More Cost Protections For You Through Health Care Reform

How does the Affordable Care Act (ACA) make budgeting for medical expenses easier? The ACA protects families from catastrophic medical expenses in two ways.

First, it keeps insurance companies from using lifetime limits on essential benefits. That ends the present situation where a serious illness and costly accident can use up a person’s insurance, leaving them without coverage for the rest of their lives and destroying them financially.

The other way the ACA helps is by limiting the amount people will have to pay out-of-pocket over the course of a year, starting in January 2014. If you buy insurance through one of the new insurance exchanges, you and/or your family will have out-of-pocket cost-sharing limits beginning in 2014. The ACA will set limits on your out-of-pocket expenses. (Want to know more about exchanges? Check out our previous blog here).

One way the new law limits out-of-pocket expenses is by guaranteeing that preventive care is completely covered with no out-of-pocket costs to you or your family, so you will be able to get routine preventive care without paying any deductibles or copayments.

There will also be yearly limits on the total amounts individuals and families have to pay. Care is not free, for these limits still require families to pay a substantial amount for their care. But the limits will be life-saving for people who have chronic high cost medical needs or sudden unexpected emergency expenses. In addition, some lower income families will also be eligible for subsidies that will help to offset their out-of-pocket costs.[1]

These are all very valuable reforms. Medical expenses have forced many families into bankruptcy – even families that have insurance. A Harvard University study suggests that “more than 62% of all personal bankruptcies are caused by the cost of over-whelming medical expenses.”[2] A study by the Fred Hutchinson Cancer Research Centers found that people with cancer are nearly twice as likely to file for bankruptcy as the general population.[3] Even people with insurance sometimes have trouble paying their medical bills: “Of the bankruptcies caused by a cancer, a surprising 78% reported having some form of health insurance.”[4] According to Duke University Medical Center, “the average out-of-pocket cost for cancer patients is currently $1,266 per month.”[5]

In February 2011, Families USA estimated that 370,200 Tennesseans under age 65 were in families that  spent more in out-of-pocket costs than the new caps for services included in the ACA’s essential benefits package with the total amount of out-of-pocket costs expected to exceed the caps by $697.2 million. 72.5% of those Tennesseans were in working families; 149,100 were in families with the head of household  employed by a business with fewer than 100 employees; and 40.3% were employed in businesses with fewer than 100 employees.[6]

The American Heart Association published a fact sheet on reforming health care. The fact sheet states  that “cardiovascular disease was one of the top reasons cited by families for medical bankruptcy. Notably, nearly 80% of those who filed medical bankruptcies had insurance. Heart disease and stroke cause among the highest out-of-pocket expenses, with stroke resulting in average out-of-pocket spending of $23,380 and heart disease $21,955 in 2007.” As you might expect, the stress of having trouble paying medical bills can also make it harder for people to get healthy again. One study “found that people who had trouble paying their medical bills did significantly worse after a heart attack than patients who were not under financial pressure.”[7]

What is cost-sharing? Cost-sharing includes your deductibles, coinsurance and copayments (but not insurance premiums). The ACA helps lower your cost-sharing (out-of-pocket expenses) for families. The ACA also places a limit on how much families will have to pay out-of-pocket for the rest of their health care. After their health costs meet these limits, families won’t have to pay any more out-of-pocket.

How much might you have to pay in cost-sharing? It depends upon your income; some families will have lower costs because people with less income will have lower cost-sharing maximums. You can find what percentage of the poverty level your family’s income is by using this chart: http://ccf.georgetown.edu/index/cms-filesystem-action?file=statistics/federal%20poverty%20guidelines.pdf.

If the ACA were effective today, out-of-pocket cost limits for individuals would range from an average of $168 per month for lower income individuals to a maximum for a person with a monthly income of $3723 paying no more than an average of $504 per month in out-of-pocket costs.[8] Without the ACA, an average household will spend half of their income on insurance premiums and out-of-pocket expenses by 2018![9] Again, only people with expensive, chronic illnesses or with unexpectedly high emergency costs will actually reach the ACA’s out-of-pocket limits.[10]

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[1] http://www.commonwealthfund.org/~/media/Files/Publications/Issue%20Brief/2011/Apr/1493_Gruber_will_affordable_care_act_make_hlt_ins_affordable_reform_brief_v2.pdf

[2] http://www.washingtonpost.com/wp-srv/politics/documents/american_journal_of_medicine_09.pdf

[3] http://www.kaiserhealthnews.org/features/insuring-your-health/michelle-andrews-on-cancer-patients-hefty-expenses.aspx

[4] http://www.giveforward.com/blog/medical-expenses-top-cause-of-bankruptcy-in-the-united-states. 90% of the HealthWell Foundation study reported having health insurance. With a “mean monthly out-of-pocket expense of $712 (median $459).” Cancer patients were the most likely to file for bankruptcy with thyroid cancer patients next most likely.  Reported 7/6/11, www.internalmedicinenews.com/index.php?id=2049&type=988&tx_ttnews%5Btt_news%5D=60636&c

[5] http://www.giveforward.com/blog/medical-expenses-top-cause-of-bankruptcy-in-the-united-states

[6] http://familiesusa2.org/assets/pdfs/health-reform/out-of-pocket-spending-caps/Tennessee.pdf

[7] http://www.heart.org/idc/groups/heart-public/@wcm/@adv/documents/downloadable/ucm_305231.pdf

[8] www.treasury.gov/resource-center/faq/Taxes/Payer/HSA2012-indexed-amoounts.aspx The ACA uses out-of-pocket limits placed on high-deductible Health Savings Accounts (HSAs).  The limits above are based on the 2012 HSA limits.

[9] http://www.annfammed.org/content/10/2/156.full.pdf+html

[10] http://www.communitycatalyst.org/doc_store/publications/Affordability_in_ACA.pdf



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