High-deductible health plans: hidden costs

September 23, 2015

Most payers and employers now offer high-deductible health plans (HDHPs), but questions remain regarding whether these options will actually help plans save on healthcare costs.

Most payers and employers now offer high-deductible health plans (HDHPs), but questions remain regarding whether these options will actually help plans and employers save on healthcare costs in the long run.

HDHPs are health insurance plans with fairly low monthly premiums, but relatively large out-of-pocket expenses for incurred medical care. Typically, deductibles range from $500 to $6,000, depending on benefit design and household size. Members are responsible for the cost of care incurred up to the deductible limits within a given year.

These plans are exceptionally efficient vehicles for constraining health costs to all purchasers: insurers, employers, and patients alike, says Christopher Kerns, MBA, managing director, Research and Insights, The Advisory Board Company. And, for patients who can’t afford traditional health insurance premiums, HDHPs are a low-cost option.

“This explains their overwhelming popularity on the [Affordable Care Act] ACA health insurance exchanges; they’re also favored by a plurality of employees on private health insurance exchanges,” says Kerns. “Although high deductibles make the premiums affordable, out-of-pocket expenses can still be burdensome for lower-income households, although typically far less than they would have been as uninsured patients.”

But while saving money across the board is all well and good, multiple sources report that people with HDHPs forgo getting care or cut back on care due to having high deductible plans. Over time, that could lead to more healthcare costs if untreated chronic conditions snowball into more serious health issues, or if undiagnosed illnesses escalate into long-term, complex health problems. Health plans and employers considering high-deductible health plans must consider the short and long-term implications.

Next: The positive effects

 

 

The positive effects

By offering a lower premium cost to members, HDHPs put the onus on consumers who ultimately can decide how they would like to spend their healthcare dollars. All high-deductible plans have an upfront deductible that is higher than traditional benefits offered by payers.

A federal guideline dictates whether a payer’s particular benefit design will be qualified as being an HDHP. Payers have the option to have a higher deductible than those stipulated by the government (up to a maximum limit), however it must meet a minimum amount to qualify as an HDHP.

Once designated as a high deductible plan, employers have the ability to help the consumer by providing tax-exempt dollars back to the patient in the form of a health savings account (HSA). “This can be used to offset the large up-front costs associated with the deductibles in HDHPs,” says Ki Park, MBA, practice area head, Managed Markets, Symphony Health Solutions. Once deductibles are met, patients are covered for eligible healthcare expenses and face copayments or co-insurance in similar fashion to traditional health plans.

The belief is that HDHP will provide an overall cost savings to the system, because patients will make the most cost-efficient healthcare decisions.

In addition, patients with a low propensity to seek healthcare will likely opt for these plans, suggesting th

e overall spend, premiums, employer cost, copayments, and payer paid costs will decrease compared to traditional health plans.

Another benefit is that employers will likely not be affected by the "Cadillac tax"-which, by definition, occurs with high-premium plans, says Amelia M. Haviland, PhD, Carnegie Mellon University. Part of the ACA, this is a 40% excise tax for premiums paid by insured and self-insured employers who exceed $10,200 for individual premiums or $27,500 for family premiums.

Next: The negative effects

 

 

The negative effects

But while saving money across the board is all well and good, multiple sources report that people with high-deductible plans forgo getting care or cut back on care. A study by RAND researchers of HDHP patients’ overall medical spending, use of preventative healthcare treatments, and cost of episode of care showed that these patients' healthcare spending was 14% lower than patients in traditional plans.

In addition, families cut back on preventative care such as immunizations and cancer screenings; they initiated fewer episodes of care and spent less per care episode. Enrollees with lower incomes and chronic illnesses also reduced me

dical spending, but not more than other enrollees.

Kerns reports findings along the same lines, noting that a November 2014 Gallup poll indicated that, among the insured population, 34% of respondents indicated that cost of care (i.e., deductibles, copayments, and coinsurance) had led them to delay medical care. That number is up sharply from 25% in 2013, and may be explained by the increase in the number of patients with high deductibles.

When patients delay care, they tend to miss or reduce doses of prescription medications. “This can obviously have some negative effects,” Kerns says. “Providers need to be able to quickly identify this as an outcome and employ resources to help households pay for prescription drugs.”

Another consequence could be that patients are forgoing elective joint or orthopedic surgery.

“Patients may opt for physical therapy or pain management, which in some cases may be the better clinical pathway,” Kerns says. “But it’s important for physicians and health systems to have early detection mechanisms to see whether or not patients are truly endangering themselves or are simply being practical.”

Next: The long-term effects

 

The long term effects

Kerns says ignoring serious ailments would produce a spike in healthcare costs. That, in turn, would trigger an increase in patient premium costs, creating even more incentives to forego care.

This could become a vicious cycle. “But that scenario is unlikely over the medium-to-long term, because the health plans that are likely to be most successful in the long term are those whose provider networks can control not only the price of the premium, but also the trend of cost growth over time,” he says. “Those that manage to provide enough low-cost access to encourage appropriate utilization of care-with services priced to market demands-are the ones who are likely to see the smallest spike in costs due to patients eschewing care. And those plans are likely to have the smallest premium spikes in any given year.”

The demographics of HDHP members also point to promising signs when assessing the long-term cost effects of these plans. Members of these plans are often younger, with fewer instances of chronic conditions, who don’t access health services frequently (see chart, pg. x). “This population has a perceived minimal risk, and the reward of paying less for coverage overall outweighs the outside possibility of an emergency health situation,” Park says.

In terms of prescription drugs, Symphony Health has studied patient populations and treatment persistency curves.

“We found that in classes where the drug improved a condition that may not have had a perceivable physical symptom, for example, cholesterol reducers, patients tended to drop off therapy earlier than in classes where a physical result of medication was observable,” Park says. “You could call this the ‘I feel fine’ effect, wherein consumers choose not to pay for something they do not believe is negatively impacting them.”

It should also be noted that a lot of preventive care is covered pre-deductible as a result of the ACA. Nonetheless, some people avoid regular preventative care tests-such as a colonoscopy, mammogram, blood pressure and cholesterol tests-because of a high deductible, the Commonwealth Fund report stated. “This could exacerbate problems and lead to higher costs later on,” Collins says.

Karen Appold is a medical writer in Lehigh Valley, Pennsylvania.