A recently-released report on insurance costs nationwide shows average premiums for health insurance exchange plans sold in Alabama have increased 223 percent since 2013, more than twice the national average and the highest increase of any state in the nation. With such dramatic increases, more and more Alabama working families are being forced to forego health insurance entirely.
Likewise, for employers offering health insurance to their workers, the growing cost of health insurance is unsustainable. For decades, through various proposals, Congress has sought to increase health care quality and lower costs. The solutions – if you can call them that – almost always involve a larger role for government and haven’t been successful. Yet what if the answer wasn’t a bigger role for government in our health care, but instead a diminished one?
The Legislature took steps this past session to lower health care costs in Alabama by increasing patient choice. The new law sets up a framework in which patients can contract directly with doctors for basic medical care, without going through costly insurance plans. Known as “direct primary care,” this delivery method of basic medical care is private and free of government interference.
Direct primary care medical practices do not accept health insurance and do not bill insurance companies for services provided. The patient picks their doctor and pays him a small monthly fee that is, on average, about the cost of a cell phone bill. In return, the patient gets unlimited visits (without co-pays) to their doctor, along with any other services, lab tests or procedures listed in the contract. The doctor avoids the costs in time and personnel needed to file and adjust insurance claims, which can consume forty percent of office revenues.
Under a similar law in Mississippi, companies in the seafood and manufacturing industries have now joined into direct primary care pay contracts wherein the company pays a monthly fee to a local physician for its employees and their families as part of the employee benefit package. The monthly amount is far less than the cost of regular health insurance that many employers (and employees) cannot afford to pay.
Studies from states where direct pay has been implemented show health outcomes improve and costs decrease under the direct pay model, with fewer ER visits and reduced hospitalizations. By offering typically unlimited visits for a flat fee, direct primary care allows patients to get care whenever they need it, not just whenever they can afford it, improving chronic disease management, medication adherence and overall health. In sum, it’s a good deal for both employees and employers.
Direct primary care has the potential to create significant change in the health care industry. Consider auto insurance: drivers don’t file claims for routine maintenance like new tires and oil changes. Insurance is only used for major repairs and catastrophic events. Otherwise, auto insurance rates would shoot through the roof and become unaffordable.
While patients under a direct pay agreement with a doctor should still seek some type of catastrophic care coverage for serious accidents, unanticipated hospital stays or extended illnesses, they shouldn’t have to buy sometimes costly insurance for routine medical care.
Health care is ripe for disruption. As we’ve seen with companies in other major sectors of the economy—Amazon, Airbnb, Uber— disruptive business models empower consumers by increasing options and lowering costs.
With health insurance premiums skyrocketing, Alabamians need more options. Direct primary care isn’t a replacement for insurance and will not meet everyone’s needs. But for uninsured or under-insured families and employers struggling to provide for their workers’ health care needs, direct primary care could be the difference between having access to quality, affordable care or not having access to any care at all.
Sen. Arthur Orr (R-Decatur), along with Rep. Nathaniel Ledbetter (R-Fort Payne), sponsored the Direct Pay Contract legislation (SB94) in the 2017 Regular Legislative Session.