Okay, poor grammar, but true.
High deductible health plans (HDPHs) are designed to a) reduce health insurance premiums by b) making people better consumers of health care. It’s also been suggested that lower costs of HDHPs may make it possible for more small employers to provide health insurance.
Let’s take these in order.
First, a bit more background these plans allow members to contribute, tax free, dollars to a Health Savings Account. These contribution limits in 2014 were $3,300 for individual plans and $6,550 for family coverage. The idea is folks will be more careful spending their “own” money than their employer’s or insurer’s. Of course, the members have to actually fund these accounts; more on that in a later post.
Comparing a HDHP plan to a “regular” lower deductible plan, premiums are reduced – but that’s only because the cost is shifted from the employer/insurer to the consumer. It’s a shell game, and the consumer ends up with the empty shell.
There’s no evidence that these plans make us better consumers of health care, and growing evidence that there’s no such result. Here’s a quote from a story about a recent study of high deductible plans…
employees who reduced their use of care the most before reaching their deductibles were the sickest workers, even though they were also the most likely to continue using services after their deductibles were reached. Once such workers did exceed their deductibles, their use of medical services increased, the study found.
This brings up the main reason high deductible plans don’t control costs; the 20% of consumers who incur 80% of health care dollars blow thru their deductible sometime in March. After which their care is free, so they use a lot of it.
Couple that result with the fact that many healthier folks avoid preventive care – including maintenance medications – because they don’t want to spend the money.
When it comes to controlling costs, high deductible plans are counter-productive.
As to the possibility that HDHPs help smaller employers afford coverage, that’s indeed possible. Notably, according to a Health Affairs article, less than 2% of the smallest employers offered HSA plans in 2012 compared to about a quarter of the largest employers.
And, as of 2012, there were only about 6 million HSAs reported to the IRS, so it does not appear as if the takeup has been dramatic. Of course, that may well have changed over the last two years.
So, if you’re looking to benefit design to control costs, what’s a better alternative?
Simple. Replace deductibles and copays with co-insurance. That is, have consumers share in the actual cost. If treatment costs $100, then the consumer pays $20; if it is $4000, then the consumer pays $800. This will make the consumer cost conscious without breaking their bank.
I understand that this will require the consumer, provider, and health plan to know what the cost of care is, ideally before treatment. That is another major benefit of a co-insurance based program; it will speed adoption of transparent pricing and make consumers much more discerning buyers.
Yes, keep an out of pocket limit to protect consumers. High utilizers will feel the pain of paying co-insurance far longer than they do today. As a result, they will be better consumers overall.
What does this mean for you?
This isn’t that complicated, nor is it difficult. Health plans that do this will gain a competitive advantage.