High deductible health plans do not work.
These plans, also known as HDHPs are the bluntest of instruments, intended to make patients more cost conscious and better consumers by making them pay the first few thousand dollars of their healthcare bills.
Instead, patients avoid care they should get, go bankrupt trying to pay sky-high deductibles, and even worse, don’t do a damn thing to get high utilizers to modify their lifestyle or care decisions.
Lazy benefits managers and employers looking for a quick fix to rising premiums continue to tout HDHPs despite the warning signs. Now, over a decade after these plans first became widely popular, some employers are finally getting the message.
I’d go so far as to argue that HDHPs help drive health care costs up; sick folks get sicker because they can’t afford preventive and routine care, while the 20% of members who incur 80% of the healthcare costs blow thru their deductible in March and then have no financial inhibitions.
Research shows most of those high utilizers don’t shop for care. I don’t see this as dumb behavior, rather a result of dumb plan design. If you’ve already paid your annual out-of-pocket maximum, you have no incentive to ask what something costs or even if you need that care.
I’ve been railing about this for years…alas, with the same effectiveness as Cassandra…
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.
7 thoughts on “High deductible health plans don’t work”
Excellent point – have thought that same for years. Thanks Joe!
Co-Insurance is the best solution for those that can afford it, with exception handling for those less well off, it truly drives the market, providers, agents, ancillary services, patients, employers, into a position of transparency. Unfortunately it is unlikely to happen given the prevalence of Medicare / Medicaid dependant providers who are unwilling or unable to carve out different paths for income.
Joe- HDHP cover preventive care. Where I disagree with them, and feel the only advantage of HDHP”s is to the Health Plans, your way is exactly the same as before they went into effect and going backwards. There is an in between. Co-insurance is way too high. You say …”and not break the bank” but for most Americans the $800 here and there WILL break the bank. Usually tests that are that high are necessary (think utilization review) so the consumer will avoid that ‘necessary’ test to avoid the high co-insurance. Now the catastrophic event takes place even quicker.
Both your way and the HDHP end with the same results and the only ones that win is the insurers. 26 years in Health Care and I can assure you, neither way works. Your way just brought us back to a similar if not exact model of the 80’s and 90’s.
Susan – thanks for the comment.
I respectfully disagree. Co-insurance is not “way too high” and it is certainly more affordable than a $5000 deductible, especially if it is set at an appropriate level given the member’s income. Three decades ago there were deductibles and co-insurance and out of pocket maximums; I’ve been in this business for 34 years and know it well.
The problem today is the absence of any upfront cost share eliminates the ability of many to get ANY care except that covered entirely due to ACA (most preventive care, as you note).
Net is healthcare costs are high due to high prices for medical services – as has been proven by research. Co-insurance is a far better way than HDHPs to add a dose of consumerism to health insurance.
About High Deductible Huealth Plans — Say It Ain’t Always So Joe!
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Agreed, for a family of four I have to budget $15k-17k for out of pocket and deductibles. Its insanity and I would much rather just pay a monthly payment for coverage and by another secondary plan to cover the rest.
Preventative care coverage is a joke. It’s like only paying for oil changes as car maintenance when you need far more than just that for true maintenance. Coverage for preventative care services and routine “health maintenance” must to increase along with decreasing cost share burden on the insured when they have only a small amount of control over the cost of care.
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