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High deductibles a healthcare worry

The newly insured may shun doctors

In its attempt to make health insurance premiums affordable, a state board is giving the go-ahead to plans with high deductibles, but that is causing concern that many newly insured people may avoid getting treated when they're sick or may run up onerous debts to pay their medical bills.

The board overseeing the state's landmark healthcare law is considering minimal coverage plans with deductibles up to $2,000 before the full benefits of insurance kick in. Saturday, Governor Deval Patrick released the latest plans, which the board is scheduled to vote on this week .

Board officials have said a high deductible is necessary to keep the monthly premiums as low as possible and potentially entice more people to comply with the state mandate to obtain health insurance.

But, research shows high deductibles deter people from getting needed treatment, including preventive care, and can plunge those without savings into debt.

"The state is going to have to make some difficult trade-offs between comprehensiveness of benefits and affordability of coverage, at least in the short-run," said Nancy Turnbull, president of the Blue Cross Blue Shield of Massachusetts Foundation, which helped shape the universal coverage law. "High deductibles are a blunt and crude way to make coverage affordable. In the future, I hope we can find other ways."

The deductible is one of the crucial elements of proposed standards for minimum health coverage that would satisfy the requirement that all adults have insurance by July 1. A deductible of $2,000 typically requires individuals to pay the full cost of any health service, including doctors visits, lab tests and hospital care, up to that amount.

The new minimal plans are targeted at 160,000 to 200,000 Massachusetts residents without insurance who earn more than $29,400 a year. But the standards, which the board of the Commonwealth Health Insurance Connector will decide on soon , will also apply to people of all incomes who already have coverage. If their plans don't meet the minimum, they will have to buy more insurance.

In Massachusetts, plans with high deductibles are not particularly popular. Slightly more than 120,000 people -- or about 2 percent of insured residents -- now have policies with deductibles over $1,000, according to interviews with major insurers. Approximately 19,000 have deductibles of $2,000 or more.

Nationally, about 8 percent of people with private insurance had deductibles over $1,000 in 2006, according to a report from the Employee Benefit Research Institute, a nonprofit organization that studies benefit issues. But surveys indicate that many would switch to more comprehensive coverage with lower deductibles if their employers offered the option or if they could afford it.

Bonnie Coleman of West Yarmouth bought a plan with a $3,500 deductible two years ago because that was all her employer offered.

The plan covered $600 worth of care before the deductible kicked in, but routine tests, check-ups and allergy shots soon used up that cushion, she said.

When Coleman's doctor sent her for a colonoscopy, she came home with a $1,200 bill and a sinking feeling that she would have to avoid other trips to the doctor. Coleman, 53, who makes just under $30,000 a year as a residential counselor at a group home, struggled to pay off the bill over many months, even with some help from the state's free care pool.

"It was horrible," she said. "They were taking $36 a week out of your pay [for the premium] and just giving you large bills. It was like not having insurance. After that, I didn't go to the doctor because I felt I wasn't covered."

For patients who are low-income or sick, deductibles can even lead to an increased risk of death, according to the RAND Health Insurance Experiment, a study that randomly assigned 2,000 families to insurance plans with different levels of coverage and followed them for five years.

John McDonough, executive director of the advocacy group Health Care For All, worries that the board's proposal could undermine the goal of universal insurance because people, like Coleman, "in marginal circumstances" will be "coerced into paying premiums for a policy they won't be able to use." Others who have spoken out against higher deductibles include the Massachusetts Hospital Association , which is concerned about patients not being able to pay hospital bills, and several lawmakers worried about whether plans with high deductibles constitute good insurance.

The staff of the connector recommended a $2,000 limit ($4,000 for families) based on national data showing that individuals who buy insurance on their own, rather than through an employer, typically have deductibles at that level.

"That seemed high by our standards in Massachusetts, but something people could stomach" to get the premiums down, said Jon Kingsdale , executive director of the connector. "We're not endorsing a high deductible," he added. "We're placing a limit on deductibles."

The connector staff estimates a $2,000 deductible reduces monthly premiums by 20 percent to 35 percent compared to a lower deductible.

Currently, the state Division of Insurance limits deductibles on HMO plans to $2,100, but sets no limit on other types of health insurance.

Insurers that provide plans to meet the new minimum standards may offer deductibles lower than $2,000, but would have to find other ways to keep premiums low, such as tightly restricting choice of doctors and hospitals. More expensive and comprehensive plans will also be available to meet the mandate.

But employers, both those who currently offer better insurance and those who now don't provide any, could decide to offer only a minimal plan with a $2,000 deductible, leaving their employees with no better choice. The law includes one mechanism that could check this potential erosion of insurance: executives of companies that offer employees only one choice would have to buy their own insurance through the same plan.

Connector board members have not extensively debated the issue of deductibles. But member Celia Wcislo, assistant division director of labor union 1199 Service Employees International Union, thinks $2,000 may be too high. "I want to make sure that the people who choose minimal coverage get a bang for the dollars they're paying," she said.

In an attempt to minimize health problems that might arise from people delaying treatment because of high deductibles, the board has proposed that the minimal plans cover at least three preventive-care visits before the deductible applies. The board has also proposed a cap on out-of-pocket spending at $5,000, which includes the deductible and copayments of $100 or more.

One board member who supports a higher deductible to reduce the premium nonetheless acknowledges it is not ideal.

"It's not the policy that optimizes health," said Jonathan Gruber, an economist at the Massachusetts Institute of Technology who has studied the impact of deductibles. "But, we can't insist everyone who has no insurance get the policy that optimizes their health. They're going to revolt."

Indeed, Cathryn Brower of New Bedford thinks even the proposed minimum standards are unfair. She pays $371 a month for a Blue Cross Blue Shield policy with a $5,000 deductible and estimates she would have to pay $100 to $200 more to bring that down to $2,000.

"I am outraged," said Brower, 62, a nurse who is now a self-employed consultant. "I don't want to pay more. I go to the doctor on average once a year. I take no medication. Why should I have to pay for something I don't use."

Gruber thinks those who don't have any insurance now would be even more reluctant than Brower to buy comprehensive insurance.

"The main thing is no one should be bankrupted by medical costs in Massachusetts," he added. "Let's get them into the system and get them real insurance, and then maybe they'll be interested in buying something better."

Alice Dembner can be reached at