× Expand Ted S. Warren/AP Photo The virus struck in the first quarter of the year, when tens of millions of people have yet to meet their deductibles.

As the country struggles with COVID-19, it’s important to understand how our current health insurance system may have contributed to the spread of the disease, and how it could make it harder to control. Our circumstances may have been shaped, in part, by a decades-old study, and an unfortunate accident of timing.

Millions of Americans know that they must pay a certain amount for their own care before reaching their deductible. When it comes to containing the coronavirus, the calendar is not our friend. The epidemic struck in the first quarter of the year, when tens of millions of people have yet to meet their deductibles. That leaves them, for all intents and purposes, without coverage during a pandemic. Congress is discussing making COVID-19 treatment free, but until that becomes law, patients must guard against the possibility of being liable for the costs.

It’s a plot twist worthy of H.G. Wells. Had COVID-19 struck in autumn, rather than early spring, millions more might have been able to seek treatment. Instead, many face unexpected medical costs as job losses skyrocket.

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The effect could be profound. A 2019 Kaiser Family Foundation (KFF) survey found that the average deductible for employer-based coverage was $1,655 for single plans. Even before the coronavirus, 70 percent of Americans polled in another survey said they did not have $1,000 readily available in cash for emergencies, and cash alternatives may be less available during this downturn. That’s a recipe for undertesting and undertreatment—both highly undesirable during an epidemic.

A recent analysis from the Peterson-KFF Health System Tracker studied the out-of-pocket costs Americans with employer health insurance could face if they’re hospitalized with the coronavirus and concluded they would pay an average of $1,464. But the study also warns that surprise billing—exorbitant charges from out-of-network providers like anesthesiologists—could be a special problem in these cases. Incredibly, Nancy Pelosi’s $2.5 trillion legislative proposal includes only a nonbinding “sense of Congress” that staffing firms (mostly owned by private equity) refrain from surprise billing during the coronavirus crisis, the equivalent of asking them nicely.

And these patients are the lucky ones. The Peterson-KFF study draws on an IBM database of health claims data from large employers, who are more likely to offer health insurance with better coverage than smaller enterprises. Ninety-nine percent of large firms offer health benefits to at least some workers, according to KFF. Similarly, a September 2019 report from the Bureau of Labor Statistics found that health insurance was available from 88 percent of employers with 500 or more employees, while both studies found that only about 55 percent of small employers offered coverage.

Individual purchasers on the health exchanges will be even harder hit, and may be even less likely to seek care. Deductibles on the 2020 ACA exchanges range from $1,519 for “gold” plans to a staggering $6,506 for “bronze” coverage. And then there are the uninsured, most of whom live in low-income households. A meta-analysis performed in 2009 showed that the effects of uninsurance were especially pronounced for the chronically ill. This tracks with other studies, which find that comprehensive coverage is most beneficial for lower-income people who suffer from chronic illnesses.

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The chronically ill are also the most likely to perish from COVID-19.

Costs may grow worse in the long run, too. The Health System Tracker report finds that COVID-related hospitalizations could cost from $10,000 to over $20,000, depending on severity. (As with all such analyses, this is only an estimate, using non-COVID hospitalizations to model costs.)

This bodes poorly for working people. Employers have increasingly shifted a larger percentage of health care costs to their employees over time. The average employee’s contribution for family coverage rose 25 percent between 2014 and 2019, and 71 percent between 2009 and 2019. That’s likely to worsen as a result of these unexpected expenses, unless the government acts quickly.

How did we get here? The world of “health benefits design” is populated by economists, data analysts, and “wonks” in the public and private spheres. (This writer used to be one of them.) For nearly 40 years, a landmark study conducted by the RAND Corporation has been a touchstone. It seemed to suggest that sharing medical costs with individuals could reduce the use of medical services without harming their overall health. Its ambiguities and nuances were quickly overlooked, as it became a kind of totem for those who would cut or alter health benefits.

Those lessons have always resulted from a simplistic reading of the RAND study, officially known as the Health Insurance Experiment (HIE). The multiyear project explored cost-sharing alternatives by comparing them across different income groups and health plan types. Seventy-seven hundred individuals under the age of 65, making up 2,750 families, were studied under differing plans. The project controversially concluded that cost sharing reduced both necessary and unnecessary care, but found that the overall quality of care was not harmed by cost sharing—except for lower-income people.

That formed the foundation for plans designed to discourage care-seeking without causing appreciable harm. In some ways, today’s employer-based health benefits are the product of a decades-long experiment in “nudge” economics, long before the term was popularized.

Medical providers haven’t been exempt. They have asked to participate in a variety of incentive-based programs designed to encourage preventive care and better outcomes. Now, Modern Healthcare reports that provider groups are asking the government to remove the financial penalties and reporting requirements associated with “value-based” reimbursement plans. But here, too, provider incentives are based on individual outcomes (aggregated by provider group), and not on overall health.

In some ways, today’s employer-based health benefits are the product of a decades-long experiment in “nudge” economics, long before the term was popularized.

The world has changed since the HIE-era 1980s, of course. RAND acknowledged as much in 2006. While understandably defending its work, RAND wrote that “the HIE showed that cost sharing can be a blunt tool,” that “economic incentives by themselves do not improve appropriateness of care or lead to clinically sensible reductions in service use,” and that “cost sharing may not address the principal causes of cost growth.”

Nevertheless, the study has formed the moral and tactical justification for a variety of health strategies in both the public and private sectors. Comments about “shared responsibility” and “skin in the game,” prominent during the crafting of the Affordable Care Act (ACA), can be seen as the lineal descendants of the culture spawned by the RAND study.

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There’s no need to relitigate the RAND study. Whatever its strengths and weaknesses, it clearly focuses on individual health outcomes. It did not study cost sharing’s impact on the overall financial well-being of its participants. And, critically in this moment, it did not study what happens to overall public health when individuals don’t receive needed care.

As for surprise billing: For the past year, there’s been talk of a “fix” to the surprise-billing problem, just as leaders from both parties insist that nobody will have to pay for coronavirus treatment. But how would either solution work, exactly? What will happen to people who are tested, but turn out to be negative and are treated for other conditions? What will it mean for future premiums to have private, for-profit insurance companies eat COVID-19 costs? And even besides that, we have trained patients to avoid care, especially before their deductibles are reached. It will be a big job to change that now.

The current health system is already confusing. That confusion is now compounded by pandemic chaos. Today’s crisis now raises fundamental questions about the way we think about health policy. We will almost certainly need to include collective well-being, as well as individual health, in our future goals and priorities.