A Look at the Debate over High-Deductible Health Plans

A Look at the Debate over High-Deductible Health Plans

With health care costs currently comprising 17 percent of America’s total GDP, there’s no question that action must be taken to slow the spiraling growth of health care spending. Over the past 25 years, a combination of factors—including technology, systemic inefficiencies, insurance coverage rates, and a changing population health status—has pushed costs up to their present high rates, and both individual and group markets are scrambling to find ways to cover the resulting higher insurance costs.

medical doctorOne potential solution that has become more prevalent in recent years is high-deductible health plans (HDHPs). When a plan’s deductible is increased, its monthly premium payments are reduced and consumers themselves pay a greater out-of-pocket amount for care before their insurance benefits take effect. The idea behind HDHPs is to help control costs on the demand side of health care (rather than reducing provider costs on the supply side); in other words, HDHPs bank on the fact that, when the true cost of care is made transparent to consumers and they are required to take on more of the cost burden directly, they may make different decisions about seeking care, which will then result in decreased medical spending.

While it’s easy to see how HDHPs could certainly contribute to reducing health care costs, some fear that the growing popularity of HDHPs could have other, less positive implications. A recent brief published in the health policy journal Health Affairs outlines some of the key considerations and concerns in the current debate regarding HDHPs. Read on for an overview of the article’s main points.

Key facts about HDHPs

Under an HDHP, all medical care, with the exception of certain specified preventive services, is paid for out of the enrollee’s pocket, until the deductible is met. Determining and defining these minimum deductible amounts, as well as the associated maximum out-of-pocket limits, are responsibilities of the IRS. In 2015, the minimum deductible was $1,300 for individuals and $2,600 for families; the maximum out-of-pocket limit was $6,450 (individual) and $12,900 (family).

Today, both group and individual markets are seeing increased use of HDHPs; in the group market in particular, HDHPs are proving highly attractive to employers given rising insurance costs (at present, employers are spending an average of $5,179 on health insurance premiums for individual employee plans, and $12,591 for family plans). According a recent employer survey conducted by the Henry J. Kaiser Family Foundation, deductibles have increased by 67 percent since 2010. Similarly, nearly 25 percent of workers are currently enrolled in an HDHP, compared with just 4 percent in 2006. In the individual market, close to 90 percent of Affordable Care Act Marketplace enrollees have a plan deductible that is higher than the minimum threshold for an HDHP.

HDHP concerns and challenges

medical instrumentsThe central question in the current debate over HDHPs is not so much whether they can prove effective at helping reduce health care use and costs (a growing body of evidence indicates that HDHPs are indeed successful at this objective) but whether such a reduction in use would have a negative impact on population health status. With the Institute of Medicine estimating that one-third of current health spending is wasted spending, there is certainly room to greatly reduce the use of unnecessary care and services. However, there are concerns throughout the industry that the cost sharing factors designed to prompt patients to think twice about accessing care they don’t need will also prevent them from seeking care they do need. In other words, HDHPs may have the effect of reducing the use of beneficial care as much as the use of unnecessary care.

While a number of studies show fairly conclusively that care use—and therefore costs—are reduced across the board when consumer cost share is increased via a higher deductible, there is so far no consistent evidence as to the health impact of this scenario. Some research does seem to indicate that necessary care use is reduced by HDHPs in ways that disproportionately affect certain population groups. For example, people with chronic illnesses or other health conditions that require regular, long-term interventions are more likely to have concerns about cost sharing and will, consequently, delay seeking care if they are enrolled in an HDHP. More studies are needed, nonetheless, to determine whether access to beneficial care is being impacted as much as access to unnecessary care.

For the time being, one particular challenge that needs to be addressed, for HDHP and non-HDHP enrollees alike, is the confusion surrounding preventive care. Under ACA requirements, a number of preventive care services are covered pre-deductible, and are therefore available to consumers at little or no charge. However, many consumers are not aware of this, so they hesitate to take advantage of preventive care due to the fear of high out-of-pocket payments; even HDHP enrollees whose preventive care is covered without cost sharing are more likely to reduce use of these services. More needs to be done to make all consumers aware of their health care options, and to encourage them to use available information to shop for cost-effective health care just as they would for any other product or service.

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