April 26, 2017

If your favorite TV shows go dark, health care costs might be to blame

Daily Briefing

A dispute over health care costs between the Writers Guild of America (WGA)—which represents screenwriters for shows like "Saturday Night Live" possible —and entertainment studios is a microcosm of larger issues in the health care industry, Dylan Scott reports for Vox

On Monday, WGA members voted to authorize a strike starting May 2 if the union can't negotiate a new contract with studios. The strike could lead to shortened television seasons and other disruptions to the entertainment industry, according to Scott.

WGA's health care benefits

A big part of the impasse between WGA and the studios, Scott writes, is over health care costs. WGA is self-insured, which means the financial health of its insurance plan entirely depends on whether its funding exceeds the cost of providing care to its members.

According to Scott, WGA's health benefits are generous compared with industry averages. Studios pay 9.5 percent of a writer's salary or pay to the benefits fund, and union members pay no premiums for themselves (although they do for dependents). Under the standard plan, union members have a $300 deductible for an individual. In contrast, according to data from the Kaiser Family Foundation, the average individual deductible among all workers with a plan similar to WGA's coverage is

$1,028, and just 12 percent of workers with employer-provided insurance don't pay a premium.

But WGA's plan is spending more money than it is collecting, Scott writes. The guild says it will lose $13.2 million in 2017 and a projected $60 million in 2020—losses it will have to cover via its reserve fund, which will be "almost gone" by 2020, Scott writes. The union wants studios, which according to Scott "are making more money than ever," to pay more into the fund to make sure it is sustainable over the long term. As the union put it, "In this negotiation, we don't seek a better health plan, only a solvent one."

Cost control is key

According to Scott, not only is WGA spending more on health care costs than it's taking in—it is also tackling medical costs that are expected to increase much faster than studio contributions to the union's health fund. Specifically, WGA projects a 3 percent annual growth rate on contributions, compared with an 8 percent increase in annual medical and hospital costs, a 10 percent increase in mental health costs, and a 12 percent increase in prescription drug costs.

And the spending trend reflects and even exceeds broader national trends, Scott writes. Between 2011 and 2015, WGA's health care spending grew by 51 percent, while U.S. health care spending overall increased by 19 percent. 

Dr. Jha 'rolled the dice' on his health to save money. Here's how it changed his view on high-deductible plans.

It's not exactly clear what's driving up WGA's medical expenses faster than the national average, Scott writes. "It could be something unique to their population—maybe they happen to be sicker overall, or cover more people with expensive conditions who are driving up costs," he suggests.

But WGA's generous health care benefits may also be a factor. "If you have really good health coverage, you're more likely to use it, and you might be less sensitive to how much it ultimately costs, as long as you're not paying too much out of your own pocket," Scott explains.

Snapshot of a larger issue

According to Scott, the health care issues central to the contract negotiations also say a lot about larger challenges in the health care industry—particularly the role of generous benefits, and how those benefits relate to the broader debate over how much people should pay for their own care.

Some experts argue that higher deductibles and cost-sharing push consumers to shop around to save money and control overall costs. Features of the Affordable Care Act, such as the "Cadillac Tax" on generous plans, were designed to encourage these types of changes in benefit design, Scott writes.

However, many Americans already feel like health care is too expensive and "want plans with cheaper premiums and lower out-of-pocket costs," Scott writes. The union and other groups also say the idea of shopping around for health care doesn't match up with reality. Critiquing the Cadillac Tax—which has not taken effect—WGA said, "It is misguided because price comparison shopping is neither practical nor desirable for a sick and worried patient. It is ill-founded because the price information is not available to a patient seeking care."

And WGA said it's already taking steps to control costs that are common among private payers, such as building preferred provider networks and putting what it calls "reasonable" caps on how much it will pay for mental health treatments. The union also said it has reconfigured its prescription drug benefits so that beneficiaries  to try lower-cost medication before accessing more costly drugs.

Meanwhile, the broader health care market is grappling with the same cost issues via value-based care, evidence-based medicine, and other initiatives. "These are a lot of the same things the WGA is trying," Scott concludes. "But there isn't a silver bullet—even with this year's 'Saturday Night Live' finale at risk" (Scott, Vox, 4/24; Lowry, CNN, 4/24). 

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