Bad Debt will increase for many with insurance under the Affordable Care Act

January 10th, 2014

The Kaiser Family Foundation released a study this week that looked at the issue of "Medical Debt among People with Health Insurance." In addition to looking at some of the factors for bad debt among the insured in recent years, it looks ahead to what trends might emerge with the implementation of the Affordable Care Act in 2014 and beyond.

This study from the Kaiser Family Foundation is evenhanded and does an excellent job of presenting all of the potential outcomes of this complicated issue.

Accounting for a number of potential outcomes, the study lists the following factors that might decrease the amount of bad debt with the Affordable Care Act:

  • Subsidies and Market Reforms for Non-group Coverage
  • Cost-Sharing Limits under Private Health Plans
  • End of Annual Dollar Limits
  • Essential Health Benefit Standards
  • Consumer Assistance

It is worth noting that hospitalization and ambulatory care are two of the categories included under the essential health benefits (EHB). It will be interesting to see how things play out in that regard considering the skepticism from many people about what the ACA will mean for emergency room visits.

The study also provides some factors that will potentially increase bad debt for those with insurance under Obamacare:

  • High Cost-Sharing will Persist under Many Plans
  • Limited Protections for Out-of-Network Care
  • Limits on Essential Health Benefit Standards
  • Lack of Resources for Consumer Assistance

From this list, it is certainly worth noting that two of the factors that are supposed to decrease bad debt are apparently offset by their own limitations under ACA (limits on essential health benefit standards and lack of resources for consumer assistance).

One problem that continues to loom is the high-cost sharing of "silver" and "bronze" plans because these plans figure to increase under ACA. This study notes the following about that issue:

"The ACA establishes an affordability standard for health insurance premiums, but not for out-of-pocket medical expenses...In the Exchanges, people with incomes between 250% and 400% FPL will likely face deductibles of up to $2,000 or more in silver plans - much higher levels under bronze plans - and OOP limits of $6,350, so would be at risk for having cost-sharing expenses in excess of 10 percent of gross income."

At TAG it is our belief that factors such as high cost-sharing plans, limited protection for out-of-network-care, and limits on essential health benefit standards will outweigh any potential mitigating factors. As a result, we are projecting a significant increase in self-pay accounts and bad debt under the Affordable Care Act.

We believe that the best course of action for companies in the medical industry is to plan ahead and be prepared to address the potential A/R challenges that will be created by ACA.

Link: ACA International - Study Examines Medical Debt among the Insured
Link: The Henry J. Kaiser Family Foundation: Medical Debt among People with Health Insurance

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