  • primary care capitation
  • per diem payments to hospitals for inpatient visits
  • DRG-based payments to hospitals for inpatient visits
  • global budgeting for hospitals
  • bundled payments
  • global capitation for organizations
  • shared savings
  • pay for performance

The second paper, Benefit Designs: How They Work, explains seven different types of benefit designs:

  • value-based design
  • high-deductible health plans
  • tiered networks
  • narrow networks
  • reference pricing
  • centers of excellence
  • benefit design for alternative sites of care

urban institute 2A third paper, Matching Payment Methods with Benefit Designs to Support Delivery Reforms, describes how to match benefit designs with payment methods.

Go here to find Payment Methods: How They Work.

Go here to find Benefit Designs: How They Work.

And go here to find Matching Payment Methods with Benefit Designs to Support Delivery Reforms.

Underinsurance Remains a Problem

Twenty-three percent of American adults are uninsured, according to a new survey by the Commonwealth Fund.

Among them, 14 million had deductibles that exceeded five percent of their income while another 24 million had deductibles that fell below that threshold but had out-of-pocket health care costs – deductibles, co-insurance, co-payments, and out-of-network payments – that exceeded ten percent of their income.

The figures are for 2012 and reflected no change since 2010 but were nearly twice those found in 2003.

commonwealth fundIn addition, the survey found that the proportion of the insured with high-deductible plans has more than tripled, from three percent to 11 percent, since 2003. This is believed to reflect the proliferation of high-deductible plans in recent years – a proliferation that has increased with implementation of the Affordable Care Act and the many high-deductible plans offered through the federal exchange and state exchanges. This survey, however, did not distinguish between pre- and post-Affordable Care Act insurance policies.

Another category of the uninsured is those with income less than 200 percent of the federal poverty level whose out-of-pocket health care costs are greater than five percent of their income. Such individuals can pose a special challenge to urban safety-net hospitals because they often are unable to pay their co-pays, deductibles, and some of their medical costs.

For a closer look at the numbers, who is underinsured, the role of high-deductible plans in being underinsured, the effect of being underinsured on gaining access to care and addressing health problems, and more, see The Problem of Underinsurance and How Rising Deductibles Will Make it Worse, an issue brief summarizing the Commonwealth Fund survey.