Anti-Deductible Health Insurance Plans

The movement away from deductibles illustrates a growing sentiment that exposing patients to more out-of-pocket healthcare costs doesn’t solve the cost conundrum and could harm patients’ health…….

 Some startup insurers are ditching the deductible

By Shelby Livingston  | September 15, 2018

Fed up with rising healthcare costs, Dove Healthcare, a skilled-nursing facility in South Eau Claire, Wis., opted to do away with its Medica high-deductible health plans and offer its 500 full-time workers coverage with no deductibles and no coinsurance through startup Bind Benefits.

The plan features lower premiums and straightforward copayments; employees can use a web tool to determine copayments before buying a healthcare service.

“With other plans we’ve had, you may not have known what the cost would be because it may be subject to the deductible and you’d have to wait for that (explanation of benefits) to arrive to know what your share of the cost is,” said Jenny Risinger, Dove’s regional director of human resources. But Bind, she said, is helping workers become better consumers “because they have the information ahead of time.”

Minneapolis-based Bind, which has financial backing from industry giants UnitedHealth Group and Ascension, isn’t the only anti-deductible insurance startup bucking the trend of shifting more costs onto employees’ shoulders in favor of models that offer better price certainty. (Ascension Ventures, the venture capital arm of the health system, could not be reached for comment; no one at UnitedHealth was available for comment.)

Another startup called Centivo also eliminated deductibles if members seek care that is coordinated by a primary-care doctor.

While employers are not yet dumping their high-deductible health plans en masse, the startups’ movement away from deductibles illustrates a growing sentiment that exposing patients to more out-of-pocket healthcare costs doesn’t solve the cost conundrum and could harm patients’ health.

Bind CEO Tony Miller helped pioneer high-deductible health plans paired with health savings accounts when he was CEO of Definity Health, which he sold to UnitedHealth in 2004. But he came to consider deductibles “a bad idea” as they rose higher and employers contributed less to savings accounts.

People end up avoiding both necessary and unnecessary care, he said. Eliminating the deductible allows patients in self-funded employer plans to shop with more certainty of the cost. So far, Bind has enrolled 50,000 members.

Bind covers primary and specialty care, emergency and hospital services, chronic care and pharmaceuticals as part of its main benefits package. Members must buy additional coverage for expensive treatments that can be planned for, such as knee replacements.

A little more than half of all workers with employer-sponsored coverage had a deductible of $1,000 or more in 2017, up from a third of workers in 2012, according to the Kaiser Family Foundation. The average deductible among workers with a deductible rose to $1,505 in 2017 for single coverage, about 2% higher than in 2016.

But even with employees shouldering a larger share of their costs under a high deductible, employers haven’t been able to blunt rising healthcare spending. Employers and employees spent $6,690 for single-coverage premiums in 2017, up 4% over 2016, and $18,764 for family coverage, up 3%, according to the Kaiser Family Foundation.

That’s partly because few consumers shop for healthcare services. In a July 2018 National Bureau of Economic Research working paper, economists found that privately insured individuals often got lower-limb MRI scans at high-priced locations even when lower-priced options were available. The researchers concluded that referring physicians had more influence over where consumers sought care than cost did.

Employer-sponsored insurance startup Centivo has taken that knowledge to heart. CEO Ashok Subramanian said the health plan, launching January 2019, gives incentives to primary-care physicians and patients to work together to lower the total cost of care, rather than relying on high deductibles to influence where and when the patient seeks care.

Providers receive incentive payments for coordinating care and promoting quality and good outcomes. And patients never see a deductible or co-insurance if they get the care that is directed by the primary-care doctor. They pay easy-to-understand flat copayments and premiums. Subramanian said the Centivo plan should cost 20% to 30% less than a typical plan with equal benefits because it holds both the patient and provider accountable.

“We believe that there needs to be a new model,” Subramanian said. “There are a lot of employers out there silently hoping that they have some alternative to give their employees.”

Centivo also offers a program that allows members to get free care for certain chronic conditions if they follow a treatment plan set by the primary-care doctor. The conditions include diabetes, complex cardiovascular disease, high-risk maternity, smoking, depression and anxiety.

Benefit consultants say most employers are not backing away from offering high-deductible health plans, though the National Business Group on Health’s latest annual survey showed that fewer large employers are offering high-deductible plans as the sole option.

Employers are, however, “trying to be less and less about cost-shifting” and instead are “helping (employees) make the right decisions and provide them with transparency to get them the care they need,” said Regina Ihrke, a Willis Towers Watson health and benefits consultant. That could mean allowing first-dollar coverage for certain conditions, such as diabetes, to encourage workers to get needed care.

Likewise, Lauren Vela, senior director of member value at the Pacific Business Group on Health, said employers are “more mindful” of the costs that employees incur under high-deductible plans and are looking for ways to protect them. But she warned that eliminating deductibles completely could lead employees to disregard how much a service costs and just spend more.

“A deductible is a good thing if it can be used to encourage somebody to get a second opinion before getting a back surgery or an MRI for no good reason,” she said.

Shelby Livingston

Shelby Livingston is an insurance reporter. Before joining Modern Healthcare in 2016, she covered employee benefits at Business Insurance magazine. She has a master’s degree in journalism from Northwestern University’s Medill School of Journalism and a bachelor’s in English from Clemson University.

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