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Health care deductibles a shock to Michigan consumers

3:30 PM, Nov 18, 2013   |    comments
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(DETROIT FREE PRESS) - Six weeks after the troubled rollout of the Michigan Health Insurance Marketplace, the Obama administration may be facing a new challenge: consumer anger at high deductibles in plans that were supposed to be the most affordable.

In southeast Michigan, deductibles in most of the 14 bronze plans listed on the marketplace - those with lower premiums - top $5,000 for a single person and $10,000-$12,000 for a family. Insurance won't kick in until those out-of-pocket costs are met.

"(People) are saying 'I can afford to buy health care, I just can't afford to get sick,' " said Allen Zuppke, a Southfield insurance broker who helps consumers weigh risks, costs and options in buying health insurance.

President Barack Obama announced Thursday that insurers can extend policies on the individual market for another year after millions of Americans, including at least 146,000 in Michigan, received notices that insurers were canceling their policies because they didn't meet the minimum standards of the health care law.

It's not clear yet how the decision will play out. Michigan's largest insurers said they're waiting for guidance from Michigan Insurance Commissioner Ann Flood, who must decide whether to allow the change.

As it stands now, those high deductibles in the new policies being offered on the marketplace might provide a reason for the low enrollment numbers announced last week by the U.S. Department of Health and Human Services. Just more than 1,300 Michiganders had purchased insurance through the federally run website, Michiganders' portal to insurance under the Affordable Care Act. The site has been plagued by technical glitches that have led to error messages and frozen screens.

Former Detroit Police Officer Alfred Goode is among those who had hoped to have purchased a policy by now. Instead, he said, he's at a loss as to what to do.

"I'm not a poor man, but I can't afford this," said Goode, who is losing his retiree insurance in Detroit's bankruptcy. "That's like another house note and a car note."

Policies sold on the marketplaces generally fit into four tiers, ranging from platinum to bronze. The bronze plans are considered entry-level plans for which consumers pick up a bigger share of medical costs - about 40%. The platinum plans cost more in monthly premiums, but consumers pick up only 10% of medical costs.

What care really costs

While some call the high deductibles sticker shock, James Ralph, another Southfield insurance broker, said it's a reality check.

For years, Michigan workers have enjoyed employer health insurance that offers near-full coverage. For many, the cost of getting sick was no more than a co-payment at the doctor's office and a few bucks for medications, he said.

And those without employer coverage purchased plans on the individual market that seemed reasonably priced, in part, because they didn't cover things such as prescription drugs or maternity care, he said.

"Most people for years didn't know how much health insurance costs," he said.

Under the health care law, all plans must carry essential benefits. That's going to raise the cost for some, but it also means better coverage. Certain visits and preventive-care services are free under the law, and consumers who make less than 400% of the federal poverty level - about $45,960 for an individual or $94,200 for a family of four - are eligible for tax credits that can be used immediately to reduce the cost of premiums.

That might help them move past a bronze plan to be able to afford a silver plan that might have a slightly higher monthly premium, but lower deductibles.

Plus, the law now caps maximum out-of-pocket costs at $6,350 for an individual and $12,700 for a family, Health and Human Services Secretary Kathleen Sebelius noted last week at a Detroit community health center.

"For most people, even if you don't have all your day-to-day medical bills paid for, you have the protection that you won't go bankrupt if you get sick," she said.

However, many consumers might not get past the sticker shock.

Dr. Jeffrey B. Klein is a longtime podiatrist who said his premium to insure himself and his 18-year-old son increases from $460 to $760 a month. What aggravates him even more is that his $2,500 maximum out-of-pocket costs jump to $10,200.

So in a year with lots of medical needs, he'd have to spend $10,200 in addition to premiums before insurance would kick in, he said: "That's $19,000 plus change in a bad year."

To mitigate risk as much as possible in the individual market, Zuppke and Ralph said they and other brokers are writing separate policies for family members. That way, if one person gets sick, the deductible remains at $6,350.

Consumer frustration worries insurers, too.

The success of the health care reform program depends on consumers buying policies. If consumers want policies that will be effective Jan. 1, they must purchase them by Dec. 15.

"The first hurdle was the technology. ... The next big disappointment could be that people sign up for a plan they don't understand," said Joan Budden, chief marketing officer of Grand Rapids-based Priority Health.

Kev Coleman, head of research and data for the consumer website HealthPocket, agreed.

Deductibles in Michigan most likely will follow a national trend. A HealthPocket analysis in seven other states found that deductibles in bronze policies are, on average, 26% higher than those of current policies. The question is whether consumers will dig deeper and shop wisely, or whether they'll simply choose a plan based on a low premium.

"A lot of consumers are going to be very angry come January when they begin to use their plans" and realize insurance doesn't kick in until deductibles are reached, Coleman said. "They'll ask 'Why didn't anyone tell us?' "

Out-of-the-box thinking

Not everyone is finding bad news on the marketplace.

For many Michiganders, existing health conditions made insurance impossible because the policies were exorbitant. Under the law, a person can't be turned down because of their health status.

"It's relative. It's going to feel good or not-so-good depending on what your reality is," said Terry Burke, vice president of Blue Cross Blue Shield of Michigan's individual business group. Blue Cross, he said, covers more than 55% of policies on Michigan's individual market.

Ralph recently broke apart an attorney's $1,800-per-month, small-group plan that covered the attorney, his wife and a single employee.

By moving the attorney to a Medicare policy and his wife and employee to separate plans on the state marketplace, Ralph said, the attorney will save about $700 a month, allowing the employee to purchase insurance for a grown child, as well.

Shopping is complicated. Oversimplifying health care reform is dangerous.

"I think they hear 'pre-existing condition' and 'affordable rates' " only, Ralph said. "It takes an understanding of more than that."

Detroit Free Press

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