Few may opt for high-deductible, low-cost plans

Experts say it's anyone's guess whether people will actually buy the high-deductible, low-cost health insurance policies formally approved by the state this week as part of the law requiring all Massachusetts residents to have health insurance by July 1.

 

"Some people will buy them because it's the law. Other people might want to buy them but can't afford them, even at these premiums," said Alan Sager, professor of health policy and management at the Boston University School of Public Health. "This is the best law that could pass, but it doesn't mean that it's a law that will work."

 

The new policies, expected to be approved by the Commonwealth Health Insurance Connector Authority late last week, will range in price from under $200 a month for younger adults to more than $340 a month for older individuals.

 

Individual deductibles will be as high as $2,000, and plans with lower deductibles will have higher premiums.

 

Critics like Sager still see the plans as being too expensive for the target market of individuals who make above 300 percent of federal poverty level, or about $30,000 a year. (People who make below that amount can receive state subsidized health insurance.) And they see the new health insurance law's future success in jeopardy, with health insurance price hikes likely to continue in the double-digits annually, outpacing wage gains and increases in the federal poverty level.

 

"This law becomes worse year after year because health insurance premiums have been rising 10 percent a year and the poverty level is only going up 3 percent a year," Sager said.

 

He's not alone in his concerns. Jim Blue, CEO of the Bostonian Group, a benefits consulting firm, said the plans will cost individuals with limited incomes who won't qualify for subsidized plans too much money. He added that many still don't know their responsibilities under the new law.

 

Residents who do not comply with the mandate face losing their personal exemption on their 2007 state income tax.

That amounts to $204 for most people. The penalties spike in 2008 -- fines will be capped at half the cost of the cheapest health care plan available. The lowest price point is approximately $2,100 per year, leaving scofflaws with about $1,000 in exposure.

 

"This has not penetrated the general public in any meaningful way, in our opinion," Blue said. "I'm not even sure there is a strong percentage of the population that even knows what the Connector is."

 

"Attractive alternative to nothing"

Some experts are more optimistic. Stuart Altman, a professor and expert on health insurance at Brandeis University, expects some people will choose not to buy insurance, but that many will sign up because the alternative is worse.

"There is a segment, we don't know how high, of people who are going to find this to be an attractive alternative to nothing," Altman said.

 

Regina Herzlinger agreed. The Harvard Business School professor, who specializes in consumer-driven plans -- insurance with high deductibles and tiered levels of coverage -- said high-deductible plans are "the fastest-selling financial product ever" despite their slow adoption in Massachusetts.

 

Layer of protection
To provide these plans under the state's new individual mandate to require health coverage makes perfect sense, she said.

 

"If you were uninsured and could not afford $11,000 to $15,000 a year in premiums, you'd be really turned on by high-deductible plans," she said, which "protect you from bankruptcy."

 

Still, these plans haven't been widely adopted on the open market in Massachusetts, and studies show mixed acceptance of high-deductible plans around the country.

 

The next few weeks will be crucial in encouraging individuals to buy these products, said Nancy Turnbull, an associate dean at the Harvard School of Public Health. The Connector board will soon decide the minimum level of coverage to comply with the health insurance law and then rule on what percentage of income a person must spend for coverage.

 

Those decisions, she said, will either help or hurt the market for the new unsubsidized products.

 

"If the mandate is implemented in an aggressive fashion the products will catch on," she said.

 

The wrong decision, she said, will leave many wary about buying the products, particularly people who have significant health care needs and are likely to use their deductibles.

 

In the end, the success of these products is uncertain because there's no precedent, said James Roosevelt Jr., the CEO of Tufts Health Plan.

 

"We've never tried to sell to people before who either think they can't afford, or think they don't want to pay for, health insurance," he said. "That being said, I think many of these products are of great value."

 

For Roosevelt, success will be shaped by how the plans are sold to the public.

 

"If we do a good job explaining all of this," he said, "I do think they will sell."

 

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