News of rising health insurance premiums has alarmed Texans as well as citizens of other states. In July, the New York Times announced that insurance companies were petitioning the federal government to approve rate increases of 20 to 40 percent and even higher. In Minnesota, for instance, Blue Cross and Blue Shield sought to raise premiums an astonishing 54 percent.
Healthcare Premiums Are Rising
In Texas, Scott & White Health Plan wanted a 32.4 percent increase on its average premiums. Humana requested a 29.72 percent rate hike, and Blue Cross asked to raise premiums nearly 20 percent.
Why are the costs so high? And what can you do about it?
Costs Have Risen
Nationwide, premiums saw no increase on average from 2014 to 2015. In Texas, rates rose an average of 5 percent across all plans, according to a table on the National Conference of State Legislatures website. This is very low compared to the average 10 percent that premiums increased each year from 2008 to 2010.
Meanwhile, people were getting sicker. Or maybe just going to the doctor more. People who finally got health insurance after being uninsured for a long time sought long-deferred services. Insurers saw increased costs in heart conditions, cancer treatment, emergency room use, and the cost of expensive medications to treat breast cancer, cystic fibrosis and hepatitis C, among others. This increased usage destabilized rates.
Federal law requires insurance companies to pay out 80 percent of the money they collect as premiums. This leaves 20 percent for overhead, salaries and profits. The law requires companies to rebate money to customers if profits get too high.
However, insurance companies said their payouts last year were unsustainable. Some claimed they paid more than 100 percent of the premiums they took in.
It’s a tough situation. On the consumer end, customers feel squeezed by high premiums. On the insurer side, companies are crushed by claims.
Ways to Reduce the Cost of Health Insurance
But consumers aren’t spending time crying about the plight of their insurers. Instead, they’re trying to figure out how to bring down their healthcare costs. Here are a few ways – some established, some more experimental.
High Deductible Plans
The most common way to save on health insurance has long been to raise your deductible. For 2015, a high deductible plan meant that a single person had to pay at least $1,300 or a family at least $2,600 before the insurance company starts paying. “Catastrophic plans” may carry deductibles of $5,000 or $7,500. The Kaiser Family Foundation found that 46 percent of employees now have annual deductibles of more than $1,000.
High deductible plans keep costs down for consumers, who pay lower premiums, and for insurers, since people will think twice about seeing the doctor if they have to pay out of pocket.
Buying a high deductible plan is a gamble. What if disaster strikes and you have to come up with $5,000? Then again, what if disaster doesn’t strike and you’ve paid out $4,000 for a year of great coverage you didn’t need?
The Affordable Care Act now limits an individual’s maximum out-of-pocket to $6,450, and $12,900 for a family. But many people will hardly find this affordable.
So how do you decide whether a high deductible plan is right for you? Certain things you can predict. If you have a chronic condition that requires expensive medication, are accident prone or get sick a lot, a higher premium and lower deductible may be the wiser course of action.
You also need to consider your risk tolerance, as high deductible plans are risky. One accident could leave you with a bill that will take years to pay off, especially if your income is low.
Health Savings Accounts
Health savings accounts allow you to save pretax dollars to cover your out-of-pocket healthcare expenses. Federal law has four requirements you must meet to be eligible for an HSA:
- You must be covered by a qualified “high-deductible” health insurance policy (HDHP). This means at least $1,300 for a single person in 2016.
- You can’t be covered by any other health insurance plan, including your spouse’s.
- You must be under age 65.
- You can’t be claimed as a dependent on someone else’s federal income tax return.
Some employers have policies that make HSA’s more attractive. They may contribute to your account, or have wellness programs which discount your premiums if you follow a regular fitness regimen.
In 2016, contributions to your HSA are limited to $3,350 for an individual or $6,750 for a family. If you need to withdraw money for qualified healthcare expenses, you can do so free of federal income tax and penalties. Since Texas has no state income tax, you don’t have to worry about state taxes on your HSA, either. If you leave your job, your HSA still belongs to you, and can be used for future qualified healthcare expenses.
Deductmeble, Inc. is a new membership program that charges a flat monthly fee to pay members’ out-of-pocket medical and healthcare expenses. Members must be insured under a PPO or HMO to qualify. When members get medical bills, they forward them to Deductmeble, who pays out-of-pocket and co-insurance costs directly to the provider. Co-insurance is the amount a person pays after their deductible is met. Deductmeble does not cover co-pays.
The company was founded by Dr. Chike Nwonta, who was concerned that Americans with health insurance forego necessary medical attention because they spent all their money on premiums, and have little or none left for out-of-pocket expenses. Monthly fees average $50 for Deductmeble members, according to an article in The Business Journals.
This is another sort of gamble. Members try to guess if that year’s health care costs will be more than what they pay for their Deductmeble membership. For example, if your deductible is $1500, your Deductmeble membership is $50 per month for a total of $600 per year, and your costs turn out to be $1200, you saved $600 by being a Deductmeble member. However, if you only had $200 in healthcare costs, you just spent an unnecessary $400 extra by joining this membership program.
Medical Sharing Programs
This newish model claims Biblical roots. As the website of one such program, Medi-Share, says, “For thousands of years, Christians have come together to care for each other and carry each other’s burdens.” Starting in 1993, Medi-Share has grown to more than 164,000 members today.
People with similar beliefs pool their money in a health care sharing ministry (HCSM). These not-for-profit religious organizations facilitate sharing medical costs between members. According to the Alliance of Health Care Sharing Ministries, HCSMs operate in all 50 states, but not all states have “safe harbor laws,” which explicitly recognize this model’s ministerial nature, thus exempting the HCSM from state insurance codes not applicable to ministries. Texas passed legislation in 2013 making it a safe harbor state.
While HCSMs are not insurance companies, they act like them in many ways. The deductible is called “the unshared amount.” Members may face lifetime caps on services. And don’t expect funding for any procedure your fellow Christians might find immoral. On the upside, members feel much more joyous knowing which families their contributions are helping – and praying for them — compared to the anonymity of paying premiums to a giant insurer. You might also find a much lower cost for coverage from an HCSM.
So take heart, Texans. Your premium rates may go up this year. But as the insurers raise your rates, inventive people are devising ways to contain your costs.