Tuesday, August 04, 2009

Center on Budget and Policy Priorities: insurance plans offered in an exchange should have limits on out of pocket spending

I mentioned earlier that, while searching for individual health insurance plans for myself, I noticed that a number of plans from Kaiser Permanente had limits on out of pocket costs. In insurance jargon, this can be called a stop-loss. In my current plan, I would pay no more than $10,000 a year (including my premiums) out of pocket. Services excluded from my plan would not count towards this limit, but unlike some other plans I've seen, my Kaiser plan has no illogical exclusions.

It is very likely that health reform will create a national exchange where Americans who can't get insurance through their employer can shop for it. Judith Solomon, a senior fellow at the Center on Budget and Policy Priorities, argues that insurance plans offered on the exchange should contain an out-of-pocket limit. In addition, the minimum benefit design should ensure that there are no illogical exclusions or limits on certain services; for example, some individual plans limit mental health treatments or limit inpatient (i.e. in the hospital) treatment. These limitations would be harmful if someone got hospitalized, or needed mental health counseling for any reason.

I would go so far as to say that Congress should mandate that all plans offered anywhere (i.e. including through large employers) should contain an explicit stop loss. It can be tiered by income, and I'm not saying that we should limit rich folks' out of pocket expenses to $1,000. However, one of the main purposes of insurance is to protect your assets. People who get really ill might otherwise spend a lot of money out of pocket, and we don't want people rationing their own care in an emergency situation. Judging from my own insurance plan, a high stop loss (i.e. high enough that it would only apply to people in major accidents) should be feasible without driving premiums up significantly.

In addition, Solomon cites some research on how much low-income people can afford to pay out of pocket. For example, one study conducted among 4 states showed that enrollment in public programs dropped by half if eligible people had to pay more than 3% of their family's income in premiums. When premiums exceeded 8% of income, enrollment dropped by 90%. In other words, the exchange's rules must protect the poor.

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