Understanding the Real Cost of “Affordable Coverage”

Today’s opinion column in USA Today highlighted the potential for a “bumpy” rollout for the new health insurance exchanges next month. The prospect of technical glitches, however, is the least of the Obama administration’s worries about implementing reform. The biggest challenge lies in persuading uninsured individuals and those who purchase coverage in the individual or small group markets that the new plans are worth the price. Administration officials continue to trumpet the affordability of the new plans. As HHS Secretary Kathleen Sebelius noted last week in USA Today, “With more than half of all uninsured Americans able to get coverage at $100 or less, the health care law is delivering the quality, affordable coverage people are looking for.” Premiums, however, are only one part of the cost of health insurance coverage. Newly enrolled consumers are in for a surprise, for the most affordable plans available for purchase in the new exchanges also impose high out of pocket costs on patients who use health care services. These costs are likely to have the greatest impact on chronically ill patients who are more frequent users of laboratory services, diagnostic imaging, and prescription drugs.

The rates announced by HealthSourceRI, Rhode Island’s new health insurance exchange, underscore the real cost of health insurance coverage. Premiums for “Bronze” plans offered by Blue Cross and Blue Shield of RI range from $166 – $177 per month for healthy 25 year olds. But what does this buy? Upon closer inspection, not much. Each plan includes a very high deductible ($5000-$5800 for individuals, $10,000-$11,600 for families). Thus, low-income individuals who are high users of the health care system may have to contribute thousands of dollars towards their care each year on top of the premiums they pay. In addition, the plans require substantial cost sharing (co-payments and co-insurance) at the point of service. Each ER visit, for example, can cost a newly insured individual up to $350; co-payments for primary care visits range from $40 if the individual participates in a “patient centered medical home” to $60 for other PCPs. Specialist care costs more. Prescription drugs also include significant cost sharing of up to $250 for the most expensive “Tier 4” drugs. While individuals in such plans will enjoy better access to preventative services, they are unlikely to feel “well insured” if they actually have to use the health care system for a serious illness.

As I noted in an interview with 630 WPRO’s Gene Valicenti last month, the success of ObamaCare is ultimately a question of persuasion. Young, healthy individuals must choose to enter the insurance marketplace, rather than paying a nominal $95 penalty in 2014. For the uninsured, the most affordable coverage available under the new exchanges is likely to be a tough sell.