Link to my presentation: https://stolaf.hosted.panopto.com/Panopto/Pages/Viewer.aspx?id=dab2b7a6-9027-4250-8248-ab9f002b1c4e
Paper:
A Study of High Deductible Health Plans in Rural Minnesota
By Eva Knee
I spent my senior year researching gaps of care at Northfield Hospital in Northfield, MN. I chose this location, not just because of its accessibility to St. Olaf, but because of the hospital’s demographics. Northfield Hospital serves patients within a broad geographic range, thus serving large ranges of culture, age, race, sex, etc. In order to conduct my research, I interviewed three administrators at the hospital – Chief Operations Officer, Nursing Administrator, and Ancillary Administrator accompanied by a literature review. I asked all individuals about their career journey and how they became an administrator at a rural hospital in Minnesota. We spoke about the departments of the hospital, who it serves well, and the barriers to care from the hospital’s perspective. Ultimately, all three administrators mentioned three themes in barriers to care: patient transportation, vast population to serve, and high deductible patients. The purpose of this paper is to examine and suggest potential solutions, such as telehealth, facility collaboration and one-campus hospitals, to increase patient and hospital success when caring for people with high-deductible health plans.
A high deductible health plan (HDHP) is an insurance plan that is defined by the Internal Revenue Service (IRS) in 2020as having a deductible of at least $1,400/individual or $2,800/family. A deductible is the amount of money a patient must pay out-of-pocket for their healthcare needs before insurance will assist with the rest of the bill. After the deductible has been paid, insurance will only help with the rest of the bill, meaning there is still more cost for the patient to pay. However, there is a limit to the amount a patient pays out-of-pocket. For a HDHP this maximum out-of-pocket cost is higher than a traditional insurance plan. The maximum out-of-pocket cost defined by the IRS in 2020 for a HDHP is $6,900/individual and $13,800/family. The idea of potentially having to pay that deductible in full and more is a daunting idea to anybody, so why would anybody choose to have a HDHP?
There are three general population groups that would choose to have an HDHP: healthy people, people with low-incomes, and employers. Healthy people tend to opt for the HDHP because their chances of needing hospital care is much lower than unhealthy people, this means their chances of having to pay that deductible are very low. Additionally, the HDHP has a lower-than-average monthly cost rate, meaning that it will be cheaper for people who do not need healthcare than other insurance plans. However, when healthy people choose HDHP, it upsets the balance of health insurance companies because traditional insurance plans are not chosen by healthy people, thus they are insuring a majority of unhealthy patients. When an insurance company covers more unhealthy patients than healthy patients, their chances of needing to pay out for a treatment is dramatically increased, because of that, those insurance companies are forced to charge more for their insurance plans in order to have enough money to cover their customers (Adverse Selection in Health Insurance, 1997). This process is called “adverse selection” and can be financially detrimental to health insurance companies and their customers.
The second population that frequently chose HDHPs are people with low-incomes because of those lower-than-average monthly costs that were mentioned earlier. It is a big risk to enroll in a HDHP for this group of people because they are on average unhealthier than the rest of the population. In the case of a medical emergency or recurring smaller medical needs, the likelihood of paying the full deductible is increased. The average low income family has around $500 in their savings account, not enough to pay either the $1,400 or $2,800 deductible, if needed (Cohen & Zammitti 2018). This leaves low-income families in a very precarious spot, either they can get healthcare they may need and not be able to pay for it, or they can avoid health care they need and worsen in health.
There is a third population that selects HDHP, that population being employers. Although there is a decrease in employer-based health insurance, many working American’s are still covered by their employer. Since 2007, there has been a steady increase in the amount of employers choosing HDHP for their employers (Cohen & Zammitti 2018). One can assume the reason for this is the lower monthly costs the employer needs to pay for the insurance (Lave, Men, Day, Wang, & Zhang, 2011). There are some employers that pair their HDHP with a Health Savings Account (HSA) for their employees. A HSA is an account that gains earnings directly from an employee’s pay and will accrue interest, which can be accessed only for medical needs. This ensures employees have some amount of savings dedicated to medical bills if a situation arises, it may be the difference between financial crises or not for an individual.
If you are young and healthy, the idea of a HDHP may sound very appealing; you save money on monthly payments, have health insurance, and will likely never need to pay your full deductible. However, for almost everyone else on HDHP, whether or not they have a HSA, HDHP carries much more disadvantages than advantages. As mentioned earlier, low-income patients may not go to health facilities to get the care they need to maintain health because of the cost. This leads to frequent mismanagement of health issues, resulting in reactionary care rather than preventative care. Patients with HDHP will only go to the hospital if a sickness is serious enough to take the risk, which usually means the sickness is very serious and can even be a health emergency. In the event of a health emergency, the healthcare bill is almost guaranteed to exceed $1,400 or $2,800, meaning that the patient will have to pay the deductible in full for that treatment before having insurance help them. This very situation has led thousands of people to declare medical bankruptcy. In fact, 54.5% of personal bankruptcies are from medical bills (Dranove & Millenson 2006).
Not only are HDHP risky for everyone with those insurance plans, but they treat chronic versus acute patients very differently (High Deductible Health Plans, 2014). A chronic patient, say with diabetes, has to go to the doctor regularly in order to manage their disease effectively. That means they are sure to run up their healthcare bill and have to pay a majority, if not all of their deductible year after year (Otto, 2018). Whereas acute patients may have to pay the majority of full deductible rarely in the case of an abnormal emergency. Both situations put HDHP patients at a disadvantage to patients on other insurance plans, but the disadvantage is amplified for chronic patients.
As previously mentioned, HDHP gains a lot of enrollees from low-income populations, however, these populations exist above the poverty line. At first glance, the fact that these patients are above the poverty line seems positive, it shows that they are making a wage. But if you dig a little deeper, you may realize that being above the poverty line does not mean they are affluent by any means, in fact, the living wage of a year is currently above the poverty line (Sosnaud, 2016). People who live above the poverty line may still just be getting enough to make ends meet, the living wage. Additionally, being above the poverty line means that these patients cannot qualify for any governmental aid such as Medicaid or Medicare. Although Medicaid and Medicare are not perfect programs, they are certainly helpful for people that use them. There is a large population gap between the poverty line and those that are affluent enough to afford traditionally good health insurance, good insurance meaning lower deductible insurance. This population gap houses thousands of people who are left in a terribly tricky situation.
Not only are HDHP putting patients at a disadvantage, but they put the hospitals and other healthcare facilities at a financial risk. Due to the lack of preventative care that low-income HDHP patients get due to fear of bills, the hospitals generally see these patients at their worst-case-scenario (Buntin, Mazurenko, & Menachemil, 2019). As I previously stated, this is more than likely to end up with a large medical bill, one that may exceed the deductible. It is then the patient’s responsibility to pay that deductible in order for insurance to assist in paying the hospital for the treatment. As we know, the average savings account for a low-income family is $500, so paying the deductible is near impossible. In order for the hospital to get money, those bills need to be paid; collecting those bills can be very challenging. During my interviews at Northfield Hospital, I learned about their initiatives to improve bill collection; payment plans, direct deposit from paychecks, etc. These methods are a great step in the right direction to increase healthcare affordability and accessibility, however, they still are not perfect. Not only does this delay payment for the hospital, but when those methods don’t work, the hospital then has to hire debt collectors to find the patients and request the money. If even that fails and the patient is unable to pay, then the hospital is forced to write the treatment off without charge. On average, hospitals have an operating margin of 3%, meaning their profit over cost (Rural Hospital Profitability, 2011). In contrast, pharmaceutical companies have an average operating margin of 18%. Because hospitals have such a low operating margin, it is imperative that they make their money, otherwise they will not stay financially afloat (Waters, et al., 2011). Therefore, when they have to write bills off it can be detrimental to the hospital.
As you can see, there are many issues that come with a HDHP for both patient and facility. Through my interviews with Northfield Hospital’s administrators, I learned about and built upon some feasible solutions to relieve the issues of HDHP. These solutions include: telehealth, facility collaboration and one campus hospitals. This is not at all an exhaustive list of solutions, nor is it applicable to every facility, but for the purposes of my research at Northfield Hospital, I will dig into these solutions.
Telehealth is a growing solution for many aspects of healthcare, and I am sure we will see it’s increased utilization of telehealth in the coming years. Telehealth is a broad concept, but generally is defined as the use of communication technologies within a healthcare setting (Telehealth, 2016). This can range from two physicians talking over the phone, to take-home, wearable heart monitors, to app reminders to refill your medications. There are various forms of commonly used telehealth, such as teleconsultations with physicians, whether that be via videoconferencing or phone. Because the ownership and use of smartphones is becoming such common practice, many health companies are moving into app-based care which increases likelihood of utilizing preventative care for HDHP patients (Lustig, 2012). This can include confidential messaging through the app, list of health history and prescriptions, and notifications for when to take medications. For places such as Northfield Hospital, who covers such a broad geographic range, telehealth can be a great tool for increasing accessibility to healthcare and for reaching isolated patients.
Large healthcare companies, such as UnitedHealth Group and the Mayo Clinic are moving strongly into the age of digitized medicine. They are utilizing apps to house healthcare records, prescription reminders and confidential messaging with providers. These large companies appear to be on the frontlines of emerging technology in healthcare; however, according to the Institute of Medicine, the Veterans Affairs (VA) health system is a leader in telehealth technology. The VA implements new technologies quickly and relatively easily, which allows it to act as a guinea pig for telehealth. They are able to do so because they are federally funded and run, so reimbursements rates for care are pre-set and can be changed through a single third party, the government (Gelburd, 2019). Whereas, other healthcare systems must renegotiate prices for each telehealth service they provide and with each insurance and pharmaceutical company they work with (Lin, et al. 2018). That process takes a lot longer, and explains why telehealth implementation is lagging behind telehealth innovation.
Telehealth is a great solution for rural towns like Northfield, Minnesota; however, until telehealth is habitually used in care-giving, collaboration with other hospitals is another solution for improving care. Northfield is located less than an hour away from the Minneapolis-St. Paul metropolitan area and this serves as a great asset to Northfield Hospital, because the facility is able to transport their patients to urban hospitals with more resources if needed. Northfield Hospital is able to do that because they have created great relationships with their partners in health. All healthcare facilities share the goal of bettering the health of their community, therefore, encouraging or partaking in competition between facilities is only a detriment to those communities. And thus, collaboration between facilities should be strongly encouraged and maintained.
HealthFinders, a healthcare facility in Northfield, focuses completely on uninsured and undocumented patients and getting care for those vulnerable populations. That offers relief to Northfield Hospital because they can spend their money and resources on other populations. As part of the Northfield Hospital/HealthFinders relationship, Northfield Hospital offers procedures such as x-rays to those undocumented and uninsured patients that HealthFinders takes off the hands of the hospital. This creates a codependent relationship between the two facilities, proving to be a great example of a relationship created and maintained to better the community. Similar stories occur all the time when Northfield Hospitals send their patients to Minneapolis or St. Paul hospitals for a treatment Northfield Hospital does not offer.
My third solution is creating more one-campus hospitals. One-campus hospitals provide all available services at one geographic location. One campus hospitals are much more common in urban areas, because there is already so little space they need to maximize the space they have. Whereas in rural areas, there is plenty of land to build upon, so hospitals can spread out. However, one campus hospitals are perhaps even more needed in rural areas than urban ones because of the spread of land. For instance, Northfield Hospital is unable to transport patients who need care from homes to the hospital. The wide geographic area the Northfield Hospital serves means that some patients may live more than an hour away, or perhaps some of the low-income population they serve (the same ones with HDHP)do not own cars to drive themselves to the hospital. There is an increase in transportation options, such as UBER, Lyft and other apps to help patients transport to a hospital; however, even those resources are scarce in rural towns such as Northfield. The point is, it is already difficult for some patients to find their way to the hospital. Therefore, when a patient needs to be referred to a specialist or needs to visit a different department for a service, it would be a great benefit to those patients if all their needs were met in one area. If a patient is asked to travel again to a different hospital or building, after already struggling to get to the hospital they originally went to, the odds they receive the care they need are dramatically diminished.
I will discuss some of the limitations that accompany these suggested solutions. Limitations include policy changes, quick changes in demands, and money. I discussed policy when talking about telehealth; the processes of negotiating with multiple insurers, who in turn have to negotiate with multiple pharmaceuticals can take months, even years. Even after going through the companies, the policies then have to be changed within the facilities, that means new training programs, new educators, and new systems for maintaining the new implementations. Additionally, in order to meet the demands of an ever changing population or to improve upon or expand the services a hospital can give, there would need to be huge financial investment and time investment. That is not possible by the hospital alone, therefore reliance on investors is pertinent to a hospital’s success. Due to hospitals’ low operating margins and the expense of implementing change, it is easy to see how difficult creating a change can be.
As you can see, there is a deficit in getting and maintaining care for patients with HDHP. There are solutions to encourage preventative care for HDHP patients through telehealth, increased services available in case of a “worse-case-scenario” through collaboration and an increased facility accessibility through one-campus hospitals. This paper is by no means a final word on HDHP patients and what we can do to improve their healthcare, rather, it is a jumping point for more research and interest in the topic. As this work continues, and as potential solutions increase, we can hope to see a real change in healthcare for both patients and hospitals when it comes to High Deductible Health Plans.
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