Got health insurance? That doesn’t mean you’ll be able to pay your medical bills

Hospitals around the country are reporting record levels of debt on their books from an unlikely source: patients with health care coverage.

As health insurers and employers have shifted health care costs to patients through high deductibles and other out-of-pocket expenses, people who in the past may not have worried about paying for a hospital visit or a surgical procedure are getting hit with massive medical bills that they can’t pay.

Duke University Health System has seen patient interest-free payment plans rise from $19 million in June 2010 to $43 million in January. The increase is largely attributable to rising deductibles, said Keith Stover, Duke’s vice president of finance and chief financial officer.

Duke is fielding 1,500 patient calls a day, most of them asking why they got a bill since they’re insured, Stover said. The call volume is up from about 1,000-1,200 five years ago, he said.

“It’s something everyone in the country is thinking about,” Stover said. “This stuff is mind-blowing – they really don’t understand their benefits until it’s too late.”

WakeMed Health & Hospitals also is experiencing a spike in patients needing help, setting up an average of 1,810 payment plans per month since October. Between February 2015 and October 2016, it was averaging 439 payment plans a month. At UNC Hospitals, patients were repaying $29 million in patient plans as of the end of January. Comparable data for past years was unavailable.

Health insurance deductibles – the amount the patient has to pay before the insurance company starts paying the bills – used to be just several hundred dollars, and zero-deductible policies were not uncommon. But deductibles have been creeping up for more than a decade as insurers, in an effort to keep monthly premiums under control, have shifted medical expenses to those who use the health care system.

The trend toward higher deductibles has been seen in employer-sponsored health insurance as well as individual coverage under the Affordable Care Act. This deductible inflation could become even more widespread as Republicans in Congress work to dismantle the ACA. Replacement proposals include provisions that could indirectly lead insurers to opt for even larger deductibles to control costs.

Those who are healthy prefer the higher deductibles to sky-high premiums because they’re not paying for services they’re not using. But when they do get sick or injured, they may experience sticker shock.

Jen Stern of Clayton got a crash course in deductibles in December after breaking her ankle in a roller derby game.

Stern, 42, accumulated medical bills in excess of $6,000 – from a hospital emergency room in South Carolina and orthopedic surgery in Raleigh.

“I wasn’t even aware that the deductible was $10,000,” Stern said. “I heard about it on the phone with the surgery center, and it was pretty devastating.”

A bartender with three kids, she still owes more than $3,000, and expects it will take her two years to pay off the debt.

Hospitals have come up with various ways to collect on the bills.

Duke Health, like other nonprofit hospitals, will adjust a bill on a sliding scale according to household income. Those who still don’t pay are eventually forwarded to a collections agency and a credit ratings firm. Charity care is available for insured people whose incomes are below a certain level.

Wake Forest Baptist Medical Center in Winston-Salem started offering zero-interest loans through Commerce Bank in November in response to patient deductibles as high as $14,300. Southeastern Regional Medical Center in Lumberton in December began assigning “financial counselors” to patients’ rooms to explain insurance benefits and payment options. Duke Health’s 225 financial counselors contact patients before their scheduled procedures to discuss insurance benefits and payment options; every Duke clinic now has a full-time financial counselor on staff to work with patients.

UNC Health Care has 200 financial counselors to assist patients.

“It’s going to be our responsibility to collect,” said Mark Miller, chief financial officer of UNC Health Care in Chapel Hill. “So much is getting left on the table because we can’t get it from the patient, or because they have chosen not to pay it, or they can’t.”

NC costs higher

As of last year, the national average deductible on an employer-sponsored health plan was approaching $1,500 a year for an individual, and had surpassed $2,000 for individual employees at small businesses. Those amounts have nearly doubled in the past eight years, according to the independent Kaiser Family Foundation.

In North Carolina, where health costs surpass the national average, deductibles are also higher. The average individual deductible is over $1,700 and the average family deductible above $3,700 in employer-sponsored plans this year, according to annual surveys taken by Raleigh consulting firm CAI. Those deductibles represent increases of 35 percent and 27 percent since 2013.

However, more than a third of employers in the state now offer what are specifically called high-deductible plans, which are not factored into the above figures. Those deductibles average about $2,700 for an individual and more than $5,500 for a family this year.

Affordable Care Act health plans, sold directly to individuals, follow a similar pattern. Blue Cross and Blue Shield, the biggest health insurer in North Carolina, offers individual plans with a top deductible this year at $7,150; the Durham-based insurer’s lowest individual deductible is $1,500 this year. As recently as 2015, Blue Cross was still offering individual ACA plans in North Carolina with zero deductibles, and the highest individual deductible was $5,500.

“They have been relentlessly growing year after year after year,” said Karen Pollitz, a senior fellow at the Kaiser Family Foundation.

Republicans in Congress have been unable to coalesce around a single proposal to replace the ACA. But their proposals so far could drive up deductibles by lifting the ACA mandated cap on the out-of-pocket costs patients have to pay, Pollitz said. That cap sets the upper limit on deductibles: $7,150 for an individual and $14,300 for a family in 2017. Some GOP proposals would count employer-sponsored health benefits as taxable income, a move that could provide an incentive to trim health benefits and increase deductibles.

Deductibles can be tricky for the layperson to comprehend. Insurance policies can have multiple deductibles – one for doctors and another for hospitals, one for medical care and another for pharmaceuticals, one for in-network providers and another for out-of-network, and a separate deductible for every single member of the family.

“There is no straightforward insurance coverage anymore,” said Janelle Colosimo, director of revenue cycle at Southeastern Health in Lumberton. “People will say, ‘Can’t you call the insurance company and make them pay,’ which is an old concept.”

Hardships multiplying

Consumer advocates say the high deductible trend is unsustainable.

“They can be a barrier to care for people,” said Mark Rukavina, principal, Community Health Advisors, a Boston organization that advises nonprofit hospitals on billing, collections and finance. “Over time we’re going to see people delaying care and needing more expensive care as a result.”

The Kaiser Family Foundation has found that the financial hardship cases are multiplying. The organization reported last year that 1 in 5 people with health insurance are reporting problems paying medical bills. They drained their savings, took on extra jobs, borrowed money, maxed out their credit cards, or withdrew money from retirement accounts and college funds. A small percentage have taken out a second mortgage on their home.

“You can see where this medical debt could become a gift that keeps on giving if it permanently impairs your ability to retire, or if you have to spend your kid’s college savings fund so now they can’t afford to go to school,” Pollitz said.

Scott Greenough, 49, was treated for liver and kidney failure in 2015 and 2016, and faced about $30,000 in medical costs – $10,000 of which was from deductibles during those two years. Without a job – which he had lost shortly before the diagnosis – he had no income.

The Raleigh software developer, however, was fortunate. His insurance premiums were paid for by the National Kidney Foundation, his living expenses by his family, and friends and relatives donated nearly $24,000 through his GoFundMe page.

Today he’s off dialysis and working again.

“I probably would have had to tap into my retirement plans,” he said. “When I wasn’t working and GoFundMe paid for my bills, it helped save my future, honestly.”

Stern, the amateur roller derby player, also turned to GoFundMe for help paying off her medical bills, raising $1,231 of her $5,000 goal. Stern, who is separated from her husband, missed two months of tending bar while recovering and had been living off child support.

“At this point I’m not able to pay my other bills,” she said. “My very short term is to try to save my house.”

John Murawski: 919-829-8932, @johnmurawski

What you can do

Federal tax policy allows the creation of special financial accounts dedicated to paying deductibles and out-of-pocket costs.

The money in these accounts is not taxed, boosting purchasing power, but the accounts are governed by different rules.

One option, the Flexible Spending Account, is bound by the “use it or lose it” rule and must be spent by a certain date or its owner forfeits his money.

Another option, the Health Reimbursement Account, is owned by the employer and only accepts employer contributions. It typically can’t be carried to your next job.

The Health Savings Account may be the most versatile account but requires a high deductible. It is available through employer-sponsored plans and through individual plans purchased through the Affordable Care Act or directly from an insurance company. The HSA is portable and can be carried by the employee from job to job. It rolls over every year and can be used for a variety of medical expenses.

Not every plan with a high deductible qualifies as an HSA. An HSA requires a minimum deductible of $1,300 for an individual and $2,600 for a family. It also has out-of-pocket maximum caps lower than the federal cap. Annual tax-free contributions are capped at $3,400 for an individual and $6,750 for a family.

If the HSA owner withdraws money for non-medical reasons, the amount is taxed and also subject to a 20 percent penalty.

HSA contributions lower one’s taxable income and money withdrawn for medical expenses is tax free. The money can also be rolled over into a retirement account.