With insurance, you can pay more for health care than without it

My 34-year-old friend Chelsi Ross went to the emergency department at Methodist Hospital in Richardson, Texas, four years ago for sudden onset of chest pain and shortness of breath. Fortunately, she was not diagnosed with a serious condition and her symptoms resolved. The blood tests, x-rays, EKG and CT scan during her four-hour ER visit totaled $11,300.75. She had health insurance, but paradoxically it cost her more than she would have paid if she had not been insured.

We’ve all heard of skyrocketing health care costs. In this case, however, I want to focus on the way our health care and insurance system is irrationally constructed, in ways that are sometimes surprisingly detrimental to patients who have insurance.

But like more than 50% of the privately insured Americans she now has, the Aetna insurance plan she had was a high-deductible plan. This means that until she spent her $5,000 deductible plus her coinsurance amount, her insurance would not go into effect. As a result, she was essentially a self-pay or cash patient until then.

Hospitals that contract with insurance companies have an “allowed amount” or “negotiated rate” that they accept. This means that instead of requiring insurance companies to pay the “sticker price,” hospitals give them a discount. So in this case, the “sticker price” of $11,300.75 was not what was expected from Aetna or Ross. Methodist Hospital gave Aetna a “rebate” of $3,503.23 for Ross’ services, so the “allowable amount” they expected from Ross or her insurer was still almost $8,000. While Aetna paid the hospital $2,192.03, she had to pay $5,605.49 out of pocket.

Methodist does offer a 45% “cash” discount off sticker prices on its website. For example, the $6,229 hospital charge for a chest CT scan is $3,426 if you want to pay out-of-pocket. That means if she hadn’t provided her insurance information and asked to pay in cash, her total bill would have been $6,215. Considering that the average annual health insurance premium for an individual is $8,345, she would have saved more than $7,700 if she had not purchased insurance during this episode.

Wait, you say, don’t you get fined if you don’t get insurance? The answer is no, as Congress eliminated the tax penalty for not having insurance in 2019. But wait again, she would only have saved money if she had no other healthcare costs that year, right? And that’s true: If Ross had needed major surgery or another expensive emergency room visit that year, her insurance would have kicked in after she met her deductible and co-pay.

But the fact that the average American has to pay at least more than $8,000 a year for insurance that shouldn’t be used—and has deductibles and co-pays on top of that—seems to illustrate one of the ways our current health care system is failing us leave. . The insurance also lets us down because you would think that they would be able to negotiate a lower price than if you did not have insurance. Isn’t one of the supposed benefits of insurance that companies have more bargaining power and can negotiate better prices? And to add to the injuries, the “discount” Aetna received didn’t really help Ross. After reaching her own maximum, she would have paid the same regardless of the “discount” Aetna negotiated with Methodist.

I’m certainly not advocating for people to be uninsured; health care costs can be catastrophically high. But even having insurance doesn’t mean people no longer have medical debt. In fact, 61% of people with medical debt have insurance, according to a report from the Kaiser Family Foundation and the New York Times. And this has real consequences. That same report found that 75% of insured patients who have difficulty paying their medical bills eventually reduce their spending on food, clothing or supplies. Whether insured or uninsured, 62% of people experiencing medical bill problems also have trouble paying other bills, and it can cause an avalanche of financial instability not just for them, but for their families.

Numerous policies have been proposed or even passed at the state and federal level in recent years to address the financial catastrophes Americans have suffered from receiving health care. But these wouldn’t have helped Ross. For example, the federal one Price Transparency Act hospitals were required to publish pricing information online starting in January 2021, but emergency patients like Ross don’t have time to search for information to decide where to seek care. The same goes for Coverage Transparency Act, implemented on January 23, requiring health insurers to publish pricing information for covered services. And the No Surprises Act, which was introduced in January 2022 to prevent people from being hit with unexpected emergency bills, would not have applied to Ross’ case since the hospital did have an agreement with its insurance company.

If it is not an emergency, you can choose not to mention that you are insured if you want to pay in cash. Hospitals may tell you otherwise, as they often prefer to bill your insurer and get more reimbursement, but it is your right to tell them that you do not want them to contact your insurer, as protected by the Health Insurance Portability and Accountability Act. But it’s almost impossible to have enough information to make that decision before you get health care because you usually aren’t sure exactly what services you need, what the hospital will charge, or what your health insurer will pay. until after the fact.

In 2021, we wrote to the hospital three times asking whether she could receive the cash discount given her situation. There was no response. Methodist also did not respond when asked for comment. However, there was someone who called Ross that month and asked her, “How much can you afford?” Even a few weeks ago, she received a call asking if she wanted to “settle” her bill, offering a 25% discount if she could pay that day. These calls are more reminiscent of flea market negotiations than a functioning health care system.

One of the building blocks of a primary health care system, as defined by the World Health Organization, often known for its work in low-income countries, is one that ‘ensures[s] people can access the services they need and are protected from financial catastrophe or impoverishment because they have to pay for them.” Yet that is exactly what we are dealing with here in the United States, one of the richest countries in the world. There are potential ways to reform the system — including big ways like single payer to reduce the inefficiencies of thousands of different health care plans, whether at the federal or state level, or less dramatic ones like a “public option,” which is a government-created health care plan that Americans can opt into if they want. But it requires us to go beyond recognizing that there are challenges in being willing to have these conversations.

Meanwhile, Ross, like so many other Americans, is still on a monthly payment plan for the health care she received while on insurance.