From a loyal reader, I was pointed to this story down in Georgia concerning state employees getting a slightly better health insurance plan mid-year. I want to highlight the problem with the original health plan.
This year has brought on an onslaught of changes, which included one form of insurance from Blue Cross Blue Shield of Georgia – a high-deductible HRA (Health Reimbursement Arrangement) – and no additional selections to choose from. It is no secret that an HRA is not a one-size-fits-all medical plan for every family, particularly individuals with long-term illnesses….In late December, our family was notified that our daughter’s occupational therapy would increase from a $25 co-pay to $127 per one hour session. We are facing $1,000 per month in medical bills between insurance premiums and four hours of therapy….
Health reimbursement arrangements/health savings accounts/high deductible health plans are designed to do one basic thing. That thing is to shift costs onto the individual for anything that could vaguely look like a “day-to-day” expense. The theory of change is that the individual will be much more price sensitive and thus a much better price shopper as well as being much more not consume any medical service in a marginal situation. From here, costs will stabilize and eventually decline. That is the theory of change.
It is a theory of change that is built on the Rand Insurance Experiment. The Rand Insurance Experiment showed that making people pay out of pocket reduced health care consumption and expenditure. However the Rand Insurance Experiment also showed that people are not perfectly rational, infinitely discounting, amazingly discerning health care shoppers; people are human with the limitations of bounded rationality that is shaped by information processing costs and competing priorities. People being people instead of perfectly rationalizing agents means high deductible cost sharing plan designs don’t guarantee that people get the care that they actually need which leads to worse health outcomes including death in some cases.
High deductible plans are appropriate choices for some people. They are not appropriate for everyone if we value appropriate as a means of providing effective, efficient care that meets the medical needs of an individual without bankrupting them or their family.
If I was the health insurance dictator in this country, I would allow high deductible plans to be sold. They would only be sold to individuals and families who are reasonably young (age is a pre-exisiting condition) without any signifcant claims history. The policies would not be automatically renewed until the most recent claims and medical history was reviewed. Furthermore, the potential buyer pool would be limited to people who have the ability to absorb a one-time shock of several thousand dollars without it being a crisis. This sub-population is fairly small, and can absorb the risk shifting that is inherent in a high deductible plan design. Anyone with chronic conditions or recurring health maitenance problems should not be a plan designed like this if the goal is to effectively manage health.