Medical laboratory and pathology groups could benefit from trend by receiving payments for testing services from secondary payer rather than directly from patient
As high-deductible health plans (HDHPs) become the norm for more Americans, gap insurance is being touted as an innovative way to protect consumers from crippling healthcare costs. This added insurance protection is proving attractive to a growing number of patients with HDHPs.
Use of gap plans by more patients also could benefit clinical laboratories and pathology groups. That’s because patients with HDHPs who would normally be required to pay 100% of their lab testing charges until their annual deductible is met, would be covered for these costs because of their gap insurance. In these situations, labs would have a secondary insurer to bill until the annual deductible was met.
“Gap insurance is proving to be a tried-and-true solution,” said Amy Broadbent, Vice President, JRG Advisors, an employee benefits firm, in a Smart Business article. “This coverage is not new, but it is gaining popularity as a solution to offset out-of-pocket costs. Traditional gap plans are structured much like an old-fashioned major medical plan,” she adds, “paying expenses up to an annual maximum, which typically coincides with the benefit plan’s deductible.”
Gap policies have a low deductible and cover medical expenses up to the level of a health plan’s major medical deductible. This means they work best when paired with a health plan that requires a deductible of $5,000 or more. Group gap insurance plans for employer-provided health benefits work alongside traditional group health plans and help keep a lid on an employee’s out-of-pocket maximum.
“People see the prices of individual insurance and they say, ‘Boy, a $6,000 deductible seems high. I don’t want something that gives me that much risk,’” said insurance broker Ryan Hillenbrand, President of the Missouri Association of Health Underwriters, in a National Public Radio (NPR) article. “That’s why [the gap insurance] market is heating up a little bit more.”
Healthcare Consumers in Sticker Shock
A Commonwealth Fund report found families spent an average of $6,422—equal to 10.1% of their income—on health insurance premiums and deductibles in 2015. In some parts of the country, where median incomes are lower, workers’ wallets were squeezed even more. In Mississippi, families on average were spending 14.7% of their income on health insurance costs. In Arizona, Florida, New Mexico, Oklahoma, Tennessee, and Texas, 12% or more of family income went toward such costs.
Hillenbrand told NPR the ever-increasing cost of health insurance is giving consumers “sticker shock.”
“The point of insurance, after all, is to help you pay unexpected costs that you can’t plan for and/or beyond your ability to pay. With out-of-pocket costs and deductibles going higher and higher, many of us now have a need to insure against paying these high costs,” states the website of the AC Forrest Insurance Group, a family-owned insurance agency with offices in Georgia and South Carolina.
AC Forrest Group describes gap insurance as “insurance for your insurance” and markets its Premium Saver gap plan to customers who wish to lower their health insurance costs “without compromising benefits.”
“The cost of health insurance is going up and businesses have been forced to deal with that by raising their deductibles or increasing out-of-pocket costs for their employees,” Alex Forrest, Vice President of AC Forrest, stated in the NPR article. “That stinks.”
Families Forgo Healthcare Rather than Pay High-Deductibles
Gap insurance is targeted toward small businesses and organizations that want to offer gap plans to their employees to keep their out-of-pocket expenses low. For employers, the added cost of offering gap insurance typically is less than providing low-deductible health coverage to workers. Employees, meanwhile, may see no loss of benefits when pairing a gap plan with a high-deductible health plan.
According to a Commonwealth Fund issue brief, deductibles for single health insurance policies grew an average of 8.5% annually between 2010 and 2015, while workers’ wages were flat.
“The vast majority of people under age 65 in the US, 154 million, get their health insurance through an employer, and many of them struggle to pay for it,” Commonwealth Fund President David Blumenthal, MD, MPP, said in a news release.
Lydia Mitts, Senior Policy Analyst with Families USA, goes one step farther, noting high deductibles stop many consumers from getting necessary medical care. A 2015 Families USA study found more than 25% of adults with health insurance went without some needed medical care or prescriptions because they could not afford them.
“Research has found that when deductibles consume more than 5% of a family’s income, those family members are more likely to go without needed care,” Mitts wrote in a blog post. “Unfortunately, high deductibles are common in the most popular health plans on the marketplace—silver plans. Ninety-one percent of silver plans have deductibles above $1,500. And some silver plans don’t even exempt doctors visits from the deductible.”
Getting Around ACA Ban on Denying Insurance
Gap insurance for individual buyers, however, works differently than employer plans. These supplemental insurance policies—often called “metal gap” if they are designed to work with Affordable Care Act (ACA) exchange policies—typically pay a lump-sum benefit that covers out-of-pocket costs due to a covered accident or critical illness. While they are marketed as a way to fill out-of-pocket gaps in insurance, benefits can be used to pay rent or mortgage, car payments, and everyday living expenses, as well as medical costs.
Health economist Deborah Chollet, PhD, Senior Fellow at Mathematica Policy Research in Washington, DC, does not recommend individual consumers race out to buy supplemental gap policies. In the NPR article, she states that insurance reforms in the ACA were designed “basically to drive these kind of creative insurance arrangements out of the market.”
Part of Chollet’s criticism of individual gap plans is because issuers do not have to comply with the consumer protections built into the ACA. They can ask about health status and deny coverage. Instead, Chollet recommends individuals shop carefully for health insurance and see if they qualify for subsidies on an Obamacare exchange.
With many ACA exchange insurance plans featuring up to $5,000 individual/$10,000 family deductibles, the arrival of gap insurance plans for these consumers should be no surprise, for a simple reason, based on classic economics. Every insurance product sold through the ACA health insurance exchanges has an identical package of covered benefits, as defined by the intellectuals who wrote the law. The only difference between the bronze, silver, gold, and platinum plans is the amount of the insurance premium and the percent of the required deductible that the consumer will pay until the full amount of the annual deductible is met.
Thus, whether the consumer is a 20-something single man, a family of four, or a married couple in their 50s, they all have ACA health insurance plans with identical covered benefits. So, it should be no surprise to Dark Daily readers with knowledge of classic economics that market forces are now in play. Consumers want choice. They want products tailored to their needs. Since the ACA health plans, as currently designed, do not meet their needs for a smaller annual deductible, these consumers are willing to buy a supplemental health insurance product that will provide them with that specific benefit.
The good news for the clinical laboratory profession is that there are health insurers willing to meet this demand by consumers for a reasonably-priced gap insurance product. When medical labs serve patients with this gap coverage, it becomes easier for them to collect all the money due them by billing the gap plan during that time when the annual deductible for the primary insurance has not been met and the patient would be personally responsible for 100% of the lab test charges.
—Andrea Downing Peck