A recent Gallup poll presents a trend that over time more people are putting off health care services due to costs, and in particular this trend has not been stopped during the first year of the Affordable Care Act despite its goal of making care more affordable.   In particular, more people appear to be delaying the start of treatment for serious illnesses.   Even though the plans have no annual or lifetime maximums, people are still holding off care, perhaps resulting in more difficult cases when they do finally seek help.

For this post, I want to express some personal experiences in the individual market.  I can understand this increased reluctance to utilize health care services.

In 2011, after the law was passed, I switched from an employer plan to an individual plan.  The actual circumstance was that I left the company so I had the option of COBRA or of getting an individual plan.   Despite hearing that individual plans were expensive or hard to obtain, I had no trouble getting an individual plan with premiums that were far less than the premiums I would have to pay for the COBRA plans.   Although this was a high deductible plan, the plan paid most of the cost of a routine physical and a colonoscopy.  I only had to pay for some minor diagnostic expenses that was applied to the deductible.

I didn’t have any serious health issues, so I had no problem renewing the policy.  I did not personally test the claim that the insurance company would decline to renew if I had developed a condition, but I did not see any evidence that it would.   There may have been some anecdotal cases where such plans were dropped for this reason, but those reports seemed to me to be ambiguous as to whether the patient had allowed the plan to lapse due to non-payment and thus forcing them to reapply for new coverage.   It was my impression that the news reporting of health insurance confused the pre-existing condition exclusions for new coverage from continued coverage for a condition that developed after the coverage started.   I understand the first, that’s the point of the detailed application process: to report any conditions so that they can decide whether to exclude it from initial coverage.   I assumed that HIPAA had already outlawed the practice of dropping a patient due to a new condition despite continued premium payment.   My understanding is that pre-existing condition exclusions applied when getting a new policy after a lapse in coverage.

I recognize the hazard of pre-existing condition exclusions for one someone must choose a new plan, such following a move to a different state.  However, even then, there was a mechanism to continue coverage with an authorized letter of prior coverage.  I was under the impression that HIPAA required the new insurer to accept the patient as long as the previous one did.   My personal experience did not involve any pre-existing conditions requiring exclusions, so I didn’t get to test this problem.   I may be wrong, but I suspect that most of the complaints come from people who had developed a condition during a period when they had no insurance.  This issue did not apply to me.

When open-enrollment for ACA started in 2013, my insurance provider gave me an option to re-apply for a new plan that started in December to be the last month where the old plan was legal.   This did involve re-applying for a new plan but they assured me that because I had already been covered, they must accept me in the new plan.   That plan allowed me to enjoy the old plan for most of 2014.  During this time, I did seek medical care and had no problems with what was covered and what assigned to the deductible that I had to pay.   This old policy allowed for 2 doctor’s visits per year with a small copay.  I liked that plan.

But now, that plan is fully defunct and I had to switch over to a fully-qualified ACA plan.   The premium increased by 60%, the deductible increased by 20%, and I lost the copay for doctor’s visits until the deductible is met.    For the likely health care needs I foresee in 2015, I can’t see any benefit of this plan over the old one.   For the same budget that pays only premiums in 2015, I could have paid premiums plus significant health care (such as minor procedure) under the old plan.  Essentially, my health care budget (premiums plus out-of-pocket) is now completely absorbed by the premiums without any attempt to use any healthcare service.

I definitely can see the incentive to put off care because any initial care will require paying money that I’ve now lost to increased premium costs.   I can see how someone on a tight budget will deliberately avoid seeing a doctor despite having the improved coverage.   Initial costs will be out of pocket on top of the premiums already paid when the increased premium alone has already exhausted budget for personal healthcare.

It is possible that my unemployment will continue through next year so that by the of 2015, I would not have earned enough to file for a tax.   My situation is probably very similar to many small-business owners or entrepreneurs who pay themselves only after they have met all their other expenses.  Starting a business can result in many years of no income.   Personally, I am not starting a business, but I’m in a similar financial situation.   I have no income so I don’t qualify for subsidies (those require low but above poverty-rate income).   I am in the same situation as small business owners who will have to pay for the full price of the policies.   Despite the expensive monthly premiums, any actual engagement with the healthcare system will involve out-of-pocket expenses.

The problem is that this out-of-pocket cost is unpredictable.   For most services, the costs of the service are not advertised and this is partly because the actual charge depends on the insurance company.   The only reliable way to find out what something costs is to first get the service and then wait for the insurance company’s explanation of benefits report.  The true patient-responsible cost will be known only after the service has already been rendered.   Normally, we make purchasing decisions knowing the cost in advance, but in healthcare, we have to accept the service first in order to find out what we will have to pay.  This cost-uncertainty is a disincentive to initiating any care especially when the initial costs are out of pocket expenses on top of the premium.

Compounding this uncertainty is the fact that a visit can find some unexpected need for follow-up diagnostics or exams.  Seeking medical care for a seemingly minor complaint can start a chain of more expenses to rule out possible problems.  Those follow-up expenses are unpredictable prior to the initial visit.   I can’t know in advance what might need to be ruled out.  Many of these tests will come back negative but I will still be responsible for paying them until I reach the deductible.   Not only are the costs unpredictable, they proved unnecessary for the condition.   I could achieve the same healthcare outcome by avoiding the service in the first place.

Another problem is that the high deductible resets every year.  This means that if someone needs a medical treatment that may involve multiple expenses covering several months, there is an incentive to postpone that treatment to start in the new year.   Otherwise, a person may easily pay out of pocket two deductibles before the insurance will be of any help.  This is another example of avoiding health care, especially if the need arises during the latter part of the year.

This problem has the added challenge to providers to deal with a burst of medical emergencies that suddenly appear at the start of the new year so that the entire cost will fall within one deductible period.  Everyone’s deductible budget starts on the first of the year.   There is not enough capacity for many people to try to start treatment at the start of the year.  If there were, then these resources would be idle at the end of the year.   In practice, a person may attempt to schedule at the beginning of the year but end up having to wait toward the end of year that will risk spreading the costs over two periods of deductibles.   In the coming years,  we may observe lawsuits where people complain that they could not start some treatment so that it can complete in one deductible period.

In any case, the planning around the deductible period will result in a postponement of seeking healthcare, especially during the last several months of the year.

This year I did not earn enough to file taxes.  According to the law, there is no penalty for no insurance for those who do not have to file for taxes:

If you belong to any of the groups listed below you are exempt from ObamaCare’s mandate to “obtain minimum essential coverage” (i.e. buy insurance):

• No filing requirement. People with incomes below the IRS threshold required for filing taxes (in 2013, $10,000 for a single person and $20,000 for a married couple)

I have the opportunity to save several thousand dollars in premiums without a need to pay a penalty.   Given the thousands more I’d have to pay for deductibles, as an uninsured unemployed person I would end up paying the same out-of-pocket for many medical needs that cost up to about $12,000.  The total patient cost responsibility would be about the same for uninsured or insured, although there may be an advantage for the insured’s discounted rates.   This fact makes the ACA insurance look more like a catastrophic plan: it would help only after I emptied my own savings of $10,000 or so.  ACA is promoted as a comprehensive plan even though its primary benefit is catastrophic.

I’m imaging someone like myself who is not making enough to file taxes.  Perhaps he is a small business owner or an entrepreneur.  He can just go without insurance and save a lot of money if he feels the risk of getting a catastrophic condition is low.   The small-business owner or entrepreneur is already taking a large financial risk in his business.   He already has a lot at stake in succeeding so that losses from the business may compete with losses from an uncovered medical need.   He may decide to factor health-problems into the business risk and just self-insure (take his chances).

Others, perhaps more like myself, are not making money and instead wasting time doing something like writing in blogs.   Because there is no income, there is no uninsured penalty to pay.  The premiums alone (without using any medical service at all) amounts to several thousand dollars.   That money can easily be saved and take the chance for 12 months until the next open enrollment cycle.  Repeated a few years, and this adds up to be a lot of money.

Certainly there are medical surprises, but one can make a fair bet on whether he’d need medical services in the next 12 months.  In addition, the possibilities include surprises like fatal auto-accidents, drownings, lightning strikes or some other kind of immediate death where health insurance won’t help in any case.   The chances of an unexpected catastrophic medical bill is not far different from chances of sudden death.   It is an attractive risk to take.

I’m in the  group that will not take the risk and instead continue to be insured.  Although I’m paying the premiums, I can see myself hesitating to use services I previously would have used for relatively minor complaints.   The problem is the uncertainty of what costs will need to be paid before deductible (or costs from surprising out-of-network charges, or uncovered services).  Virtually any service I will likely need will have to come out of pocket on top of the premiums I’m already paying.  Furthermore, I have experienced surprise expenses for even a routine visit that may require follow-up tests, diagnostics, or medications.   There is no way to know in advance how much of a bill you’d end up with if you check in for a tolerable complaint.   The incentive is clearly on the side of avoiding or postponing care more than with older insurance.   It is true that the new law covers routine physicals, but those are not for addressing specific complaints.   Specific conditions require separate doctor’s visits and resulting follow-ups resulting in costs that apply to the deductible.  Financially, it is safer to stay away from the doctor until things get catastrophic.   Once again, the new law is catastrophic coverage.

It will take a few more years before we get reliable data, but I suspect that the data will show that there are more people avoiding health care now than before ACA was passed.  The financial risk for seeking care is too high.  They will still benefit from ACA’s catastrophic coverage (such as no maximums), but they’ll wait until it is a catastrophic need.  From an overall population perspective, the qualify of healthcare will be worse because many people will interpret the ACA-compliant plans as catastrophic-only insurance.