New babies, new mothers – and a new way to pay for medical costs

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One in seven women who gave birth in the previous 18 months has at least $250 of medical debt. For comparison, only one in 13 women who have not given birth in the previous 18 months has a similar amount of medical debt. In other words, having a baby makes a woman two times more likely to be in medical debt.

Childbirth is the No. 1 cause for hospitalization in America. Only 4% of women who give birth do not have health insurance or some other outside source for payment.

If most mothers have insurance, why is the rate of medical debt so high?

The answer is because of the out-of-pocket costs associated with their health insurance plans. The average deductible for family health insurance is $3,000 to $5,000 per year. As a result, the average out-of-pocket cost for childbirth for a woman with health insurance is $2,854.

That amount is more than many American households can afford. According to a Bankrate survey, only 44% of households could pay for a $1,000 expense on their own—the rest would have to borrow money. Even worse, 27% of households have no emergency savings whatsoever.

Eric Bricker, MD
_{© Coupe Health}

Insured, uninsured, or underinsured?

According to MetLife, one of the largest insurance companies in America, “Insurance helps to financially protect you, your dependents and your assets from emergencies, unexpected expenses and losses. It mitigates risk by transferring potential financial burdens to providers in exchange for regular payments known as premiums.”

One might argue that according to MetLife’s definition of insurance, health insurance in America is not insurance at all because it does not in fact financially protect you. Sometimes the term underinsured is used to describe the situation of a person whose health insurance has such high out-of-pocket costs that it does not provide adequate financial protection. By that definition, perhaps most mothers are underinsured.

Alternative health plans

However, there is an alternative way to design a health insurance plan where the out-of-pocket cost is not so front-loaded as is in the case of a health insurance plan with a traditional deductible.

These alternative health plans have no deductible and instead have only copays for all health care services. Childbirth is a copay. Office visits are a copay. Lab tests are a copay. Prescription medications are a copay.

As one might imagine, these copays are not all the same, with the copay for childbirth being several hundred dollars versus the copay for an office visit being only $20. However, alternative health plans can even have a built-in financing option for people such that a copay of several hundred dollars can be paid over several months or even a year at 0% interest.

The purpose of these alternative health plans is to make health care more affordable for plan members and their employers.

To achieve this goal, alternative health plans also vary the copay amount depending on the quality and cost of the doctor and hospital facility. The doctors and hospitals that have higher quality and lower cost have lower copays. The doctors and the hospitals that have lower quality and higher cost have higher copays.

These variable copays allow an alternative health plan to align patient out-of-pocket costs with the value of the doctors and hospitals within the insurance network.

Measuring quality

Quality and cost are highly variable within an insurance network. One of the best ways to measure quality is to judge physicians by their own specialty society guidelines. For example, does a cardiologist follow the guidelines of his or her own specialty society? Alternative health plans use claims data to measure doctors by doctors’ own standards — not the insurance company’s standards.

Accordingly, doctors who follow their own guidelines the most have lower copays. Doctors who follow their own guidelines the least have higher copays.

Similarly, some hospital systems have an in-network contracted rate that is two to five times more for a medical service than in other hospital systems in the same town. The contracted rate is the allowed amount that is paid by the patient and their employer after the insurance discount is applied. The allowed amount is the true price for a health care service as opposed to the initial billed charges, which are much higher. For example, one hospital system in a town has an allowed amount for a normal vaginal delivery of $12,000, while another hospital system in the same town for the same service has an allowed amount of $4,000.

Aligning incentives

To put the patient first, alternative health plans prioritize quality over cost when setting the copays, such that the copay for the highest-quality service is always the lowest.

While alternative health plans do not eliminate patient out-of-pocket costs for health care services, they do offer greater financial protection and higher-quality care through the alignment of incentives, which is truly innovative.

In our misaligned American health care system, real health care innovation is alignment innovation.

As a physician and hospital finance consultant, Eric Bricker, MD, has been exposed to various pain points the U.S. health care system inflicts on patients undergoing care. It became his mission to help alleviate this suffering and address the financial challenges burdening patients in the industry. To help educate others about the inner workings of the healthcare industry, he started working as medical director at Coupe Health, an alternative health care plan.