Pulling It Together: What Conservatives Won In Health Reform (And Don’t Seem to Know It)

Conservatives obviously don’t like what they call “Obamacare” because they think it expands the role of government too much and spends too much money.  But ironically, the Affordable Care Act (ACA) actually promotes — though not explicitly — something that has been a fundamental objective of conservatives in health care for years: high-deductible health plans with more “skin in the game.”

In a new study we just released, we commissioned three different actuarial consulting firms to estimate what deductibles may look like for people buying coverage in the new health insurance exchanges beginning in 2014.  The analysis is complex because the levels of coverage in the ACA are specified using an “actuarial value” (the percentage of health care expenses the plan is expected to cover for a typical population of enrollees).  Needless to say, actuarial value is not exactly a concept that makes a whole lot of sense to most people.  The combination of deductible and coinsurance amounts that satisfy an actuarial value — which determine how much someone with a given level of health expenses will pay out-of-pocket — will vary from plan to plan and can only be estimated at this point.  That’s the reason we used three firms — to surround a difficult technical task.

The three firms produced a wide range of estimates (a notable result in itself, and one that has implications for consumers and for federal policymakers now writing the regulations that will guide how state exchanges operate).  But significantly, in all cases, the deductibles were high — ranging from $2,750 with 30% coinsurance to $6,350 with no coinsurance for an individual policy for the basic Bronze plan in 2014, which is the minimum people can buy and satisfy the so-called “individual mandate.”  Patient out-of-pocket costs would be capped at $6,350, an amount that’s specified in the ACA.  All of these amounts would be double for a family policy.

These are high levels of cost sharing by any standard, although the ACA also ensures improvements in the quality of the insurance people get and offers a better deal for many people than is now available in the broken, non-group market.  For example, it prohibits denials of coverage based on health status, provides access to preventive services with no cost sharing, and specifies an essential benefits package for all plans offering coverage in the exchanges and the small- and non-group markets.These higher deductibles are also consistent with the trends we are seeing in the marketplace.  Our 2010 employer survey found that the share of workers enrolled in a higher-deductible plan (with a deductible of $1,000 or more for single coverage) has nearly tripled since 2006.  Almost half of all workers in small firms are now enrolled in such a plan.  It is possible that the ACA will accelerate these trends by establishing a standard for coverage with high deductibles as a matter of national policy once the exchanges are in place.

Conservatives (and some economists) have always favored more “skin in the game,” arguing that it will incentivize consumers to be more prudent purchasers of health services and hold down utilization of health care overall.  They particularly favor high-deductible plans tied to tax-preferred savings accounts. According to our study, both Bronze and Silver Plans in exchanges would have deductibles that meet the standards for Health Savings Accounts.  It is possible, but hard to prove, that one of the factors responsible for the historically moderate increases in employer premiums in recent years has been increases in deductibles and other forms of cost sharing, which (along with the recession) may have caused workers to use less health care.  Liberals believe in comprehensive coverage not “skin in the game.”  Many health services researchers who have examined this question worry that plans with too much up front cost sharing will cause people to defer needed care, impose an added burden on families’ economic security, and present special risks for the chronically ill if they defer care.

The deductibles in the ACA have not been a focus to date for several reasons.  The Congressional Budget Office, Congress’ official budget scorekeeper, released estimates of premium costs but not deductibles.  Also, reducing deductible levels through higher actuarial values would have added to the cost of the legislation, which was already a hot issue.  And, the advocacy community mostly focused its attention elsewhere, especially on the public option and on subsidies for lower income enrollees in the exchanges (which lower this high cost sharing for people with incomes up to 2.5 times the poverty level).

It is possible that in the future, once the ACA is fully in place, there will be pressure to reduce deductible levels to make out-of-pocket costs more affordable.  But there will be countervailing pressure to keep premiums down, and deductibles are likely to remain high, consistent with trends in the marketplace.

A different way of looking at the ACA is that it represents a bargain between liberals and conservatives, although not one that was ever explicitly made.  The left got 32 million people covered and reforms that eliminate the worst abuses in the health insurance system.  And the right got a further push, beyond the momentum already underway in the market, towards just the kind of “skin in the game” insurance they have always believed will help control health care costs.  It’s the big victory in health reform conservatives seem not to realize they have won.