A LOOK BACK: Early Health Care Reform Mandates Likely to Increase Medical Receivables Balances

Sticker shock on employer-sponsored health insurance plans hit American workers like never before in 2010. The worst may be yet to come and health care reform mandates aren’t necessarily to blame.

Employers are looking for more savings in medical plan costs and they are turning to their workers for them. Companies increased their employees’ share of medical costs by an average of 14 percent in 2010 through higher deductibles, co-pays and co-insurance requirements. Before the 2010 year ends, workers will have paid nearly $4,000 on average toward the cost of family coverage, according to the 2010 Employer Benefits Survey by the Kaiser Family Foundation.  Hundreds more will likely be added in 2011, experts say.

The trend likely means more health care receivables to manage and collect for debt buyers and collection agencies specializing in medical bad debt.

Chris Wunder, president of Receivables Outsourcing Inc., told insideARM.com that the patient portion of bad debt balances vary significantly, but have been slowly and consistently rising the last 10 to 15 years. He expects the speed with which those balances will grow to increase soon.

“We will see a more dramatic rise in the patient responsibility portion (of healthcare receivables) than the slow rise we’ve seen in the last 10 or 15 years,” Wunder said.

The new health reform mandates exempt employers from new cost-sharing and coverage mandates in 2011 if they hold co-insurance percentages steady, raise deductibles or out-of-pocket limits by no more than 15 percentage points, and co-pays by no more than $5.

But many employers think the limits are too restrictive. They say it’s more cost efficient to comply with reform mandates now, rather than stick within limits on increases to deductibles, co-pays and co-insurance.

According to Mercer, 35 percent of employers surveyed will increase deductibles or out-of-pocket maximums by more than the amount allowed by reform. Thirty one percent said they will increase employee co-insurance, and 23 percent will raise co-pays by more than $5. Twenty percent will consider a new health plans.

Machinist workers at Cessna Aircraft in Wichita, Kansas are learning just how much cost-sharing their employer would like. The company’s latest contract offers only health reimbursement and health savings account plans, which would raise premiums by up to 160 percent and cost employees $4,000 to $5,000 more, on average, over seven years without merit pay increases.

The union is recommending a strike, said spokesman Bob Wood. But Cessna already has cut its workforce by more than 50 percent in the past two years in response to lower demand for private aircraft.

In decades past, employers have been slow to increase employee cost sharing, said Beth Umland, Mercer’s research director for health and benefits.  The current economy has led employers to take a different view.

In Kaiser’s 2010 Employer Health Benefits Survey employers admitted the increases in employee cost-sharing — up a modest 3 percent last year — was prompted more by the recession than rising premium costs. And employers estimate that meeting the health care reform mandates for 2011 to extend dependent care eligibility to age 26 and remove lifetime benefit maximums would add 2.3 percent, on average, to their 2011 costs, according to Mercer.

Nonetheless, the 2.3 percent increase from reform mandates on top of the 8 to 9 percent employers would pay if they make no changes to their existing plans and cost-sharing practices is not an option for most employers, and many are taking steps to hold their costs to about 6 percent, Umland said.

“Each year in our annual survey, we ask employers if they plan to shift a greater portion of the premium cost to employees — in other words, to raise employees’ contributions as a percent of premium.  Usually, one-fourth to one-third expect to raise the employee share.  This year, it looks as if it will be more like one-third to one-half,” Umland said.

Umland said the requirement to cover adult children is a contributing factor for passing more of the premium costs onto employees. But the majority of employers who say they will raise employee contributions also say they will raise the contribution for dependent coverage proportionally more than for employee-only coverage.

Wunder said now is the time for account receivables managers who specialize in health care to reach out to clients to let them know you understand the sensitivity of patients being asked to pay more.

“As the patient portion of bills gets larger the ability of our industry to perform well is going to become more important to our hospital clients. I would think the same would apply to private practices,” Wunder said.  “Let them know you will continue to treat patients in a fair and honest way.”