Too Much Skin in the Game: Out-of-Pocket Costs May Limit Testing and Treatment of COVID-19

A patient talking with a nurse who is checking computer records.

There is an increased demand for testing and treatment as coronavirus cases around the United States multiply.

In addition to the logistical challenges of creating an adequate supply of reliable tests, the financial aspects of accessing care are also coming into focus, along with broader equity issues related to missed work, closed schools, and other aspects of containment.

Many people with flu-like symptoms may visit the emergency department (ED). But the financial outcomes of such a visit can be daunting. As an example, a recent news article described how a Miami patient’s ED visit for flu-like symptoms resulted in a $3,200 bill. While these costs clearly pose a barrier for the uninsured, the likelihood of significant cost-sharing, combined with a wariness about out-of-network billing, may deter even those with insurance from seeking care.

To avert the potential public health risk that could result, many have called for increasing the affordability of testing and treatment of symptoms. Some policymakers have already acted. Last week, Gov. Andrew Cuomo ordered that insurers in New York eliminate cost-sharing for any testing related to coronavirus. Other states have followed suit. There has also been a federal response—CMS has announced that testing costs are waived in the Medicare program and other discussions are taking place. The insurance industry is also taking action. The industry trade association, America’s Health Insurance Plans (AHIP), has signaled an intention to address the issue. Individual companies, such as Cigna, have made their own announcements about testing costs.

Waiving cost-sharing would make a difference in the individual and small group market, where exposure to out-of-pocket costs is considerable. Using commercial claims data for people with health insurance coverage from HCCI (Health Care Cost Institute), a very general estimate of an average ED bill is approximately $1,100 just to walk in the door. This charge includes both professional fees and facility charges, both of which have risen over time and vary by metro area. People with insurance are generally charged a negotiated rate, also known as an allowed amount, if they are treated by in-network providers. If someone is seen by an out-of-network physician in the ED, which happens 16.5 percent of the time at in-network facilities, there is the potential for even greater out-of-pocket costs.  

On average, people with insurance from a large self-insured employer might pay about $200 out-of-pocket for an in-network ED visit. But in the individual market, the out-of-pocket cost would likely be far greater. Overall, 87 percent of individual market plans require the deductible be satisfied before there is any cost-sharing. (We exclude Cost Sharing Reduction (CSR) plans, which have much lower cost-sharing requirements.) In the fully insured small group market, the share is somewhat lower, yet almost 70 percent of plans have a benefit design where the deductible must be satisfied before cost-sharing takes place.

The most common structure of ED benefits in the individual market is for coinsurance to start after the deductible is met. This is the case for half of all bronze plans in the individual market. The small group market is quite similar. And coinsurance rates are not insignificant, with a median of 30 to 40 percent. For plans that have co-pays after the deductible, the amounts are also high, with a median payment of $1,000 for bronze plans in both markets.

With median deductibles of $4,000 for silver plans and $6,000 (small group market) or $6,500 (individual market) for bronze plans, many consumers would not even reach their deductible and would be responsible for the entire charge. For most of the approximately 20 million people in the individual and small group markets with these benefit designs, a trip to the ED to get tested for coronavirus comes at a pretty steep cost.

If people avoid care, containing the spread of the virus becomes more difficult. Recognizing this, multiple public and private actors are searching for ways to reduce the financial barriers, yet like most things in our health care system, the response is fragmented and piecemeal. This experience should inform our thinking about designing insurance benefits in a way that appropriately values both individual and public health. Too little skin in the game may be conducive to moral hazard, yet too much creates a hazard for the public’s health. In the context of a global pandemic, this is not a game.

Data from HIX Compare and the Robert Wood Johnson Foundation. With appreciation to Joanna Seirup at Vericred.


About the Author

Katherine Hempstead is a senior policy adviser at the Robert Wood Johnson Foundation. She works on health care issues, mostly those related to health insurance, costs, and access to care.

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