High Deductible Health Plans (HDHP) are causing some individuals to avoid seeking medical treatment because they cannot afford the out-of-pocket expenses, some experts suggest. The implication of this position is employers should only offer higher premium, traditional PPO style plans. This view is inaccurate and misguided as high deductible plans are a response to the issue, not the cause.
By any statistic, healthcare expenses and the cost of healthcare to consumers has gone up dramatically, outpacing inflation and wage growth. For example,
- According to the Kaiser Family Foundation, per capita spending on healthcare has gone from $2,000 in 1970 to $11,000 in 2018. This comparison is done in constant 2018 dollars.
- The American Journal of Managed Care reports that healthcare spending by families with large employer health plans has increased two times faster than workers’ wages over the last 10 years.
- The Milliman Medical Index reported that in 2018, the cost of healthcare for a typical American family of four covered by an average employer-sponsored preferred provider organization (PPO) plan is $28,166.
The increase in the cost of healthcare has been driven by less competition due to the consolidation of providers, significant year-over-year increases in prescription costs, and strategies designed to enable higher patient billing such as having out-of-network services in an in-network facility. For example, radiology treatments may be out of network in an in-network hospital.
These high costs are being passed onto employers through higher insurance premiums. To help manage the impact of increasing premiums on financial performance, employers have passed an increase in premium costs to their employees. Employers also began offering plan designs such as HDHPs, which lowered premiums, but offered higher deductibles and out-of-pocket expenses. Other plan designs such as narrow-network offerings helped to lower premiums by limiting where employees can seek care.
The healthcare consumerism movement began around 20 years ago, and consumer driven healthcare (CDH) began to gain momentum. CDH puts more responsibility on the consumer for decision making and paying for healthcare, which in theory encourages the consumer to make more informed, cost-conscious decisions. An HDHP with an HSA is one such plan design. Achieving the benefits of the CDH concept has been a bit choppy because the healthcare data, claims and pricing infrastructure was built between healthcare payers and providers — the consumer does not really know the cost of a service provided until long after the service is provided.
The lack of healthcare cost transparency makes it very difficult for consumers to make informed, thoughtful decisions about the healthcare services they receive. While several very helpful transparency tools are available, the complexity of the service-claim-payment process can limit the benefit of the transparency tools.
While sticking to a traditional PPO plan limits the employees’ role in price-checking healthcare services, it also increases the premium costs for employers and employees, regardless of healthcare usage.
Instead of directing people to avoid HDHPs, a better way to address people skipping appropriate healthcare treatments is to make the cost of healthcare more affordable. A few changes that would make a huge impact:
- eliminating out-of-network services at a network facility.
- the healthcare industry embracing full transparency and providing pricing pre-service.
- evaluating strategies to manage the escalating costs of prescription medication.
- making health savings accounts (HSAs) available to all insured, not just those in certain high deductible plans.
Until some of the above structural changes are made, employers can help their employees today by shopping their health coverage each year, offer both a PPO and high deductible plan if possible, and provide assistance in helping them pick the right plan for their personal situation.
