What are the consequences of the trend toward high-deductible healthcare insurance plans?

The RAND Corporation released a study that identifies a trend where consumers are purchasing or opting for high-deductible healthcare insurance plans. While these plans may cut down on healthcare spending, policyholders are also less likely to seek out care when they need it.

In recent years, high deductible health plans (HDHP) have become an increasingly popular tool for shifting healthcare cost from the employer to the employee. Because of savings from the elimination of benefit coverage of small-ticket items as well as their administrative costs, premium outlay for the employer can be lower and therefore more affordable. Dana B. Mehta, CFA, MHP, CEBS, says that as the bulk of routine costs are paid by the employee, HDHPs are deemed to make the employee more cost conscious, a better shopper for healthcare, and more health conscious. “Having more skin in the game, employees are more receptive to better health management and cooperative with employer wellness plans,” she says. “The burden of the cost shifted to the employee is somewhat reduced by pairing the HDHP with a health savings account (HSA), which permits the employee to accumulate funds for healthcare out-of-pocket expenses on a tax advantaged basis.”

Mehta says that HDHPs have had a significant influence on the healthcare industry. She outlines these examples:

  • They benefit insurer sales by permitting them to offer their customer, the employer, an attractively priced product.
  • They reduce claims payment administrative costs as claims generated early in the year go toward the deductible and do not have to be paid.

“The influence of HDHPs on providers, especially hospitals, is expected to be predominantly negative. They shift the burden of collection from insurers on to the private individual, increasing the ranks of the underinsured and causing bad debt balances to increase: Mehta notes. “This problem may be mitigated if the HDHP offers the provider the ability to verify coverage and patient balances before service is rendered. Regardless, many patients may not be able to cover their financial responsibility at all.”

Wayne Citron, an expert specializing in policy interpretation and laws and regulations governing insurance and financial matters, says that the trend toward high-deducible plans is growing due to increasing healthcare costs and higher premiums for consumers. Insurance companies write high-deductible plans in an effort to accomplish several objectives. They offer high-deductible plans to limit their exposure to claims that may result in an increase cost in processing. “It cost as much to process a $5,000 claim as it does to process a $500 claim, and these costs are passed on to the consumer in the form of a premium,” Citron explains. By offering high-deductible plans, insurance companies could pass on some, but not all, of their savings to make more plans affordable and available to consumers. “If this was accomplished, fewer people would seek free care,” he says.

The purpose of health insurance is to pay for unexpected events, but some high-deductible plans are unaffordable when an event happens and the policyholder has to pay that deductible out-of-pocket. “One of the drawbacks high-deductible plans have is that the insured often does not believe that he or she will get sick or injured,” Citron says. Accidents and illness can happen at any moment and a problem for the consumer is that he or she may become uninsurable at some point.

Ronald Wobbeking says that consumers play an important role in this trend. He says that consumers need to take more responsibility for their own health and nutrition. “The health insurance system does not lead the consumer to be involved in keeping costs under control,” he says. “Currently, we have consumers wanting quality treatment available and healthcare providers willing to provide any necessary healthcare services because a third-party insurance company is paying the. High-deductible plans may help get consumers involved in staying healthy and being smart users of the healthcare system.”

Wobbleking explains that insurance companies should provide consumers with catastrophic protection and not first dollar coverage. “The consumer should be self-insuring up to some limit so they stay involved in the decision process. If medical inflation continues, premium increases for high-deductible plans will be substantially higher than just medical inflation, especially if the deductible for the insurance plan remains the same each year,” he says.

Keith Wood says that one of the reasons for the trend toward high-deductible health insurance plans is the plans’ affordability. “If we, as a society, can change our thinking toward the way we use health insurance, cost may decline. However, I do believe there is a serious consequence of this trend, especially if people don’t change their habits in utilizing their insurance,” explains Wood.

Wood agrees with other experts that the consequences may include people not seeking medical attention when it is truly needed. “They might not visit the doctor because they know they will have pay out-of-pocket for the visit instead of paying just a copayment,” he says. “Many patients do not understand that they pay upfront for doctor office visit copayments as part of their monthly premiums.” Sometimes patients actually pay more for an office visit with health plan with co-payments than if they paid out-of-pocket.

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Comments

  1. Dana B. Mehta, CFA, MHP, CEBS says:

    Comment on Rand study: This was done in 2004 -2005, when HDHPs were just becoming popular. Additionally, the study covered only approximately one year of experience. Soon thereafter, the HDHP’s negatives were quickly recognized and major insurers modified their plans to provide first dollar coverage for certain preventive services. Today, many HDHPs combine high deductibles, co-pays and first dollar coverages. Some are geared to be combined with HSAs/HRAs at least partially funded by the employer with expectations the employee will draw on the funds as necessary. However, it is important the sale of HDHPs be combined with beneficiary education on how to minimize cost over the long run.

  2. High deductible plans are not worth the money unless people have a back up plan. There are plans that fill the gap when a policy holder goes into the hospital. I work with several companies that offer indemnity plans that can offset the deductible if needed. However, affordable healthcare comes with exposure and not all policy holders can afford to be exposed. That would explain why they are not going to get check up or dealing with the illness until it is severe and they have no other choice but to go the doctor.

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