How will expanding catastrophic health plans affect providers?

President Donald Trump’s recent executive order to expand catastrophic health insurance plans would offer a low-cost alternative to people in the Affordable Care Act (ACA) exchanges. However, there are serious questions about what they would mean for consumers, providers and hospitals.

The expansion of catastrophic plans would likely result in less utilization of providers and could increase costs as patients put off care until their medical issues are more serious, and therefore more costly. But it could also push providers to improve their patient engagement and embrace the increasing level of consumerism in healthcare, experts say.

It's a mixed bag for payers as well. These plans could upset the balance of risk pools, but insurers can benefit from offering more options to beneficiaries.

Bret Schroeder, healthcare expert at PA Consulting Group, told Healthcare Dive there is market demand for less-costly plans. Expanding catastrophic plans could help patients who can’t afford more comprehensive plans. The downside is consumers will pay more out-of-pocket costs if they need care.

“If you’re unemployed and seeing skyrocketing premiums, this is an attempt to get care at lower costs. On the other hand, there’s a slippery slope in terms of the financial impact, which can be significant,” Schroeder said.

What are catastrophic plans?

Catastrophic plans are meant as a low-cost safety net from financial ruin. Members in those plans pay little for premiums, but also have the highest deductibles allowed by the ACA. How high? This year, the deductible was $7,150 for an individual plan and next year that increases to $7,350 per person and $14,700 for a family policy.

These plans cover you if you have a serious health issue that surpasses your deductible, but you’re on the hook for out-of-pocket costs until you reach that deductible.

Unlike his executive order to stop cost-sharing reduction (CSR) payments to insurers, Trump’s order including catastrophic plans won’t cause any changes soon. Instead, his action directed the Departments of the Treasury, Labor and Health and Human Services to “consider expanding coverage through low-cost short-term limited duration insurance,” also known as catastrophic insurance. That executive order also trumpeted association health plans.

The departments would need to partake a process of proposing rules and getting public input, which could take years. So, it’s going to be a while before catastrophic health plan expansion happens. Catastrophic health insurance is already part of the ACA exchanges, but it’s not open to everyone. The only people eligible for the short-term plan are those under 30 or with a hardship exemption or affordability exemption. Trump’s order would open up the-short-term plans to more people, possibly everyone.

Currently, the short-term plans hold a small portion of the ACA exchanges market. Out of the 12.2 million people with exchange plans altogether at the beginning of the year, only about 110,000 people were enrolled in ACA catastrophic plans.

People currently enrolled in catastrophic plans are covered for the same essential health benefits as those in the other ACA plans. However, in Trump’s executive order, he suggested catastrophic plans could be exempt from ACA provisions, which could lower costs of the plans, but also offer fewer benefits.

Trump’s proposal also looks to increase the length of the short-term plans. Now, the plans are meant strictly as a stop-gap measure to provide a low-cost option before the person enrolls in a “metal” plan in the exchanges or an employer-based plan. The ACA only allows for three-month catastrophic plans. However, Trump is looking to making them a more permanent option, with people being able to stay on the plans for a year.

What could this mean for providers and hospitals?

Rita Numerof, co-founder and president of Numerof & Associates, told Healthcare Dive studies on high-deductible health plans (HDHP), such as catastrophic health plans, show they reduce healthcare costs, at least in the short-term, but that’s not always positive.

HDHP members often delay care because those plans require the consumer to shoulder more of the cost. Delaying care can lead to long-term health problems for the patients — and less utilization for providers.

“Based on this evidence, we should expect an increase in catastrophic health plan enrollment to result in decreased utilization and lower short-term healthcare costs,” Numerof said. She added that not getting appropriate health services and not adhering to medication can cost more in the long run and lead to more severe health issues over time.

Having more patients pay a larger percentage of their healthcare bills also likely means more uncompensated care and bad debt for providers and hospitals. Stenglein said health systems are already seeing patients paying more out-of-pocket. A recent Kaiser Family Foundation study found that the average deductible for people in employer-based health insurance increased from $303 in 2006 to $1,505 in 2017.

"Based on this evidence, we should expect an increase in catastrophic health plan enrollment to result in decreased utilization and lower short-term healthcare costs."

Rita Numerof

President of Numerof & Associates

Having people pick up a larger portion of healthcare bills also complicates the billing cycle. Hospitals and providers need to track down payments from patients rather than dealing directly with payers. That’s harder on health systems and more time intensive.

Expanding catastrophic plans may cause issues for providers, but reimbursements to hospitals and providers likely won’t see a change. Numerof said healthcare companies have already seen downward pressure on reimbursements and she doesn't see that ending, but catastrophic plans won’t quicken that.

What does this mean for payers?

Beyond helping people between jobs, Trump views catastrophic plans as a solution to those who live in counties with only one insurer offering ACA exchange plans, people with limited provider networks and those who missed open enrollment. Nearly half of counties will only have one ACA exchange payer in 2018.

Numerof said the executive order looks to promote competition within the health insurance market and offer more choices for consumers. Numerof said the order is a step in the right direction regarding healthcare consumerism.

There are questions as to whether catastrophic plans could help insure more Americans. Gallup reported recently that the percentage of uninsured Americans increased for the first time since 2014 and is now at 12.3%. Numerof said it’s difficult to know whether expanding short-term plans might improve those numbers. “Ultimately, if the goal is to ensure everyone has access to healthcare in this county, we must first focus on bringing down the overall cost of healthcare,” she said.

Chris Stenglein, CEO of Provider Web Capital, which works on both the practice and patient side of financing, told Healthcare Dive that catastrophic plans could help people who are currently uninsured. “If you don’t have insurance today and you have a high-deductible plan, it’s better than nothing,” he said.

For payers, there is a worry that expanding catastrophic plans may result in healthy people abandoning other types of plans. This could create an unbalanced risk pool in the other plans, which will lead to higher costs for the remaining members.

However, UnitedHealthcare, for one, is speaking positively about catastrophic health plans. During a recent third-quarter earnings call, UnitedHealth officials said they are interested in both types of plans in Trump’s executive order (short-term and association plans).

What can providers and hospitals do?

More HDHPs and catastrophic plans could spark further healthcare consumerism. Numerof said more patients will demand data from providers so they can make better healthcare choices. That information could include costs and quality data for facilities, physicians and treatment options.

Consumers already have difficulty finding information about cost, quality and outcomes. That needs to change, she said.

“Consumers that are responsible for a greater share of the healthcare dollar will also expect a more convenient healthcare experience — from scheduling initial appointments and the intake process to the discussion and scheduling of follow-up treatment,” she said. She added that patients will likely prefer getting care at lower-cost settings, such as ambulatory surgery centers, retail clinics and even within their own homes. That means fewer dollars for hospitals.

Healthcare consumerism is already forcing hospitals and health systems to rethink their business models to remain viable, Numerof said.

“(Healthcare delivery executives) need to place less emphasis on site-level reimbursement and more emphasis on finding new and innovative ways to increase market share. One way to do this is by shifting elements of care delivery away from high-end, expensive settings to more convenient and affordable options for consumers,” she said.

Stenglein said greater consumerism is an opportunity for providers to engage patients. One way to accomplish this is to offer multiple payment options, including extended billing options that give patients a longer time to pay for services, he said.

Stenglein suggests caregivers remain focused on providing healthcare and delegate financial tasks to administrators, front-end staff or outsource to another company. What’s important, he said, is for providers to innovate and practice medicine and let others handle the financial aspect.

Stenglein offered these solutions for providers:

Implement more affordable tech-based health solutions like text messaging services or appointment scheduling apps
Provide counseling with onsite billing staff to make bills easier to pay and understand
Supply patients with estimation tools from practice management & EHR systems
Consider practice financing options to bridge any revenue gaps from patients
Offer flexible patient financing options — including longer terms — to provide more manageable solutions for families by offsetting costs

Despite the potentially negative impacts to providers and hospitals, Numerof said catastrophic plans are an opportunity for hospitals and providers to compete for business and help patients make better healthcare decisions.

Numerof said providers that will benefit from more catastrophic plans include those that:

Offer patients alternative products and services
Demonstrate and communicate economic and clinical value through the use of costs and outcomes data
Manage variation in cost and quality across the continuum of care
Operate efficiently
Show transparency about cost and quality of services

“This is an opportunity for those organizations that want to move to total cost of care and are focused on caring for patients in a more comprehensive way to compete for patients,” said Numerof.