As high-deductible insurance plans continue to gain traction nationwide, it’s important that physician practices help patients understand how their insurance works and exactly what their financial responsibilities will be.
Overcoming confusion and a widespread lack of knowledge about high-deductible plans and other insurance products can benefit a practice in two ways: It should help increase timely collections and therefore improve cash flow. And it can boost customer satisfaction by reducing the likelihood that patients are caught unaware by significant financial obligations.
“The reduced monthly expenses associated with high-deductible health plans are welcomed by enrollees,” said Ken Carr, vice president of revenue cycle consulting for McKesson Business Performance Services. “But because they’re typically uninformed, patients too often are shocked when faced with the higher out-of-pocket expenses associated with high-deductible plans.”
“For hospitals and physicians, the point-of-service therefore represents the best opportunity to educate enrollees in order to minimize unpaid, self-pay accounts receivable.”
Growth of High-Deductible Plans
The number of high-deductible plans is on the rise as large employers look for ways to shift a greater portion of healthcare costs to employees. High-deductible plans offer lower monthly premiums in exchange for higher employee deductibles and/or co-pays. The higher fees are paid for by the insured on a pre-tax basis from a health savings account (HSA) or other health reimbursement arrangement.
In 2013, 66% of companies with 1,000 employees or more offered at least one high-deductible plan, a figure that was expected to grow to 80% in 2014, according to a recent survey. Significantly, 15% of the companies surveyed reported that a high-deductible plan was the only health insurance option they offered. That percentage has doubled since 2010.1 All told, about 20% of all covered employees are now enrolled in high-deductible plans, up from just 5% in 2007.2
In addition to reducing premium and claims outlays for the employer, high-deductible plans are designed to cut overall healthcare spending by making consumers more cost-conscious when selecting healthcare services. The expectation is that if patients are spending their own money, incentives are created to preserve cash by avoiding unnecessary care. But whether most employees truly understand how the plans work is doubtful.
Health Plan Confusion
A recent study in the Journal of Economics revealed a woeful lack of knowledge among Americans about the particulars of health insurance generally: Among those between the ages of 25 and 64 with health coverage, only 14% understood the four key insurance concepts of deductible, co-pay, co-insurance and out-of-pocket maximums.3
Another study by the U.S. Department of Education similarly found that only one in 10 Americans possess a proficient level of health literacy, or the ability to understand and use health-related information in daily activities.4
When the public’s ignorance is coupled with front-office personnel who don’t fully grasp the details of various insurance plans themselves, the result can be a financial disaster, according to Carr.
“Insurance confusion on both sides can have a severe impact on provider organizations,” he said.
High-deductible plans can also dissuade individuals from seeking treatment. A study in Health Affairs concluded that lower-income patients enrolled in high- deductible plans may skip required emergency care because of high upfront costs. That, in turn, can lead to higher rates of hospitalization and greater overall spending in the future.5
Already, hospitals and physicians are reporting growing bad debt associated with patients who are enrolled in high-deductible plans. The American Hospital Association estimates that upward of 25% of hospital bad debt is due to patients who are actually insured, according to a recent article in Becker’s Hospital CFO. 6 Observers anticipate that the “bronze,” lower-cost health plans available through the state insurance exchanges will further exacerbate the problem, since most carry steep out-of-pocket maximums of $5,950 for individuals and $11,900 for families.7
Engagement, Education Are Key
As the numbers of enrollees in high-deductible plans continues to grow, hospitals and physicians groups must redouble efforts aimed at educating patients about the particulars of their health coverage. That process begins by ensuring that staff has a clear understanding of the plans they’re likely to encounter. It also means accessing patient coverage details during registration and check-in to ensure the individual understands what their financial obligations will be.
Many providers are going a step further by requiring full payment before services are rendered. Mid-State Orthopedic and Sports Medicine Center in Louisiana, for example, uses a computer program to determine ahead of time exactly what a patient will owe. If the patient is unable to pay the entire amount upfront, Mid-State works with the individual to set up an installment payment plan.8
Along with contacting patients ahead of the service date to discuss payment and installing financial counselors at the point-of-service, other organizations are implementing web-based applications that can help patients get information about their financial obligations once services have been scheduled.9
“It comes down to taking a pro-active approach to billing and collections,” said McKesson’s Carr. “The old method of collecting a small payment upfront and then relying on the insurance to pay the balance is increasingly obsolete.
“You have to let the patient know what to expect and then work with them to figure out a reasonable and equitable way to get the bill paid. That means providers must be transparent about their pricing. The simpler they can make it for consumers, the more likely they are to get paid in a timely fashion. And the less likely they are to generate consumer ill-will due to healthcare sticker shock.”
To help ensure that your front office staff is well-versed in the various types of healthcare plans, click here for a glossary of terms (PDF, 57 KB).
1 Michelle Andrews, “Large Companies Are Increasingly Offering Workers Only High Deductible Plans,” Kaiser HealthNews, March 26, 2013, http://www.kaiserhealthnews.org/features/insuring-your-health/2013/032613-michelle-andrews-on-high-deductible-plans-and-large-employers.aspx
2 David Markiewicz, “Patients paying more upfront for care,” Atlanta Journal-Constitution via Physicians for a National Health Program, April 15, 2014, http://www.pnhp.org/news/2014/april/patients-paying-more-upfront-for-care
3 “More Employee Responsibility, More Unpaid Bills? The Rise of High-Deductible Health Plans and What it Means for Hospitals,” Becker’s Hospital CFO, Sept. 26, 2013, http://www.beckershospitalreview.com/finance/more-employee-responsibility-more-unpaid-bills-the-rise-of-high-deductible-health-plans-and-what-it-means-for-hospitals.html
4 Anna Gorman, “Say What? Many Patients Struggling to Learn the Foreign Language of Health Insurance,” Kaiser Health News, June 16, 2014, http://www.kaiserhealthnews.org/Stories/2014/June/16/Many-Patients-Struggling-To-Learn-The-Foreign-Language-Of-Health-Insurance.aspx
5 “More Employee Responsibility, More Unpaid Bills? The Rise of High-Deductible Health Plans and What it Means for Hospitals,” Becker’s Hospital CFO, Sept. 26, 2013, http://www.beckershospitalreview.com/finance/more-employee-responsibility-more-unpaid-bills-the-rise-of-high-deductible-health-plans-and-what-it-means-for-hospitals.html
7 Beth Kutscher, “Targeting bad debt: Hospitals getting proactive on billing,” Modern Healthcare, August 17, 2013, http://www.modernhealthcare.com/article/20130817/MAGAZINE/308179957
8 Ron Shinkman, “Medical groups become more aggressive with patient debt collections,” Fierce Health Finance, April 27, 2014, http://www.fiercehealthfinance.com/story/medical-groups-become-more-aggressive-patient-debt-collections/2014-04-27
9 Beth Kutscher, “Targeting bad debt: Hospitals getting proactive on billing,” Modern Healthcare, August 17, 2013, http://www.modernhealthcare.com/article/20130817/MAGAZINE/308179957