What Is Affordable Healthcare?
Monday, January 30, 2012
From employers and consumers to government leaders and insurers, everyone is talking about affordability in healthcare. But what’s considered affordable? It’s a difficult question to answer because the word means something different to everyone.
While it’s safe to say all of us want healthcare to be more affordable, what will satisfy everyone’s quest for less? 10% reductions? 20%? Or 30%? And what about the next year, and the next, especially in light of continued annual double-digit premium increases?
It’s not a simple discussion, but one that’s now at the center of the emerging state healthcare benefit exchanges that are designed to provide affordable healthcare options for individuals, and even small businesses.
GET THE LATEST BREAKING NEWS HERE -- SIGN UP FOR GOLOCAL FREE DAILY EBLASTWill the new formula work?
The federal government is attempting to address the affordability issue with a formula to help determine which employer health plans are affordable and whether premium subsidy will be available for qualifying employees to purchase exchange options instead.
For example, a family of four who made $89,400 in 2011 would meet the maximum 400% of federal poverty guidelines and pass the first hurdle to qualify for premium subsidy to purchase a plan through the exchange. However, income alone is not the sole determining factor. Next, if the employee’s share of the least expensive individual plan offered by the employer exceeds 9.5% of household income annually (in this case, that would be $8,493), the employee would qualify. As a final step, if the employer’s plan is deemed a “low value” plan because of high copays and deductibles, the employee would qualify and then be able to purchase a more affordable plan through the exchange rather than stay on the employer’s plan.
Other options
Outside of the exchange formula, the debate over affordability continues. Some define it by the lowest cost plan option. Others view slowing rate increases year-over-year as more affordable healthcare. And, because of lifestyles and priorities, two consumers with identical incomes could define affordability very differently because of each one’s spending habits.
Central to the issue is what consumers are willing to do to help make healthcare more affordable. Since 80-85% of healthcare costs are due to medical claims, there’s significant evidence to suggest that lifestyle and behavior influence the affordability of healthcare. But are consumers willing to change their habits – or pay higher premiums for unhealthy behaviors to help make healthcare more affordable?
As we struggle to describe affordability, everyone has a different opinion. The key is finding a solution where everyone benefits, regardless of the definition.
How do you define affordable healthcare? We welcome your comments on this issue.
Amy Gallagher has over 19 years of healthcare industry experience. As Vice President at Cornerstone Group, she advises large employers on long-term cost-containment strategies, consumer-driven solutions and results-driven wellness programs. Amy speaks regularly on a variety of healthcare-related topics, is a member of local organizations like the Rhode Island Business Group on Health, HRM-RI, SHRM, WELCOA, and the Rhode Island Business Healthcare Advisory Council, and participates in the Lieutenant Governor’s Health Benefits Exchange work group of the Health Care Reform Commission.
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