Medical debt will persist despite health law
by Jayne O'Donnell and Paul Overberg, USA TODAY 
Millions of Americans will get health insurance through the Affordable Care Act that will protect them from potentially ruinous medical expenses, but a new USA TODAY analysis shows the health plans they can choose still leave them vulnerable to thousands in deductibles and other out-of-pocket costs each year.
Medical insurance deductibles for plans on the federal exchange covering 34 states average $3,000, and those for the least expensive, bronze-level plans average $5,082, according to the USA TODAY analysis of deductible data for HealthCare.gov. Those costs, according to a recent study, may still be more than many people can afford.
The USA TODAY analysis also found the lowest out-of-pocket limits on HealthCare.gov plans were $4,350 for individuals on bronze plans and $8,700 for families, although these were not the norm and are likely paired with high premiums.
Even relatively modest cost sharing can prove unaffordable because expenses are often unexpected, and most Americans have less than $3,000 to cover such costs, according to a new Kaiser Family Foundation report on medical debt among the insured concludes.
The new health care law requires consumers' portions of health care expenses - known as cost sharing - to be capped at $6,350 for individuals and $12,700 for families.
Many plans have lower limits on out-of-pocket costs than the federal limit, but the plans increasingly also have separate deductibles for prescription drugs. And expenses for drugs that aren't covered by plans or for out-of-network physicians aren't applied against limits.
That makes it more likely consumers, especially those with chronic health conditions such as asthma or high blood pressure, will be hitting these out-of-pocket maximums, says Matt Eyles, executive vice president at consulting firm Avalere Health.
"The ACA is an important safety net, but it doesn't necessarily solve the problem of high up-front medical expenses for those who don't have ability to pay for them," Eyles says.
Kaiser analyzed Centers for Disease Control and Prevention survey data and did case studies of 23 people with medical debt, which is the leading cause of bankruptcy in the U.S. It found cost sharing for covered services that were in-network providers and facilities was the leading contributor to debt for those interviewed. CDC's 2012 National Health Interview Survey showed 34% of people in higher-deductible health plans had difficulty paying medical bills compared with 24% of people in lower-deductible health plans
"It starts with the cost sharing that they're not really prepared to pay and are not in a position to budget for," says Karen Pollitz, a Kaiser Family Foundation senior fellow who co-authored the study with the Georgetown Health Policy Institute. "Then there are the multiplying factors where it's the mom and the infant and it's crossing plan years and people start doing drastic things" to pay the debt.
Department of Health and Human Services spokesman Joanne Peters said the situation is still far better than it was before the ACA.
"The new marketplace is night and day from what consumers faced in the individual market before the health care law, where they could see unlimited out-of-pocket expenses for plans with limited benefits and high deductibles, if they (could) even get coverage without being denied for a pre-existing condition," Peters said in an e-mail.
The 40% portion of medical bills borne by those with bronze plans may also shock many consumers when the bills start rolling in. Consumers with incomes below 250% of the federal poverty level ($28,725 for an individual) have lower cost-sharing limits if they buy silver plans on the exchanges. But families of four with incomes above 400% of poverty ($94,200) are ineligible for financial assistance and unlikely to have enough cash on hand to pay even the deductible for many plans, the Kaiser study showed. These families tend to have about $12,000 in liquid assets, Kaiser says, but when other consumer debt is taken into consideration, most have net liquid assets of $5,200 or less.
Premiums can add significantly to health care costs: An earlier USA TODAY analysis of premiums on the HealthCare.gov site found more than half of counties lacked a plan that would meet the federal affordability test for a couple making about $62,000 a year, or just over the amount eligible for subsidies. A third didn't have a plan deemed affordable for an individual above 400% of the poverty level or about $47,000, meaning the premium cost more than about 8% of annual income.
John Roll, a former transportation consultant from Southern California, has an outstanding medical bill of $88,000 from neurological tests that followed brain surgery in 2009. That bill went to a collections agency. Making matters worse, Roll has an urgent operation coming up this year to remove a hematoma near his liver. He can't work and his wife is unemployed, but at least having that bill capped at under $6,500 makes it possible that they could pay it out of retirement savings, he says.
"I'm hugely relieved," Roll says of the ACA caps. "In 2011, we were talking about a strategic divorce so we wouldn't have to get sucked under by the medical bills."
Cathy and Scott Carson of Truckee, near Reno, say medical debt will be unavoidable for them. They are waiting to hear whether they can get a hardship exemption so they don't have to buy a new plan to replace the one that got canceled last year because it didn't meet the ACA requirements. The cheapest one they can find includes a $5,000 deductible for each of them and costs $729 a month, Cathy Scott says that's more than they can afford on their combined $80,000 annual income, which is patched together through seasonal and contract work. But she hardly likes the option of going without insurance either.
Either way, "Debt is only an accident or serious illness away," she says. Any unexpected health cost at a doctor's office - where upfront payment is generally required - would have to be paid for by credit card, she says, and it could take years to pay if off.
While deductibles are increasing in amount, they are increasingly applied even before co-payments start. So while preventive care is covered in full under ACA, many plans will charge the full cost of visits for injuries or ailments until the deductible is met. This is going to create some sticker shock for consumers used to paying small co-pays for these, says Nancy Thompson, senior vice president at CBIZ Benefits and Insurance Services.
Deductibles for employer-provided plans have increased in the last five years, but are far below the averages on HealthCare.gov The average deductible was $1,135 a year in 2013, according to a study Kaiser released in August. While that was largely unchanged from 2012, it was up considerably from the average of $735 in 2008. For at least another year, employers can basically double workers' out-of-pocket costs by having a separate drug deductible if an outside company manages the company's drug benefits.
Cathy Scott is relieved that ACA has taken effect, but hopes "over time changes will be made to make it affordable and equitable to all."
What's your insurance experience this year? Tell us at healthinsurance@usatoday.com
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