Deductibles, wages and discrimination

I can see where she is coming from. I disagree with it in detail.

Increased deductibles have differential impacts conditional on prospective healthcare costs.

I am assuming that the counterfactual is constant deductible in year 2and a fixed compensation pie with elements (cash, insurance, 401(K) etc) shifted around for any number of reasons.

An individual who has healthcare costs in the future year that are below the current year deductible has no new exposure. They are no worse off. If anything they are slightly better off if we assume that there is an inverse relationship between deductibles and premiums and then assume that higher premiums means lower net cash compensation which assumes a constant compensation bundle whose components are merely shifted around.

An individual who has healthcare costs in the future year that is above the current year deductible is losing money. They will get a slight increase in cash compensation due to lower premiums but they will take a cut in income net of medical expenses because they are paying dollar for dollar the difference between the old deductible and their total medical spending. There is a narrow wedge of people in this category who will on net be better off but most people in this group will be on net worse off.

Increasing deductibles means, all else being held constant, lower net of healthcare take-home pay for people who have high medical costs in the policy year. Conversely, higher deductibles are great for people who barely if ever touch the medical system in the policy year. This policy decision has significant differential impacts as a function of prospective healthcare spending. Broadly, higher deductibles are good for employees who have the following attributes: young, healthy, childless, male. Again broadly speaking, higher deductibles are bad for employees who are some combination of: older, pre-existing conditions, have children, and female.

I am not sure if a lawyer would ever want to raise a case of sex discrimination on the basis of a company changing their insurance plan design, but there is a decent argument that could be made that the change in plan design has easily foreseeable disparate impact.

UPDATE 1 Talking to a couple of lawyers this morning and they are all saying that this would be a long shot argument at best.






26 replies
  1. 1
    Starfish says:

    People who barely touch the medical system do not see it this way. They are seeing themselves paying monthly for an insurance plan that is not covering anything. Insurance looks like throwing money into a hole as far as they are concerned.

  2. 2
    currants says:

    Mayhew/Anderson, maybe you should write your titles like the lawyers do over at LGM, where you know the conclusion from the title (which follows the formats of legal briefs) and the reasoning supporting the conclusion follows. I wasn’t going to keep reading, but I always learn something from your posts so I did. (All of that by way of saying I’m kind of surprised there are no comments yet.)

    While you lay out a really clear argument and it’s a great point, I suspect that, given the current administration and SJC climate (you know, hostility toward women), bringing that case might not be a great idea right now. IMO. Wish it were otherwise–but as my grandmother used to say, “If wishes were horses then beggars would ride.” Which, now that I’ve written it out, seems an odd saying, although since she was born in 1902, maybe not.

  3. 3
    currants says:

    @Starfish: Yes, that too, but I think his main point was his last sentence.

  4. 4
    Butch says:

    @Starfish: Since I lost corporate coverage I had to take a part-time job just to afford health insurance and the deductible itself would wipe out everything we could possibly save for a year. All I’m doing is buying a premium; we have health insurance at least nominally but we do not have health care.

  5. 5
    StringOnAStick says:

    Deductibles produce weird incentives to get as much taken care of as you can once you get close to meeting the max out of pocket. I would have waited another year or two to replace my other knee but between being close to meeting the max and worrying that my husband’s company will do their usual thing and change insurance companies every three years means I do it this year, hot in the heels of doing the first one. In my case the deductible game made me decide to get more care this year, not less.

  6. 6
    tybee says:

    @StringOnAStick: we did the same knee thing this year: one on January 2nd, 2nd one on May 1st.

  7. 7
    What Have the Romans Ever Done for Us? says:

    What’s happening to premiums is the big question. If deductibles AND premiums are both increasing faster than wages then people are demonstrably worse off, even those that barely touch the health care system in a year. What they are seeing is that they’re paying more this year than last on a monthly basis and if they need health care their out of pocket expenses have also increased. From their perspective it’s still a pretty crappy place to be even if their monthly premiums are lower than otherwise because of their high deductibles. You could see how they might still be feeling like they’re getting screwed.

    Maybe you’ve posted on this before but what is your take on the NPR series on outrageous medical billing? They interviewed one lady who was rescuing a stray cat, which bit her, so she went to the ER for a rabies shot (something that most county public health departments give away for free apparently) only to get a bill for $60K for the shot (not the entire visit – which would still be outrageous for an outpatient visit – but for the shot itself). The major problem is there seems to be no relationship between billing and cost of providing service in the medical-industrial complex. Sometimes people wind up going bankrupt because of this, but a lot of those excessive costs are absorbed by insurance companies and it seems like that’s a major factor in pushing premiums and deductibles higher. Why is that happening? Administrative bloat at hospitals, monopoly/monopolistic competition amongst pharmaceutical companies or hospital systems, or something else? It seems like the root cause of most of our problems in the health care system.

  8. 8
    Brachiator says:

    Broadly, higher deductibles are good for employees who have the following attributes: young, healthy, childless, male.

    Why isn’t a young, healthy, childless woman not in as good a position here as a male?

  9. 9
    Brachiator says:

    @Starfish:

    People who barely touch the medical system do not see it this way. They are seeing themselves paying monthly for an insurance plan that is not covering anything

    I wonder whether they feel the same way about auto insurance or home owners insurance?

  10. 10
    Old School says:

    @Brachiator: My guess would be that females tend to actually have doctor appointments even if young, healthy and childless while males are more likely to not use healthcare at all.

  11. 11
    Brachiator says:

    @Old School:

    My guess would be that females tend to actually have doctor appointments even if young, healthy and childless while males are more likely to not use healthcare at all.

    Possible. I am curious, though.

  12. 12
    Kirk Spencer says:

    @Brachiator: pap smear. Birth control. Higher rate of urinary tract infections aka yeast infections. In simple, because the reproductive organs are more complex

  13. 13
    Butch says:

    @Brachiator: Does your car insurance include a $12,000 deductible and clauses that mean it basically won’t cover a thing? I’m currently fighting with Blue Cross because a claim for “preventive and wellness” services was denied; the ACA requires that those services, which are considered essential health services, be covered, but BCBS has one excuse after another why there’s an exception.

  14. 14
    TenguPhule says:

    @Brachiator:

    Why isn’t a young, healthy, childless woman not in as good a position here as a male?

    Different medical issues that factor in the risk assessment?

  15. 15
    TenguPhule says:

    @Brachiator:

    I wonder whether they feel the same way about auto insurance or home owners insurance?

    Auto insurance for sure. Even if you only pay twice a year instead of every paycheck, the amounts are painful.

  16. 16
    socratic_me says:

    I can’t speak for anyone else, but my experience in public education was that “deductibles going up” never meant a trade off in care. It means the cost of insurance was going up while the benefit stayed the same (and that the district was no longer willing/able to pay the difference). It was never “we are switching up the formula”. It was “you got a COLA/raise but actually less take home because we are about to extract more pay for the same (or worse) benefit”

  17. 17
    ProfDamatu says:

    @Kirk Spencer: All of that, plus the possibility of pregnancy, a very expensive medical event that generally isn’t going to happen to men.

    Slight correction, though: “urinary tract infections aka yeast infections.” No. UTIs are a completely different thing from yeast infections. The former is a bacterial infection affecting the, um, urinary tract; the latter is an overgrowth of yeast in the vagina/on the vulva. Different parts of the body.

    Men can indeed get UTIs, though as you note it is less common. But vaginal yeast infections can’t happen to cis men. :-)

  18. 18
    taumaturgo says:

    Is neatly called a deductible. I call it a tax. Insurance is a huge scam, and health insurance, in particular, is at the top of the class – perpetrated by the plan designers to lower premiums and at the same time safeguarding the profits needed to sustain the scam and lined their pockets. If they were to cover all incidents @ zero deductible and charge the true premium, they will have close to no clients. The only risks insurers are certain to cover at zero deductible is the possibility of lower profits and compensation. Inexplicably, with the current evidence at hand of ALL the other advanced economies charging less, covering more folks and obtaining better results, we continue to bitch and moan while continuing to feed the beast. In some quarters is known as “Freedumb”

  19. 19
    What Have the Romans Ever Done for Us? says:

    @TenguPhule: My guess is the big difference is the non-trivial probability that a young, healthy, childless woman could become a young, healthy woman with child.

  20. 20
    Skepticat says:

    When I owned a small advertising agency with a small staff in Massachusetts, I paid 100 percent of their health insurance coverage. Much more frequently than any of us liked, I’d say, “Hey, you all just got another big raise,” when the premiums went up yet again. Those costs were a not-insubstantial reason I finally handed the company over to someone else.

  21. 21
    Ruckus says:

    @Skepticat:
    Decades ago I had employees and paid 100% for healthcare insurance for all of them. Every year had to make decisions about which plan was good, let alone which was best. And every year the costs went up. It was around 25-30 yrs ago that the insurance industry seemed to start finding ways to cover a lot less, to keep prices down. In 1995 the company I then worked for was told that they could no longer purchase the insurance they had been and wanted to continue at any price. We had been at no copays, no deductible. We went to a small monthly deduction, a $200/year deductible and minimal copays for office visits. It was still decent insurance but the cost went up significantly is what I was told by accounting. Now insurance is far worse I’m told and see by comments here.

  22. 22
    OGLiberal says:

    My 12-year old son has Crohn’s disease,,,diagnosed at 7-years old. Through nobody’s fault but bad luck. When he was first diagnosed, his treatment was covered 100%, no co-pay, no deductible. Then my employer surveyed everybody and asked if they wanted higher deductibles and more take home pay or the same deductibles but the same take home pay. Guess which way most people voted? Now, we’re on the hook for $3,000 before my son hits his annual out-of-pocket limit, which is after the first Remicade treatment of the year since it costs about $15-20k each infusion (6 times a year). Any pay increase I get/got doesn’t cover that extra $3k out of pocket.

    My colleagues – the majority of them – voted selfishly for a few bucks more each paycheck because they all think, “It won’t happen to me.” Can tell you from experience that it can. That’s why it’s called insurance. My son is about the only person in the family who uses the insurance, outside of wellness visits for my daughter, who needs eye surgery to correct a lazy eye (also, not her fault) but I’ve been putting it off because my son’s care is more urgent – if he doesn’t have it, his life will be miserable – and I worry about my ability to pay for all of it because our out-of-pocket “family” limit is over double my son’s individual annual limit.

    Now, the fact that my kid’s medication costs a ridiculous amount (it does work) is another thing but higher deductibles for an almost unnoticed increase in take home pay – if that – is not a good deal.

  23. 23
    Skepticat says:

    @Ruckus: The two smartest things I ever did were stop being an employer and turn 65 so I could go on Medicare. I must admit that the expensive coverage I had for the agency was excellent and covered several major medical issues for me (cancer, hysterectomy, detached retina) and my staff with minimal to no cost. That was a long time ago, however, probably about the same time as you were suffering through it.

  24. 24
    TenguPhule says:

    @Ruckus:

    We went to a small monthly deduction, a $200/year deductible and minimal copays for office visits. It was still decent insurance but the cost went up significantly is what I was told by accounting. Now insurance is far worse I’m told and see by comments here.

    People would literally kill for that kind of dream plan.

  25. 25
    StringOnAStick says:

    @tybee: Mine was 3/11 for one, the next is 7/2. Three years ago I participated in a clinical trial for a plastic meniscus replacement for just the inside of the knee; my “bad” knee was in too rough of shape so I had them do it to the “good” one. It was supposed to last 10-15 years and now it is 3 years later, the MRI shows it is breaking down and the clinical trial doc wants to just put another one in. It was as hard a recovery as my knee replacement has been so far (though I know the replacement will take longer), I popped it out of place once, and the promise of 10-15 years was worth it, but I’ll be damned if I’m going to go through open joint surgery every 2-3 years and I’m tired of being a lab rat. I trust the replacement doc, the pain is real, the meniscus has been severely trimmed to put the now broken down artificial meniscus in so getting this knee replaced too seems like a no brainer. I’d rather have healthy original equipment, but I had a TON of fun wearing out these knees and the doc says skiing again is no problem and that’s what I care about.

  26. 26
    gene108 says:

    If anything they are slightly better off if we assume that there is an inverse relationship between deductibles and premiums

    I wish to live in this utopian society you speak of

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