Whether they enroll in major medical coverage through their employers or an ACA marketplace, many Americans today select plans with high deductibles. This might be a plan that’s defined by the IRS as a “high deductible health plan” or a traditional plan that offers, relatively speaking, high deductible options as a way to keep monthly premiums more affordable.
But it also means people are assuming responsibility for sometimes exorbitant out-of-pocket healthcare costs—costs that may be offset with help from cash benefits provided by supplemental insurance.
Let’s take a look at the market’s trend toward higher deductibles—and higher out-of-pocket costs—and find out how an insurance portfolio containing supplemental insurance plans can provide invaluable peace of mind.
Higher deductibles can mean lower premiums
It’s no secret that healthcare costs have been on the rise for decades, even before President Obama signed the Affordable Care Act into law in 2010. Since 2013, in fact, average individual health insurance premiums increased 99% and family premiums increased 140%.1 That means annual major medical health plan deductibles are rising in an effort to keep pace with these ever-rising premiums.
Increasing policyholders’ cost sharing responsibility—defined by Healthcare.govlink opens in a new window as “the share of costs covered by your insurance that you pay out of your own pocket”—has been a key way to keep insurance premiums more affordable and within reach of more Americans. The basic formula is: higher out-of-pocket costs = lower monthly insurance premiums.
The logic goes, an individual or family assumes more personal financial responsibility for paying their medical expenses on the back end, in the form of deductibles, coinsurance and copays (with annual deductibles being the “biggie”) in exchange for a lower cost of insurance coverage on the front end, in the form of lower monthly premiums.
Healthcare consumer trends show that more people are indeed making the “higher deductible/lower premium” choice. According to a Consumer Reports study, two-thirds of people on the ACA exchanges in 2016 were enrolled in Silver Plans, which have relatively low premiums and average deductibles of $3,572 for an individual and $7,474 for a family.2
A study by eHealth found that the average annual deductible for individual plans in 2017 was $4,328 and the average deductible for family plans was $8,352.1 Note the rise in average deductibles since 2009:
But as deductibles rise, so do out-of-pocket costs
The reality consumers face is that higher deductibles mean they need to pay even more out-of-pocket before their major medical insurance may start paying benefits. And keep in mind that in addition to deductibles, most major medical plans require policyholders to pay coinsurance and copays until they reach their annual out-of-pocket maximum as defined by the U.S. Department of Health and Human Services. In 2017, this amount was $7,150 for self-only coverage and $14,300 for family coverage; in 2018, the out-of-pocket maximums rise to $7,350 for self-only coverage and $14,700 for family coverage.3
These maximums offer important protection against healthcare cost-related financial catastrophe, but coming up with thousands of dollars to cover medical bills is an insurmountable challenge for many Americans, especially those without adequate savings on hand. As we show in Medical Emergencies and Major Illnesses Hit Your Employees’ Pocketbooks—Hard, almost a quarter of people reporting medical bill problems struggle with bills less than $1,000.4 And in Supplemental Insurance Plans That Can Help Fill Your Employer Health Plan Coverage Gaps, we revealed that over 25% of adults have no savings set aside for emergencies. 5
What if something happens?
While ACA-qualified major medical plans cover some basic services first-dollar, most medical bills will be subject to the plan’s cost-sharing requirements. Major Medical Insurance is meant to provide financial protection in case “something big” happens, after all, and usually, this “something big” is unexpected, resulting from an accident or serious illness. Related expenses, which usually include both medical and non-medical bills, are the insured’s responsibility up to their plans’ out-of-pocket maximum.
The bottom line is that these costs are difficult for many people to manage—especially if they have a high deductible to meet before their major medical plan kicks in—and cash benefits from a supplemental insurance policy can make a difference.
Supplemental insurance may help
Supplemental insurance policies come in a variety of forms. Policies include accident and sickness coverage which can pay indemnity benefits to you when you have a covered loss. Other types of supplemental insurance coverage are critical illness insurance which pays a lump sum benefit to you if you are diagnosed with one of the covered conditions. And, disability insurance provides monthly benefits to help replace lost income if you are totally disabled and unable to work. Benefits under these types of policies are paid directly to the policyholder and can be used however person needs, for example some of the medical bills not covered by major medical insurance due to a high deductible plan.
Read Supplemental Insurance Plans That Can Help Fill Your Employer Health Plan Coverage Gaps to learn more about how the various types of supplemental insurance plans can help—no matter how high your major medical deductible might be!
1 https://resources.ehealthinsurance.com/affordable-care-act/much-obamacare-cost-2017.link opens in a new window
2 https://www.consumerreports.org/health-insurance/high-deductible-health-plan/.link opens in a new window
3 https://www.shrm.org/resourcesandtools/hr-topics/benefits/pages/2018-oop-caps.aspx.link opens in a new window
4 2016, April 12). The Burden of Medical Debt: Results from the Kaiser Family Foundation/New York Times Medical Bills Survey - Section 1: Who Has Medical Bill Problems and What Are the Contributing Factors? Retrieved October 27, 2017, from https://www.kff.org/report-section/the-burden-of-medical-debt-section-1-who-has-medical-bill-problems-and-what-are-the-contributing-factors/.link opens in a new window
5 Lake, R. (n.d.). 23 Dizzying Average American Savings Statistics. Retrieved July 14, 2017, from https://www.creditdonkey.com/average-american-savings-statistics.html.link opens in a new window
Accident Insurance is underwritten by Combined Insurance Company America (Chicago, Il). In New York, this coverage is underwritten by Combined Life Insurance Company of New York (Latham, NY). Exclusions and limitations apply, see policy for complete details.