Pulling it Together: What Conservatives Are Winning
Conservatives are out of sorts these days about the direction in which health care is headed. They think the new health reform law expands the role of government too much and spends too much at a time when they believe deficit reduction should be a higher priority. The claims about death panels and a government takeover of the health system aside, these are principled positions for conservatives to take – they are supposed to be for smaller government and less public spending. But for all of the frustration and even anger within the conservative movement about where health care is headed, the fact of the matter is that they are winning more than even they may realize in the current health care equation. That’s because the nature of health insurance itself is being redefined and moving gradually but seemingly inexorably in the direction conservatives have long advocated: more consumer “skin in the game” through higher patient deductibles.
Item: In our recent survey of people in the non-group insurance market, we found that the average deductible for an individual policy is now $2,498, and for families it’s $5,149. These are very high thresholds by any standard. Consider, for example, that a family with median income facing such a deductible would be spending almost 10% of their annual income just for their deductible before their insurance kicked in.
Item: The percentage of workers facing high deductibles — $1,000 or more for single coverage – has been growing rapidly. It doubled from 10 percent to 22 percent between 2006 and 2009, and increased from 16 percent to 40 percent in small firms.
Item: Indications are that the share of workers with high deductibles is continuing to grow, a trend I expect our 2010 employer survey to confirm when we release it in September as we have every year for more than a decade now. And a substantial number of these high deductible plans are paired with tax-advantaged savings accounts, which conservatives have long advocated. Facing cost pressures without alternative answers, employers are moving to plans with less comprehensive coverage to reduce their expenses for employee benefits.
Item: Health reform is unlikely to reverse these trends. Large employers will continue to look for ways to address the rising cost of health care. And, for the basic “bronze” insurance plan that people will be required to buy, deductibles could run several thousand dollars for individuals and double that for families. To be sure, other aspects of health reform cut the other way. For example, there will be no cost sharing for preventive services in newly-purchased plans, and insurers will be required to cap consumer out-of-pocket costs at defined levels. And, of course, there are substantial subsidies to reduce premium and out-of-pocket costs for lower-income people. But, for the first time, the government will be defining the threshold that decent insurance must meet, and that minimum coverage will have the kind of high deductibles that conservatives favor.
Given the drift towards less comprehensive coverage in the marketplace, it is perhaps no surprise that two seemingly contradictory things are happening at the same time. For several years we have seen moderate increases in premiums for employment-based health insurance. I suspect that rising deductibles and other out-of-pocket costs are one explanation for this. It’s simple arithmetic that employers can buy down premium increases by switching to less comprehensive coverage and shifting more costs to workers. Plus, these higher out-of-pocket costs exert downward pressure on utilization – in some cases for the better, in some cases for the worse — and thus on premiums as well. At the same time, people have never been more upset about their own rising health care costs, as the coverage they get offers less and less financial protection. This seeming contradiction underscores the fundamental difference between how people and experts look at health care costs: To experts, who focus on the rate of increase in aggregate numbers such as the annual increase in health insurance premiums, costs look like they have been moderating. But to people, who focus only on what they themselves are paying, expenses out of their own pockets are rising far faster than they can afford, especially in a bad economy.
If you look at what is happening in health insurance from a policy perspective, the big challenge will be to find the right balance between appropriate cost sharing and cost sharing that is so high that it poses barriers to care and a threat to people’s economic security, especially for people who are chronically ill or have lower or moderate incomes. Deductibles are just one part of this picture. Looked at through a political lens, liberals have gained through passage of major health reform legislation, including expanded coverage and increased government oversight of the health insurance system. But increasingly, the insurance itself is looking more and more like the vision advanced by conservatives – less comprehensive with more skin in the game. That’s where conservatives may be winning more than they realize in the ongoing battle over the future of health care.