Benefit changes (decreases)
One of the recommendations proposed by our insurance broker Hill, Chesson, and Woody (HCW) is to raise the deductible and the out-of-pocket max.
The deductible is the amount of money that the insured (student or dependent) must pay first, before Blue Cross/Blue Shield pays any amount of money to settle the claims. Currently this deductible is $100. So the first $100 in claims is always paid by the individual. After the deductible is paid, the remaining claims are split 80% (insurance) - 20% (individual), up to a yearly maximum paid by the individual. This maximum is the out-of-pocket max, and is now $1000. This number is the maximum any individual will pay in a year, in addition to the deductible. Prescription drugs have a separate deductible and no out-of-pocket max.
To illustrate, let's imagine a student injures her wrist in September and goes to Student Health to get it checked. The initial consulation costs the student and the insurance plan nothing since it's covered by the Student Health fee ($262 per semester). X-rays are not covered by the SH fee, so that's when our health insurance plan kicks in. If X-rays cost $200, the student first pays the deductible amount of $100. Then the insurance will pay 80% of the remaining costs, or $80. For the X-rays the student pays a total of $120.
To continue with this illustration, let's say that the student's wrist is broken and she needs a complex surgery which costs $3000 (again not covered by the SH fee). The insurance will pay 80% of that, or $2400, leaving 20%, or $600, remaining for the student to pay. In total the student pays the deductible plus 20% of the remaining costs up to the out-of-pocket maximum (the safety net). So far the student has paid the $100 deductible, plus $620.
Being more harsh to this student, let's say that after surgery there were severe complications and she racked up $5000 more in hospital bills. With the 80%-20% co-insurance split, she would be on the hook to pay $1000 more. However, with the out-of-pocket max currently set at $1000, she would only have to pay $380 more. The insurance would pay for the remaining $4620.
Under this scenario, the student pays $100 + $20 + $600 + $380 = $1100.
The insurance plan (everybody else) pays $80 + $2400 + $4620 = $7100.
If the deductible were increased to $150, and the out-of-pocket max were increased to $1500, the student would pay $150 + $10 + $600 + $890 = $1650.
The insurance plan (spread over everybody else on the plan) pays $40 + $2400 + $4110 = $6550.
Q: Why should we raise the deductible and the out-of-pocket max?
A: The $100 deductible and $1000 out-of-pocket max are archaic numbers. Raising them is long overdue.
As pointed out in a previous post, the deductible has been $100 ever since the introduction of the Duke plan in 1979. The out-of-pocket max has been $1000 for as long as we have records. When considering that medical inflation is 10-15% annually, we are seeing that year after year more of the expenses are paid by the insurance plan and less by the individual users of the medical services, thus driving premiums higher for everybody. Increasing premiums cause healthier students to drop out of the plan. Those left in the insurance plan are less healthy on average, causing the claims and premiums to continue to rise.
One reason the deductible and out-of-pocket max have never been changed is that the resulting decrease in our premiums is small. Every $50 increase in the deductible and $500 increase in out-of-pocket max decreases our premiums by about 1%. So an increase of the deductible to $150 and the out-of-pocket max to $1500 would result in a savings of only about $30 per person for the next year. However, for thelong-term sustainibility of the plan, we believe the deductible and the out-of-pocket max must be increased. Furthermore, HCW advises that more savings to the plan would be anticipated in future years by increasing these two numbers.
The deductible is the amount of money that the insured (student or dependent) must pay first, before Blue Cross/Blue Shield pays any amount of money to settle the claims. Currently this deductible is $100. So the first $100 in claims is always paid by the individual. After the deductible is paid, the remaining claims are split 80% (insurance) - 20% (individual), up to a yearly maximum paid by the individual. This maximum is the out-of-pocket max, and is now $1000. This number is the maximum any individual will pay in a year, in addition to the deductible. Prescription drugs have a separate deductible and no out-of-pocket max.
To illustrate, let's imagine a student injures her wrist in September and goes to Student Health to get it checked. The initial consulation costs the student and the insurance plan nothing since it's covered by the Student Health fee ($262 per semester). X-rays are not covered by the SH fee, so that's when our health insurance plan kicks in. If X-rays cost $200, the student first pays the deductible amount of $100. Then the insurance will pay 80% of the remaining costs, or $80. For the X-rays the student pays a total of $120.
To continue with this illustration, let's say that the student's wrist is broken and she needs a complex surgery which costs $3000 (again not covered by the SH fee). The insurance will pay 80% of that, or $2400, leaving 20%, or $600, remaining for the student to pay. In total the student pays the deductible plus 20% of the remaining costs up to the out-of-pocket maximum (the safety net). So far the student has paid the $100 deductible, plus $620.
Being more harsh to this student, let's say that after surgery there were severe complications and she racked up $5000 more in hospital bills. With the 80%-20% co-insurance split, she would be on the hook to pay $1000 more. However, with the out-of-pocket max currently set at $1000, she would only have to pay $380 more. The insurance would pay for the remaining $4620.
Under this scenario, the student pays $100 + $20 + $600 + $380 = $1100.
The insurance plan (everybody else) pays $80 + $2400 + $4620 = $7100.
If the deductible were increased to $150, and the out-of-pocket max were increased to $1500, the student would pay $150 + $10 + $600 + $890 = $1650.
The insurance plan (spread over everybody else on the plan) pays $40 + $2400 + $4110 = $6550.
Q: Why should we raise the deductible and the out-of-pocket max?
A: The $100 deductible and $1000 out-of-pocket max are archaic numbers. Raising them is long overdue.
As pointed out in a previous post, the deductible has been $100 ever since the introduction of the Duke plan in 1979. The out-of-pocket max has been $1000 for as long as we have records. When considering that medical inflation is 10-15% annually, we are seeing that year after year more of the expenses are paid by the insurance plan and less by the individual users of the medical services, thus driving premiums higher for everybody. Increasing premiums cause healthier students to drop out of the plan. Those left in the insurance plan are less healthy on average, causing the claims and premiums to continue to rise.
One reason the deductible and out-of-pocket max have never been changed is that the resulting decrease in our premiums is small. Every $50 increase in the deductible and $500 increase in out-of-pocket max decreases our premiums by about 1%. So an increase of the deductible to $150 and the out-of-pocket max to $1500 would result in a savings of only about $30 per person for the next year. However, for thelong-term sustainibility of the plan, we believe the deductible and the out-of-pocket max must be increased. Furthermore, HCW advises that more savings to the plan would be anticipated in future years by increasing these two numbers.