by Patrick Creagh, Marketing Specialist
In September we looked at high deductibles and their impact on patient payments. Healthcare providers look at trends in deductibles because that is where the majority of patient A/R originates. Premiums, on the other hand, are paid to insurance companies and do not directly impact patient A/R. However, premiums do affect the patient’s propensity to pay, and this can have downstream effects on satisfaction with the billing process, even if the provider is not responsible. For this reason, it’s worth looking at premium trends.
A Commonwealth Fund study was released last week that examined employer-sponsored coverage trends from 2006-2015. In the chart below [exhibit 5], you can see that premiums and deductibles increased as a percent of median household income in 2015 at roughly 10%. So an employee making the median household income will, on average, spend 10% of his or her income on health insurance. It’s important to remember that half of Americans will spend more than 10% given that they earn less than the median.
What does this look like in dollars? The next chart from the Commonwealth study shows the increase in total potential cost (average premium plus average deductible). The average American employee is paying $6500 for health insurance in 2015 if they meet their deductible.
You’ll notice both charts show bars for the national average as well as averages for the 5 highest and lowest cost-burden states. The 5 highest-cost-burden states are Arizona, Florida, Mississippi, Oklahoma, and Texas. The lowest are District of Columbia, Hawaii, Maryland, Massachusetts, and Pennsylvania.
How do Premiums Affect Patient Payments?
It’s easy to link patient payments to copays and deductibles, because those are the dollars the provider collects from the patient. The provider does negotiate claims with the insurance company of course, but adding the additional context of increasing premiums can help providers improve their patient-facing revenue cycle process.
A study published in USA Today last month shows that 6 out of every 10 Americans have less than $1000 in savings at a given time. Consider that the average single person deductible is $1400. You can see how an unexpected medical event such as an accident or disease could easily put the average American in debt, especially if the provider does not offer financing options or charity care for that patient.
With the employee premium contribution costing 5% of median household income in 2015 on average [exhibit 5], lower-income or middle-class patients may have little money leftover to save for an unplanned medical expense. The average annual premium is typically much higher than the average deductible, and ‘must’ be paid to ensure coverage, so patients may prioritize paying their premiums before paying their deductibles.
Providers should take into account increasing premiums as well as increasing deductibles and copays when formulating a patient financial engagement strategy. While getting paid quickly is important, offering flexible payment options such as monthly payment plans may be a more effective strategy for some patients. Alternatively, you can offer early payment discounts or financing options to help ease A/R days; design a customized strategy that works for you and maintains your hard-earned patient satisfaction after the episode of care.