By Trudy Lieberman
Community Health News Service

Steve Schneider owns a digital marketing agency in Indiana where he insures six people on the company’s health insurance plan — two employees and their dependents — for about $37,000 a year. He says it’s an “ultra-high” deductible plan that requires each family to pay the first of the year’s $12,100 in medical costs out of their own pockets and charges totaling $6,050 for each family member before the insurance plan pays.
That’s hardly insurance, but that is the norm. “Every year,” Schneider told me, “it’s how much can we offer and how much can employees pay? How high can I push the deductible to lower the premium?”
Schneider is one of thousands of small-business owners who are making that same calculation this fall. In Stowe, Vermont, Jen Kimmich runs a craft brewery and wonders how long she can continue to pay a large share of the costs to insure her 42 employees.
She provides full coverage for all her employees even if they work as few as 10 hours a week. “They deserve it,” Kimmich says, “but it’s expensive and we don’t know how much longer we can keep paying for it.”
Why is insurance going to cost so much again this year? Keep in mind that the out-of-pocket costs consumers pay in the form of high deductibles, copays and coinsurance are just as important as the premiums in determining the total cost of your insurance.
Cost sharing is simply another way to make consumers pay more for their coverage.
But why is insurance still so expensive when the news media is full of stories about how Americans have stopped going to the doctor and avoiding medical services, either out of fear of contracting the coronavirus or fear of racking up high medical bills they would struggle to pay?
Don’t fewer services mean less demand that would prompt doctors, hospitals and other providers of medical care to reduce their prices as a way to attract patients? That’s the way it works with other goods and services.
Don’t bet on it, says Dr. David Blumenthal, president of The Commonwealth Fund, a philanthropic organization in New York City. “The reduction in insurers’ costs from reduced use of routine services will be much greater than the cost increases associated with care of COVID-19 patients. That means companies have realized substantial short-term profits.”
Blumenthal added, “Consumers shouldn’t assume they will get the benefit of the doubt. If there’s any doubt about how much the use of care will go up, insurance companies will assume the worst. That’s what investors want.”
The companies have market power. Although insurance actuaries, the ones who crunch the numbers, say there is plenty of pressure from employers to keep premiums low, insurers have enough clout to raise deductibles, copays and coinsurance. That places the burden on those who get sick.
Hospitals, which account for about one-third of U.S. health care spending, also have market clout. Bob Herman, a journalist who covers the hospital industry for Axios, told me, “The public safety net and rural hospitals haven’t been doing great and have been neglected for years. One the other hand, he says, “It’s a different story with the big, urban hospital systems.”
“They are sitting on large rainy-day funds, which were built up by high prices over the years,” he explained. “COVID put a wrench into some of their plans to expand and expansion is good for hospitals. They are crying poverty but are paying consultants and lawyers millions of dollars to complete acquisitions.”
Many hospitals have begun costly advertising campaigns to drum up business. As that business returns, prices for hospital services are not likely to drop.
Dr. Sandeep Jauhar, a cardiologist at Northwell Health in New York, says hospitals in the state argue, “We need to ramp up care.” He added, “Some departments are being told to not only resume care at pre-pandemic levels but to boost volume of care to make up for financial losses.” In other words, they are being told to drum up business and in many cases they have enough market power to keep prices high.
While medical experts urge people not to delay needed care, it’s important to remember that Americans often get too much care. “Hundreds of billions of dollars are spent unnecessarily on health care,” Jauhar says, and maybe we should reboot in a different way. “Maybe patients don’t need as much care as we’ve been providing.”
Even if the number of services performed goes down, I’d wager, the price will continue to go up.
What kind of insurance increases are you expecting? Write to Trudy at trudy.lieberman@gmail.com.