High-deductible and skinny health insurance plans drive medical debt

A recent Urban Institute report highlights the issue of medical debt but fails to examine two of the chief driving forces of this debt: inadequate enrollment in comprehensive health care coverage and high-deductible health plans that intentionally push more costs onto patients. It also fails to appreciate the looming crisis when the public health emergency ends and Medicaid enrollment could plummet.

As the extent of medical debt shows, both the government and the private market is failing too many patients, leaving too many either uninsured or with subpar plans that expose too many people to bills they cannot afford to pay. While hospital financial assistance is crucial to helping many individuals of limited means access care, it is no substitute for a solution that gets to the root causes of medical debt.

Affordable, comprehensive health care coverage is the most important protection against medical debt. While the U.S. health care system has achieved record rates of coverage, significant gaps remain and new threats are on the horizon. One of the gaps is the failure by some states to expand Medicaid, while the most imminent threat is the potential loss of Medicaid coverage for millions of people as the public health emergency ends. We must ensure that every individual has access to some form of comprehensive coverage.

In doing so, we must put an end to deceptively inadequate health plans. These include short-term limited duration health plans and health sharing ministries that often appeal to consumers because they are cheaper and often marketed to appear comprehensive. The reason they are cheaper is because when you read the fine print you discover they cover fewer benefits and include few-to-no consumer protections, like required coverage of pre-existing conditions and limits on out-of-pocket costs. Subscribers for these types of plans often find themselves responsible for their entire medical bill without any help from their health plan and can accumulate significant medical debt.

Many of the same concerns apply to high-deductible health plans. These plans are specifically designed to increase patients’ financial exposure through high cost-sharing – the amount the subscriber must pay out-of-pocket. Yet, many individuals enrolled in these plans find they can’t manage the gap between what their insurance pays and what they themselves owe as a result. It’s not a mystery why high-deductible health plans contribute to medical debt.

Hospitals and other providers do not determine how much insured patients owe for their care. Instead, that amount is set by the health plan. While every hospital has a financial assistance policy to help those most in need, they can only help so much and so many. And no matter how generous, hospital financial assistance will never be a substitute for a health plan that covers preventive and necessary care at an affordable price on the front and back end of coverage.

We must tackle the problem of medical debt, and we must do so at the root: ensuring all individuals are enrolled in comprehensive health care coverage and ending deceptive marketing of health plans and unaffordable cost-sharing.

Potential solutions include:

• Restricting the sale of high-deductible health plans to only those individuals with the demonstrated means to afford the associated cost-sharing.
• Prohibiting the sale of health sharing ministry products and short-term limited duration plans that go longer than 90 days.
• Lowering the maximum out-of-pocket cost-sharing limits.
• Eliminating the use of deductibles and co-insurance and rely solely on flat co-payments, which are easier for patients to anticipate.
• Removing providers from the collection of cost-sharing altogether and require that health plans collect directly from their enrollees the cost-sharing payments they impose. This approach would eliminate the vast majority of patient bills from providers altogether.

Moreover, the AHA has been actively engaged in identifying and promoting best practices in patient billing for decades. The AHA updated our voluntary patient billing guidance in 2020. The guidelines include assisting patients who cannot pay for the care they receive and protecting patients from certain debt collection practices, such as garnishment of wages, liens, interest on debt, adverse credit reporting and lawsuits. Most hospitals provide free care for patients with the most limited means as defined by income below 200% of the federal poverty limit. In the event of an unpaid bill, the Internal Revenue Service has prescribed an extensive series of steps and wait times that most hospitals must adhere to before taking any collection actions, which is a last resort.

Hospitals’ doors are always open to anyone who needs care, regardless of ability to pay. In total, hospitals and health systems of all types provided in 2020 more than $42 billion in uncompensated care, or care for which they received no payment.

Hospitals and health systems will continue to work to advance solutions that make care more affordable and accessible for all patients. But health plans must do their part by providing adequate coverage that does not subject patients to unaffordable bills and medical debt.