If you're like a lot of Floridians and get your health insurance through an employer, some of your health care decisions may be made for you before you ever set foot in a doctor's office, hospital or lab.
About 42 percent of Floridians have health insurance through an employer-sponsored plan. That means somebody has made big choices on your behalf. Choosing an employer-based health insurance plan decides the network -- essentially the list of doctors and facilities available to you at negotiated rates. And with that decision, your employer also chooses how much financial risk you’ll be exposed to if you do get sick. The insurance option your boss picks out for you sets your out of pocket maximums, your co-pays, the pharmacy benefits, the deductibles. But with yearly double-digit increases in the cost of providing health insurance, employers also have to think about the business' bottom line.
"It is a challenge. Prices increase every year, so there isn't much stability," says Rene Silva, general manager at Orthodenco Labs in North Lauderdale. WLRN spoke with Silva earlier this year as he was assessing health insurance plans for his 20 employees.
"If prices increase, then the benefits of the plan change. And so we have to start taking a look at the value proposition between the cost and reduced benefits or the increasing cost in trying to keep the same benefits," he said.
Health Spending and the U.S. Economy
Employer-provided health insurance premiums have jumped 16 percent between 2013 and 2016, according to the Kaiser Family Foundation. While the price of coverage has grown, so has the financial risk born by workers. Nationally, in 2012, about one in three workers with health insurance through their jobs had an annual deductible of at least $1,000. By 2017, that had grown to one out of every two workers with employer-provided coverage.
"I do think over the last several years, in attempts to keep premiums down, there's been more of a trend toward higher deductibles," says Marilyn Tavanner, CEO of America's Health Insurance Plans.
"More is indeed out-of-pocket," says University of Miami Business School health economist Steven Ullmann.
WLRN spoke with Tavenner and Ullmann about the employer-based health insurance market.
(This transcript has been edited for clarity)
WLRN: What responsibility does an employer have to protect employees from medical debt?
Tavanner: There are individual and family caps to prevent [employers] from being able to put everything into a high deductible and then [employees] not be able to afford it. The individual cap is around $7,500 and family caps can go up to $14,000 or $15,000, which is still a large portion of someone's income, particularly if you're middle- or lower-income. It's very important to pay attention to what you have in terms of a deductible.
Do you think the rise in healthcare premiums and the rise in deductions the employee is responsible for helps explain why we haven't seen significant wage growth?
Ullmann: I think there are a lot of factors that play into that. We're very much a service sector here in South Florida. So that plays into it. Health insurance costs are indeed high for individuals and that is an issue. There's a counterbalance -- do you provide more benefits or do you provide higher wages? There's sort of a bit of a tradeoff.
Healthcare Cost Drivers
What is behind the increase in healthcare spending?
Ullmann: We have seen prices going up. Some of the drivers for that are things like pharmaceutical costs, the increased wages of physicians, the costs incurred by hospitals and technology. Whereas in other industries when you introduce new technologies, costs go down. When you're dealing with healthcare, technology can cause costs to go up. In terms of quantity, if you looked at my physical 30 years ago, it's a very different type of physical than it is today. We can do more to people and with people to retain health. The other aspect in terms of the quantity is that we are getting older and living longer.
Warren Buffett, Amazon CEO Jeff Bezos and JP Morgan Chase CEO Jamie Dimon announced in January they were teaming up to tackle health care. Where is the health insurance industry most vulnerable for disruption?
Tavanner: I don't know that the health insurance industry is most vulnerable. They're very interested in these types of arrangements. The idea is to take some of the inefficiency out of the system. So efficiency may be an area of vulnerability.
Ullmann: One of the areas is medical information and health records. Even though we have a push for electronic health records, what happens is that each healthcare system has its own electronic health record. You could literally walk across the street and one healthcare institution doesn't know what happened in the other healthcare institution. Also, people are not necessarily utilizing the least costly methodology. For example, a friend of mine was a tennis player. She went to one of our healthcare systems. She perceived she had a hairline fracture. So the doctors said, 'We'll run an MRI.' She looked at them and she said, 'An MRI' A $1,000 MRI? Wouldn't a $50 x-ray pick up where there's a hairline fracture?' And the doctor said, 'Yeah, sure, but you have good insurance.'
Tavanner: Also the use of clinical protocols. You have a certain, well-tested clinical protocol for a treatment of, say, Type 1 diabetes, or the treatment for primary back pain. Instead of each individual physician and each individual nurse practitioner that you come in contact with wanting to do [it] their own way, which may add additional cost to the system, they're working off of what actually produces the best outcome. So you start to not do steps that are not needed. All the steps that produce the best outcome for the individual, and that usually tends to be more cost-effective.
Ullmann: With a fee-for-service system, the more you do, the more you make. In our state and down in the southern part of our state we're still very much a fee-for-service environment. That is a cost driver.
The Wall Street Journal reports Humana and Wal-Mart are talking about a possible merger. CVS health is buying health insurer Aetna. Cigna is buying Express Scripts, a pharmacy benefits manager. Humana is buying part of the home healthcare provider Kindred Health. Is the standalone healthcare insurance business in trouble?
Tavanner: I don't think the standalone industry is in trouble. What we're seeing is folks either decide to work regionally or locally in a market and build up what is a significant presence in that market so that they can have strong partnerships with hospitals and physicians.
How do you hear that -- significant presence in that market?
Ullmann: Competition in healthcare -- it works in some parts like it does in other parts of the economy. You have more competition the price goes down. There are other parts of the health care system where you have more competition and the price goes up. If you have one hospital that puts in a brand new piece of high tech equipment and you have another hospital down the road that puts in another piece of high-cost equipment to compete, theoreticall [there's] competition, so price should come down. On the contrary, each of those hospitals now has a major piece of capital equipment[and] they've got to pay the darn thing off. That means you have to do procedures on those pieces of equipment. So these are cost drivers, and indeed that impacts insurance and insurance costs.