Low-Premium Insurance Patients Don't Just Focus On Cheapest Cost
    By News Staff | April 5th 2013 11:17 AM | 9 comments | Print | E-mail | Track Comments

    Health plans that offer low premiums and high deductibles believe that patients with deductibles of $1,000 or more for individual coverage (or twice that for family coverage) will shop around for the best price to get their health care.

    Not so, according to a new analysis by the USC Schaeffer Center for Health Policy and Economics and the RAND Corporation which examined consumer decisions with and without these so-called consumer-driven health plans (CDHPs) when receiving nine common outpatient services, like office visits, chest x-rays and colonoscopies.

     CDHPs have gained traction in the health insurance market as premium costs have boomed in order to cover even more services and riskier patients as well. In 2006, CDHPs made up only 4 percent of the total employer-provided heath insurance plans in the U.S but by 2010—the latest date that statistics were available—that figure had jumped to 17 percent.  Is it saving them money?

    The new analysis in Forum for Health Economics&Policy
    found that patients with low premium health plans paid roughly the same amount as their traditionally insured counterparts for 8 out of 9 services analyzed. The only exception was office visits where the researchers found that patients with low premium health plans paid about 2 percent less for office visits. That's for people who used those services. Obviously people who are healthy and want insurance to be insurance and don't expect it to cover their birth control and sex change operations are paying far less than high premium, low-deductible customers.

    "We looked at data from 63 large employers and find little or no evidence that enrolling in a consumer directed health plan encourages price-shopping for health care," said lead author Neeraj Sood, associate professor at the USC Schaeffer Center.  

    The problem is twofold, Sood said. A lack of transparency about the costs of medical treatment makes it difficult for shop around for the best price – when's the last time you called around to radiology departments to inquire about the cost of an x-ray? Also, patients are most likely just to receive outpatient services from the providers their primary care physicians recommend.

    "People don't question their doctor's advice," Sood said, who speculated that one possible solution would be to find a way to incentivize those doctors to help their patients find the most affordable options possible.

    Overall, CDHPs do seem to offer a cost savings to patients, he said, but only because the high deductibles discourages patients from seeking care. That, in turn, can create health problems down the road.

    "CDHPs are gaining market share and the trend will likely continue. We need more aggressive price and quality transparency initiatives coupled with high deductibles to increase consumerism in health care" Sood said.


    Gerhard Adam
    Obviously people who are healthy and want insurance to be insurance and don't expect it to cover their birth control and sex change operations are paying far less than high premium, low-deductible customers.
    Wow, that was helpful.  Perhaps next time we can include parents who clutter up the waiting room with children and their sniffles.
    Mundus vult decipi
    I would rather reduce my premium expenses and save the difference to cover the high deductible price of insurance.  We recently cut out things like vision care simply because they weren't used.  It was then that my daughter started complaining about her vision.  Even paying cash for all of the expenses of the visit we came out ahead financially by cutting the premium cost.  

    One thing is that we are fiscally responsible.  We spend less than we earn and save as much as possible.  For those that will actually save the money for the first few thousand dollars of a high deductible plan, CDHP's save money and there is no shopping around.  We don't have time for that. 

    The real problem is most people are not responsible and these are very risky for people that will spend the savings and then borrow to pay if they have an emergency.  It is getting each little sniffle covered that drives costs up so much.  Avoid that and save money, but you really do need to save that money.

    Gerhard Adam
    It is getting each little sniffle covered that drives costs up so much.
    That's actually not true.  Costs are up for two reasons.  The first is that there is no market, so it is solely contingent on whatever hospitals feel they can collect from insurers.  It's what happens when the service provider doesn't actually interact with their "customer".

    The second problem is that hospitals feel that they can charge every ancillary expense whether or not you availed yourself of the service.  In other words, when you go in for the sniffles, you're also being charged for that shiny new MRI machine that the hospital just acquired.  Even if you're just lying on a bed, you're paying for all that equipment, regardless of whether you ever use it or not.

    It's that kind of "model" that drives costs up, because there is absolutely no incentive for hospitals or the medical community to control costs.  Why worry, when they can charge you $18 for an aspirin.
    Mundus vult decipi
    I am referring to the cost issue at an individual/family basis.  If you sum up the typical costs for my  family over the course of a year, premiums are the largest portion of the expenses.  For my family they are typically 60% of the total cost per year. 

    If I cut that in half and saved the difference the cost of health coverage would be greatly reduced for my family.  It is the expensive premiums to cover the sniffles that drive up my personal costs.

    In a free market system efficiencies are arrived at because the individual makes good decisions based on their own cost/benefit analysis.  Distortions arise when prices are fixed (as most medical procedures are currently price fixed by what Medicare will pay), or when there is insufficient or inaccurate data available to make good decisions.

    I want the flexibility to make the best decision for my family, but that option is limited by the distortion of government regulation.
    Gerhard Adam
    ...that option is limited by the distortion of government regulation.
    Funny that you would blame government regulation and completely ignore insurers regulation.  Medicare isn't the only payer out there, and the majority of procedures are price fixed based on what insurance will pay, not on what they actually cost to deliver.

    There can be no free market system as long as insurers are part of the process since it insulates the service provider from the market.  As a result, they can charge what the insurer can bear, not what the market will bear. 
    Mundus vult decipi
    The basis that everyone uses is the Medicare Fee Schedule.  Insurers use that as the baseline schedule for everything else.  Medicare says a cardiologist earns more money, everyone falls in line with that.

    Auto insurance is a reasonable comparison for how the free-market should work.  Insurers pay out based on the value of the cost to restore or replace.  Government regulation of that exists, but essentially it functions as a free market and it works.

    You say insurers are to blame, but they are not the ones requiring that oil changes, tire replacement and car washes be included in your auto insurance. How can premiums not go up when everything is rolled into "insurance?"
    Gerhard Adam
    Auto insurance is a reasonable comparison for how the free-market should work.
    It's not a reasonable comparison at all.  An automobile has a replacement value, which can be readily quantified.  There is never an instance of where the insurer is unaware of what the maximum replacement cost is.  They even limit liability.

    Now, compare that to health care and you can see a completely non-viable business model, because there is no instance of where someone's health or life can be economically quantified. 

    If you want to make the comparison, since everyone will eventually die, then that would be comparable to an auto insurance company knowing that everyone they insure will get into an accident that totals their car. 

    I don't know what your point regarding "oil changes, tire replace, and car washes" has to do with anything.  Insurance doesn't dictate what you eat, what clothes you buy, where you live, or how often you shower.

    The point is real simple.  If there is no way to quantify the value of the item being insured, then insurance cannot produce a viable business model.  There is no case, except in healthcare, where such a preposterous economic position is being maintained.

    This is precisely why there is the issue of pre-existing conditions.  The only way health insurance can truly be successful is to limit their liability, which is to collect premiums from healthy people and minimize their exposure on the actual medical conditions that people have.
    Mundus vult decipi
    You are relentlessly dodging the point and changing the topic.  
    The Main Point:  My family costs are lower if I have a high deductible, low premium and wisely save the difference to cover the deductible as needed.

    You still have never responded to that basic point.  The more control I have over the money spent on my families health care, the better off my family will be.  High deductible plans give me precisely that.  Why are you opposed to me improving the finances and health of my family?   Why do you think you have the right to make those decisions for me? 

    As for your other comments.  If you go to a auto shop and ask for how much it will cost to re-build a transmission, they have a table that shows the billable hours for that precise job.  The actual cost may be off, but they will quote a precise amount and are generally held to that precise value.  If they finish more quickly they make extra.  If they are slow, they lose money.  In the end it averages out.  Auto insurance companies use the same tables to determine if the bid for a repair is correct or not.

    Every procedure that exists should be billed the same way.  Troubleshooting costs will be variable, but there is little to be done about that.  Insurance companies have been working exactly towards that model on billing per procedure.  Doctors who work in specific healthcare networks agree to the fixed charges for a procedure.
    You are also incorrect on quantifying the value of a human life.  That is also done on a regular basis.  If you die in an airplane crash, there is a precise value attached that the airline pays out.  Several years ago that value was ~$2.6 million. 

    Gerhard Adam
    My family costs are lower if I have a high deductible, low premium and wisely save the difference to cover the deductible as needed.
    So what?  Your particular situation is hardly generic enough to serve as a model.  There are numerous variations on that theme, so I don't particularly care what you personally do.  If that works for you, then I'm not telling you you can't do it. 

    However, you raised the point about what drives costs up and I'm disputing your assertions.  Yes, I get all about how wise you are with your spending, but that isn't the situation as it applies to many people.
    Several years ago that value was ~$2.6 million.
    Enough said.
    Mundus vult decipi