High Discount Health Plans: Right for the Consumer, but What About PFS?

That headline was not a typographical error. I’d bet many of us in the healthcare industry (save insurers) would apply that label to today’s high-deductible health plans (HDHPs). Folks working in patient financial services (PFS) often tell me that the patient portion of an account is increasingly becoming an additional write off on top of the negotiated fee. If you thought that HDHPs were tough on your collection performance metrics, get used to seeing more of that transaction code hitting your patient accounting systems.

While scraping a few dollars out of my pocket to settle a friendly wager on Affordable Care Act enrollments during the first week of open enrollment (I bet on a decline—not the increase we saw), I saw some additional statistics from the Centers for Disease Control and Prevention that pointed to HDHPs now making up more than 40 percent of commercial plan enrollments. ^a If you look in the employer-sponsored plan market, that proportion jumps to more than 50 percent, clearly indicating some growing risk in the quality of receivables. There also is some evidence that HDHPs are causing reductions in utilization.

So what’s to back up the assertion of additional discounts on HDHPs? A 2017 study conducted by Crowe Revenue Cycle Analytics found that net revenues on managed care accounts (which include HDHP insurers) had declined by 2.5 percent on outpatient accounts and by 1.4 percent on inpatient accounts over the prior year, without a decrease in the insurer contracted rate. ^b Those researchers cited lower collections on the patient pay amounts on HDHP accounts as the primary cause for that decline.

In its article citing the Crowe Revenue Cycle Analytics study, Modern Healthcare notes that insurers now pay only about 70 percent of a provider’s revenues, down from about 90 percent only five years ago, thanks to HDHPs shifting payments from the insurer to the patient. Add that fact to the latest news that HDHPs now represent a larger share of patients and you have a recipe for even higher uncollectable balances after (and maybe even, before) insurance.

Many healthcare leaders may be tempted to rest on the assurance that their point-of-service (POS) collection procedures are solid, but these processes may actually do more harm than good. We all know the adage that the older a patient pay balance on an account gets, the lower the likelihood that balance will be fully collected. When verifying insurance benefits, many organizations still face a challenge in discovering at registration just how much each patient will owe for the services they will be receiving. Most likely, they will take a nominal “deposit” from the patient as POS cash, bill the account to the insurer, wait for the remittance advice (which has the true patient responsibility amount), and only then pursue collection on the patient pay balance. We all know how that turns out. These days, the big after-the-fact surprise of a bill for most of the cost of services has a risk of becoming a public relations problem.

With respect to the common idea that an organization might be able to make it up elsewhere, consider the fact that the HDHP plan has a chilling effect on utilization. A study published in the October 2017 issue of Health Affairs found that HDHPs are associated with a significant decline in the volume of services used by patients covered by such insurance contracts. ^c The hidden detail in that study is that the declines were seen in preventive health screenings, low-cost diagnostic testing, routine prescriptions, and some emergency department services. However, the high-cost areas of hospital confinement did not show significant declines. These findings suggest it will be hard to find areas in which organizations can make up revenues after patients exceed their deductibles. A benefit designed to put more responsibility on the patient does what we expect to see in economics—the higher cost to the patient reduces the demand for services. It appears the only solution is to find a way to realize greater yield from patient-pay balances without alienating patients.

The question then becomes, what can healthcare organizations do about this vexing challenge? A good starting point is an up-front conversation with the patient (or guarantor) about what something will cost. Even though an organization may not know the extent to which a patient has met his or her deductible when it first verifies the patient’s insurance, the organization probably can get a good idea of the patient-pay balance with a good faith estimate on the fees created by the patient encounter, using the insurance verification as a starting point to determine the worst- case scenario of patient responsibility. A frank conversation with the patient about the expected cost, including a direct query about any other known provider encounters and the results of the insurance verification, should provide a basis for assessing the worst-case scenario for the patient responsibility and then finding solutions that help the patient avoid a big surprise 60 days after the service.

That approach works if the patient has resources. But what if that’s not the case? According to CareerBuilder, as almost eight in 10 consumers live paycheck to paycheck, making a medical debt potentially catastrophic. ^d

Even so, healthcare organizations need to make some arrangement to prevent HDHP patient pay balances from going to bad debt. There are plenty of organizations out there working with providers to make credit lines available to patients to help with these issues. Others work to connect patients with charities that might help defray some of that balance. Maybe if we can promise fast handling of any patient credit balances, we can make taking a worst-case payment a more palatable solution for the patient. That same CareerBuilder survey said that 56 percent of consumers cannot manage to save even $100 a month. For patients in that sort of situation, waiting 30 days on settling a credit balance can seem like a lifetime.

Patient-pay balances on HDHP accounts have been a challenge for years. Although many of these plans give patients newly expanded access to insurance resources (such as the “bronze” plans under the affordable Care Act), the amount these patients still owe continues to pose a tough challenge. A patient may think he or she is covered and try to access services without understanding the real cost consequences. Healthcare organizations should be transparent about what patients are buying with their HDHPs and be up front about patients’ responsibility on their accounts. A few patients might decide not to pursue services, but the benefit of reduced bad debt might be worth it.

HDHPs are big and getting bigger, so in addition to being up front and transparent, we need to present options to help with balances, look at our current procedures for ways to streamline, be willing to accept that this issue is probably here to stay, and adapt accordingly.

Footnotes

a. Daly, R., “CDC: High-Deductible Plan Enrollment Continues to Climb,” HFMA Healthcare Business News, Nov. 16, 2017.

b. See Barkholtz, D., “Hospitals Struggle With the Dilemma of Patients Hit by High Deductibles,” Modern Healthcare, July 7, 2017.

c. Agarwal, R., Mazurenko, O., Menachemi, N., High-Deductible Health Plans Reduce Health Care Cost and Utilization, Including Use of Needed Preventive Services,” Health Affairs, October 2017.

d. CareerBuilder, “Living Paycheck to Paycheck is a Way of Life for Majority of U.S. Workers, According to New CareerBuilder Survey,” press release, Aug. 24, 2017.