Forecast: Cash to reign in health care

The future of health care is less insurance and more cash.

With premiums for health insurance likely to head north next year as President Obama’s health care reform law fully takes effect, both individuals and employers will pay for more health care out of their own funds and buy less insurance.

That was the take-home message from a decidedly right-leaning panel of experts convened May 14 at the Indianapolis Marriott North hotel by Carmel-based Shepherd Insurance & Financial Services.

“We are going to see a massive movement to cash in the entire American health care system,” said Dan Perrin, president of the HSA Coalition, based in Washington, D.C. Perrin formerly worked for the late Pat Rooney, who headed up Golden Rule Insurance Co. in Indianapolis.

But Perrin’s prognostications appear to be playing out in fact. Even before the rollout of Obamacare, consumers and employers have steadily increased their embrace of high-deductible health plans tied to health savings accounts and health reimbursement arrangements. Such plans commonly often offer deductibles of $4,000 for family coverage, although most employers contribute some cash to help workers cover those costs.

In 2012, 34 percent of all workers covered by emplyoers were in health plans that had deductibles of $1,000 or more–more than triple the rate in 2006, according to a survey by the California-based Kaiser Family Foundation.

Next year under Obamacare, new public exchanges will offer subsidies to help customers buy one of four levels of standardized health insurance. The cheapest of those levels, known as bronze plans, are expected to be the most popular—and to come with high deductibles that require lots of out-of-pocket payments before the insurance kicks in.

Bronze plans could likely have deductibles of $4,000 for individuals and $8,000 for families, according to a 2012 prediction by the Kaiser Family Foundation.

Doctors are slowly moving to favor cash. Only about 4,400 physicians nationally operate cash-only, or concierge, practices. But a 2012 survey by Merritt Hawkins found that 7 percent of doctors are thinking of switching to that model in the next three years.

In addition to these trends, a wave of employers is looking to move to self-funded health plans, which are exempt from most of Obamacare’s new regulations. In a self-funded plan, an employer pays for its workers’ health claims from its own coffers and then buys stop-loss insurance to cover itself above a certain threshold.

Think of it as a high-deductible health plan at the corporate level.

Stop-loss insurers typically would not cover employers with fewer than 200 people—both workers and their dependents—on its health plan. But now, said Steve Gregory, vice president of health and wellness at Shepherd Insurance, stop-loss insurers are offering policies for health plans with as few as 25 people on them.

Self-funded employers hire health insurers or third-party administrators to process their medical claims and handle employee enrollment in the health plan.

“This growing market is providing more choices, even as the fully insured market has become less competitive,” Gregory said.

The fully insured market—dominated in Indiana by Anthem Blue Cross & Blue Shield—likely faces substantial premium increases next year.

Premiums for individual insurance policies are expected to rise 68 percent by 2017, according to a recent study by the Society of Actuaries.

The reasons? Indiana’s high-risk insurance pool will be folded into the individual and small-business markets, bringing the higher medical bills of those sicker patients with it. Also, Obamacare’s requirements that all individuals buy health insurance and that health insurers not turn anyone away are expected to bring some sicker patients into the health insurance market.

Employer-sponsored and individual insurance also could see higher premiums because of new taxes on health insurers, who will likely pass that on to customers as a 2-percent to 3-percent premium increase. There are per-employee taxes employers must pay to help the federal government pay for “transitional reinsurance” and new kinds of medical research.

Indianapolis-based Apex Benefits Group, a health insurance brokerage, predicted that the new health insurance rules would boost premiums 20 percent at one of its clients over the next six years—above and beyond any increases that would have occurred without the law.

Given these trends, Perrin urged employers to make his prophecy self-fulfilling.

“If you want to protect yourself from these cost increases that we see coming,” he said, “buy as little insurance as you can.”