Sky-High Deductibles Broke the U.S. Health Insurance System

Jun 27, 2018, 01:30 PM

When Carla Jordan and her husband were hit with a cascade of serious medical issues, she knew that at least her family had health insurance through her job. What she didn’t realize was that even with that coverage, a constant stream of medical bills would soon push the family to the edge of financial collapse. The Jordans, both 40, were once solidly in the middle class, but ever since the 2008 financial crisis, money has been tight at best. Then calamity hit. In 2016, Carla needed a gallbladder operation. Her husband John suffered a seizure the same year, followed by an unrelated infection that sent him to the emergency room. Toward the end of the year, Carla was diagnosed with diabetes. Even after paying $501 a month for medical insurance, they ended the year owing $8,000 to 18 different providers, with creditors threatening to garnish John’s wages. Health plans similar to the Jordans’ that put patients on the hook for many thousands of dollars are widespread and growing, but some employers are beginning to have second thoughts. “Why did we design a health plan that has the ability to deliver a $1,000 surprise to employees?” Shawn Leavitt, a senior human resources executive at Comcast Corp., said at a conference in May. “That’s kind of stupid.” A handful of companies, including JPMorgan Chase & Co. and CVS Health Corp., have recently announced plans to reduce deductibles or cover more care before workers are exposed to the cost. Yet it’s still the reality for a growing share of Americans. Today, 39 percent of large employers offer only high-deductible plans, up from 7 percent in 2009, according to a survey by the National Business Group on Health. Half of all workers now have health insurance with a deductible of at least $1,000 for an individual, up from 22 percent in 2009, according to data from the Kaiser Family Foundation. About 41 percent say they can’t pay a $400 emergency expense without borrowing or selling something, according to the Federal Reserve. The bottom line: People like the Jordans simply can’t afford to get sick. About 40 percent of Americans can't afford an unexpected $400 expense, according to the Federal Reserve The family had an Anthem Inc. insurance policy through Carla’s job as a public school teacher in Stafford County, Virginia. But the monthly premium barely covered any of their bills before paying a $2,000 deductible. And by the end of 2016, the Jordans were deep in the hole to doctors, hospitals, an anesthesiologist, urgent care, and various labs and testing centers. Their doctors sent collections notices. Some dropped them as patients until they paid up. “I actually dreaded going to the mailbox,” Carla recalled. “I feel like I’ve done everything I’m supposed to do.” And yet, she said, sickness pushed the family “right over the brink.” Since the early 2000s, employers have mostly embraced high-deductible health plans. The thinking has been that requiring workers to shoulder more of the cost of care will also encourage them to cut back on unnecessary spending. But it didn't work out that way. In the wake of the 2008 financial crisis, many families were hard-pressed to meet their soaring health-insurance deductibles. At the same time, studies show that many put off routine care or skipped medication to save money. That can mean illnesses that might have been caught early can go undiagnosed, becoming potentially life-threatening and enormously costly for the medical system. How the U.S. insurance system came to stick its customers with increasingly onerous medical bills is a 15-year-long story of miscalculations and missed opportunities. It started in 2003 when President George W. Bush and congressional Republicans passed a change to the tax code that encouraged employers to experiment with high-deductible plans, which ask patients to pay out of pocket for care — sometimes thousands of dollars — before insurance coverage kicks in. The trend got a push when the financial crisis hit: As the econom...