The Massachusetts Health & Hospital Association (MHA), on behalf of our member hospitals, health systems, physician organizations and allied healthcare providers, appreciates the opportunity to offer testimony in strong support of a HB523, “An Act Relative to Uncollected Co-pays, Co-insurance and Deductibles.”
An unfortunate health insurance trend is that a greater portion of healthcare costs are now subject to high deductibles, co-payments, and co-insurance, thereby shifting large out-of-pocket expenses to consumers. As health insurers promote products that require ever increasing and unaffordable co-payments, co-insurance and deductibles, those insurers must take greater responsibility for the resulting bad debt that falls on those that provide care. HB523 places greater accountability on health insurers for the products they create and establishes a mechanism to partially address the bad debt that providers incur for unreimbursed care related to consumer out-of-pocket expenses.
HB523 levels the playing field, giving providers additional financial security for uncollectable debt without unduly burdening insurers. Under this legislation, providers must make a concerted effort to collect the relevant co-insurance, deductibles, and co-payments that patients owe after claims have been adjudicated and paid by insurance companies. These efforts must be documented clearly, and, if the collection efforts are unsuccessful, the provider may submit a request to the patient’s insurers for reimbursement of 65% of the uncollected amount. This percentage is the same amount that the Medicare program reimburses hospitals for patients’ uncollected out-of-pocket expenses. This legislation does not affect the collection of co-payments under $250, as those can generally be collected at the time of service and are not dependent on the cost of an admission or whether the patient has used other services.
The Center for Health Information and Analysis (CHIA) has documents this insurer-to-consumer shift in healthcare expenses. According to CHIA’s September 2017 annual report, membership in high-deductible plans grew 9.9% between 2015 and 2016. By 2016 more than 900,000 (21.8%) were enrolled in high-deductible plans. This is a significant increase from 2012 when only 14% of insurance company members were in high-deductible plans. Adoption of high-deductible plans occurred across nearly all employer size categories between 2015 and 2016.
The state’s health insurance exchange, the Health Connector, also has experienced a large shift in cost-sharing to consumers. The actuarial value of the health plans offered in the Connector has decreased greatly under the Affordable Care Act (ACA). Current health plan annual deductibles run as high as $2,750 for an individual and $5,500 for a family. Hospital “co-payments” defy the historical co-payment assumptions as they can typically be as high as between $500 and $1,000 for emergency department visits, inpatient stays, and certain outpatient services, including high tech imaging. The annual out-of-pocket maximum cost for bronze-level health insurance can be as high as $7,150 for an individual and $14,300 for a family. In some plan designs, 35% co-insurance applies for certain services. The majority of members are enrolled in silver and bronze plans, which have the higher member cost sharing. Adding to this trend is the uncertainty surrounding the Affordable Care Act’s cost-sharing reductions. If these subsidies are eliminated, there will be even more patients unable to pay for the out-of-pocket portion of their care, resulting in greater hospital bad debt.
The commonwealth's Group Insurance Commission (GIC) also offers products with deductibles and large co-payments for certain services. Inpatient admissions require co-payments of up to $1,500 depending on the hospital tier; individual deductibles are set at $500 or $550 for an individual, and double that for a family. In addition, private employers are employing benefit “buy downs” such as higher deductibles, co-insurance, and co-payments to reduce premiums, as reported in CHIA’s 2016 Massachusetts Employer Survey. Specifically, “When asked about strategies to control costs, employers cited ‘increased copayment and deductibles’ as both a strategy that they found effective (47%) and a strategy that was enacted within the past year (40%).”
Health insurance companies determine which products are created and sold and they establish the rules for those products. However, healthcare providers alone must deal with patient confusion and anxiety about their financial responsibilities, bear the brunt of patient anger, expend considerable time and money collecting patient liability after insurance, and write-off millions of dollars in bad debt annually when patients cannot, or choose not, to pay the amounts owed. Hospital bad debt does not end with individual hospitals; it also affects their communities. When hospitals are forced to absorb this debt they are unable to appropriately reinvest in their facilities or are forced to reduce services.
Under the current system, there are no incentives for insurers to refrain from developing products with ever-increasing and complex patient liability, since healthcare providers completely bear the burden of any loss if patients don’t pay. HB523 appropriately updates and re-balances the current standard by making insurers more accountable for the ramifications of the products they create while maintaining provider responsibility for collecting outstanding amounts due after insurance payments. For these reasons, MHA respectfully urges the committee to issue HB523 a favorable report.
Thank you for the opportunity to offer comments on this important subject. If you have any questions or require further information, please contact MHA’s Vice President of Government Advocacy Michael Sroczynski at (781) 262-6055 or firstname.lastname@example.org.