Rising Healthcare Deductibles Spur Bad Debt for Providers

The percentage of U.S. workers covered by health insurance who are required to meet a deductible before any benefits are paid by their insurance plan rose at a double-digit rate from 2002 to 2005, according to a report by the Agency for Health Research Quality (AHRQ).

Sixty four percent of workers with insurance plans were required to meet a deductible in 2005, compared to 48 percent three years earlier, according to the report “Deductibles for Employer-Sponsored Health Insurance in the Private Sector.”  Meanwhile, the average increase in deductibles rose 46 percent for individuals and 29 percent for workers with family coverage.

Employer-sponsored health plans are a primary source of insurance coverage in the U.S. But as premiums rise employers are cutting back on the coverage and/or requiring employees to pick up more of the tab.

“Even if the premiums didn’t go up, the cost of a doctor’s visit or prescription drug could be more,” said Beth Crimmel, the report’s author. “You (employee) still end spending more money than previously.”

The trend is contributing to the record levels of health care bad debt, because of the rising percentage of unpaid co-pays and deductibles, experts say. Adam Feinstein, a Lehman Brothers Healthcare Facilities analyst, predicted for-profit hospitals alone would record $12.5 billion in bad debt and charity care expense in 2007.

Some private-sector employers offered multiple health care plans with different deductible requirements in 2005, Crimmel said. But most employers, particularly smaller firms, offered just one plan. “In that respect, employees don’t have a choice of trading off the (higher) premium” for a smaller deductible, she said.

As a result, for workers with single-person coverage, the average deductible increased from $446 in 2002 to $652 in 2005. For workers with family coverage, the average annual deductible was $1,232 in 2005, compared to $958 in 2002.

Workers at companies with fewer than 50 employees saw the steepest increases. The average deductibles at small firms rose from $602 to $929 for individual coverage and from $1,371 to $1,899 for family coverage, according to the report.