California Individual And Group Health Insurance Plans

MarketWatch - June 14: San Francisco - It's not just higher co-payments and monthly premiums that can crimp your health-care budget. Along with a trend of sharply rising cost-sharing and higher deductibles that put consumers on the hook for more money up front in the last few years, many large employers and private insurers also have been raising the total amount the insured has to pay out of pocket every year before full coverage kicks in, experts say.Out-of-pocket maximums aren't always easy to decipher or compare because some plans count the deductible in the tally while others don't. Excluding deductibles, the median out-of-pocket maximum rose 10% to $1,650 in 2005 from $1,500 in 2003 among 975 employer clients surveyed by benefits consultant Hewitt Associates, said Johan DeKeyzer, principal in Hewitt's health-management practice in Newport Beach, Calif."The philosophy there is it's still an affordable number," he said. "People will pay that in car insurance, basically." Increases would have been much worse had employers not shared in the burden of rapidly rising health costs, said Chris Renz, principal with Mercer Health & Benefits in San Francisco."During this 10 year period, total plan costs have doubled, yet out-of-pocket maximums have only gone up 50%," he said. At Watson Wyatt, a benefits consultant in Stamford, Conn., the average for plans with an out-of-pocket maximum was $1,735 in 2005-06, though the research doesn't specify if the deductible is included in that figure, senior consultant Tom Billet said.Nearly 88% of 498 companies surveyed last year had employee-only, in-network, out-of-pocket maximums, while 12% had no maximums, he said.Higher out-of-pocket maximums mean the relatively small portion of people who need extensive health care will end up paying more for it before getting full coverage, said Paul Fronstin, director of the health research and education program for the Employee Benefit Research Institute in Washington."Most people still have very good protection because they won't need a lot of health-care services," he said. "But if you do need a lot, it's going to cost you more than it did in the past...More is going to come out of your pocket before insurance kicks in 100%."Such trends may be worrisome for those hit hard by health problems. Last year, some health-policy experts found a strong correlation between crushing medical bills and bankruptcy for low and middle-income consumers, many of whom had insurance at the time the illness began. See related story.As easy as it is to focus on deductibles and co-pays, insured workers are wise to look at all their plan's maximums, including internal plan limits such as fixed-dollar caps on prescription drugs, mental-health visits and physical therapy, health experts say. "What I see happening in the next few years is continued upward movement on the out-of-pocket limits, and particularly as more employers move toward consumer-directed plans," Renz said. "I do see some pain for employees in this area, particularly for those who have poor health status or high medical costs."His advice: Don't compare plans on monthly premiums alone. Examine options carefully and in their entirety. "Not just premium, not just deductible, but what the out-of-pocket protection is.While some people may save money by choosing the lowest possible up-front costs, doing so can be a big gamble for others, he said. "Sometimes we see an employer, they might get a lot of lower-paid people electing that because it's the cheapest. But if they end up with a serious condition it could really be devastating from a financial perspective."What percentage of plan participants are likely to spend to the max? "About 5% would be expected to hit the out-of-pocket maximum in a year," Renz said.States have different approaches to determining thresholds for health plans' out-of-pocket maximums, ranging from permissive to authoritarian. New Jersey, for example, sets a cut-off, said Marshall McKnight, spokesman for the Department of Banking and Insurance's Office of Managed Care in Trenton."Once a person has spent $5,000 on co-insurance, co-payments or deductibles in a year, network services must be covered with no more cost sharing," he said. In California, high-deductible HMO products on the individual market have annual out-of-pocket maximums as high as $4,000 for individual coverage and $8,000 for a family, said Lynne Randolph of the California Department of Managed Health Care in Sacramento. But those maximums don't include deductibles ranging from $1,000 to $2,500 for an individual and $2,000 to $5,000 for a family, bringing the true out-of-pocket costs to as much as $6,500 and $13,000 respectively, she said.Out-of-pocket costs are nearly double in some cases what they were two years ago, Randolph said. "Two years ago, we were given products with a range of $2,000 to $2,500 per individual out-of-pocket max and $5,000 per family, so they have [risen] over the past two years." This upper range "seems to be the highest threshold we will be considering in the near future," she added. Individual health policies traditionally have higher out-of-pocket maximums than group insurance, said Bob Hurley, vice president of ehealthinsurance.com, an online insurance broker in Sacramento.