Is a $0 Deductible, Actuarially Equivalent Health Plan Possible?

Actuarially Equivalent [definition]:  

“Actuarial value is a measure of how much financial protection you get from a health insurance plan. Two health plans that pay the same percentage of medical expenses are said to have benefits that are actuarially equivalent.  For example, two health plans that both pay 85% of the cost of care, with you paying the remaining 15% of costs, are actuarially equivalent.”1 

Deductible [definition]:  The amount of money that employees must pay out-of-pocket before their health insurance kicks in.  On average, $1,669 per person per year.2 

No one likes high deductibles, but employers must maintain the same actuarial equivalence of their health insurance plans.   

It would be great to eliminate the deductible AND keep the health insurance plan actuarially equivalent.  Is that even possible?? 

Yes… through Copays!! 

The copays for a health insurance plan can be structured in a scaled fashion such that the deductible is GONE, but the percent of healthcare expenses paid by the member vs the employer stay the same. 

For example, a typical high-deductible PPO plan will have an individual deductible of $1,500, copays for office visits and medications only, and 20% co-insurance for labs, imaging, procedures, surgery and hospitalizations up to an out-of-pocket max of $4,000. 

Conversely, an alternative health plan with only copays will have an individual deductible of $0, similar copays for office visits and medications and NO co-insurance. 

An alternative health plan replaces the deductible and co-insurance with copays for labs, imaging, surgery and hospitalizations. 

More expensive medical services have copays that are several hundred dollars, so there is still cost-sharing in the plan design between the member and the plan itself, BUT that cost-sharing is more evenly ‘spread out’ instead of ‘front-loaded’ against the member. 

This ‘spreading-out’ of the cost-sharing makes medical services more affordable and can lead to medical problems being caught and treated earlier. 

Back-Pain Example 

Back-pain can most frequently be addressed through office visits, non-narcotic pain medication, MRIs, physical therapy and occasionally out-patient steroid injections.  In a typical high-deductible health plan, the out-of-pocket cost for that care would likely be in excess of $1,000.  Many employees are unable to afford $1,000 of unplanned expenses and would not seek care. 

Unfortunately, back-pain decreases mobility and can lead to weight-gain from being overly sedentary.  Increased weight makes back pain worse through additional pressure on the spine.   

Additionally, back-pain can cause employees to need to take time off work, which for hourly-employees is especially problematic because it leads to a loss of income as well. 

Unaddressed and worsening back-pain can lead to ER visits, referrals to spine surgeons and the prescription of addicting narcotic pain medication.  This care might cost several thousand dollars, and the narcotic medication can lead to a downward-spiral of personal and professional consequences. 

On the other hand, a copay-only alternative health plan allows an employee to have office visits, medication and physical therapy for <$100.  Because the care is affordable, the employee can seek care sooner and avoid the MRIs, injections, ER visits, specialist referrals and narcotic pain medication. 

Same Actuarial Value, Different Results 

In the above example, the employer did NOT change the actuarial value of the health plan.  Rather, the employer decreased the initial out-of-pocket cost to the employee and increased access to care. 

In fact, the overall cost of care was even lower in the copay-only alternative health plan because the cost-share was more effectively distributed.