Obamacare reduces maximum out-of-pocket costs, but not enough for some

Obamacare went a long way toward preventing the insurmountable medical bills that led to a large percentage of U.S. bankruptcies. But for many people, the $6,600 per-person, per-year cap on out-of-pocket costs might as well be $600,000, it's so unlikely they could pay it.

This is a problem many people will never have to worry about.  Without a major disease or accident requiring costly specialty drugs or surgery, very few of us will have enough co-payments and cost sharing to total $6,600 in any year, much less every year. Even fewer families will have so many medical bills that their share will reach $13,200, which is the family maximum for plans purchased on Obamacare exchanges.

“It’s like a hole that has to be filled,” says Jose Fernandez, associate professor of economics at the University of Louisville. “The whole idea behind it is to make insurance act like insurance rather than a YMCA membership.” Traditionally, health insurance paid for all sorts of routine care, and the patient just had to chip in with a co-pay, he says. These days, however, patients are being asked to pick up a much bigger chunk of the tab. That happens first through deductibles, which are what you pay before insurance chips in.

Out-of-pocket maximums include deductibles as well as co-pays and co-insurance, but not premiums or cost-sharing when you get care out of network. Maximums for private plans are often lower than $6,600 — sometimes by a lot —  they just can't be higher.

Christian and Jaycee Garcia of Silver Spring, Md., have been hard hit by medical bills, even with their out-of-pocket maximum of $6,350 a year for each family member. Their 20-month-old son, CJ, was born with the rare genetic disorder Eagle Barrett Syndrome and severe scoliosis. He will have his 13th surgery in August, with two more to follow in September, all to rebuild his digestive system and urinary tract and to insert metal rods next to his spine so he can sit up without a brace.

Although Christian Garcia earns $60,000 a year as a restaurant manager, the more than $700 monthly insurance premiums for his work plan and another privately purchased plan for his wife and kids plus other monthly bills make paying the family's share of the hospital bills impossible. The couple have $11,000 in medical bills they are paying $270 a month on, and bills from two other hospitals have gone to collections. Monthly expenses, including the payment on his medical bills, are about equal to his take-home pay of about $3,000 a month.

They have sold their wedding rings and moved out of their apartment into Christian's stepfather's home, where they pay $500 a month for rent and share a bedroom with CJ and their baby, Jeremiah, who is 5 months old.

Because there's a cap on how much people can make to get Supplemental Security Income to help with disabled children, Christian Garcia said he was told the only way they could get help would be to have two more kids.

"You have to be really at a point where you can’t live and can’t help yourself anymore," says Christian Garcia. "We’re trying to do everything the right way, and help cannot be given."

Katherine Hempstead, director of insurance coverage at the Robert Wood Johnson Foundation, says the Affordable Care Act was "supposed to prevent things like that from happening and, in general, it does."

Still, patients are responsible for an increasing portion of their health care costs, mostly due to higher deductibles — and also the fact that more health care services are now subject to deductibles, according to a recent RWJF report that Hempstead co-wrote. From 2013 through 2014, patients' share of their costs grew 9.5% for established patients and 7.9% for new patients.

People with high out-of-pocket medical expenses should keep track of them, Fernandez says, because you can deduct any out-of-pocket medical expenses that exceed 10% of your adjusted gross income — or 7.5% if you or your spouse is over 65.

That's something the Garcias could do — but only if they had been able to pay the full annual amount of their bills. And at the rate they are going, they will never be able to do that. Next year, they'll hit CJ's $6,350 maximum cost sharing,  so that will be added to the amount they owe for his care.  Hempstead says that means the family would be better off with a plan for 2016 with lower cost sharing, even if premiums are higher.

"I'm not saying there's no room for improvement, but there have been huge strides in taming the insurance market," Hempstead says of Obamacare.