Is High-Deductible Health Insurance Worth the Risk?
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There is no doubt that these plans can be a source of real financial hardship and poor medical decisions. They can lead to several thousands of dollars of out-of-pocket costs, and the higher burden on working families has been a theme sounded by both Democrats and Republicans in this election season.
Yet even people with a steady flow of medical bills have decided that the potential savings are worth the risk. On average, families saved almost $150 a month in premiums, or $1,800 a year, if they chose the high-deductible option, coupled with a health savings account offered by many large employers, according to Mercer.
“Most employees are choosing to move into them of their own free will,” said Beth Umland, the research director for health and benefits at Mercer.
Beth Walker, who signed up for a family plan with a $6,000 yearly deductible with her husband, Ordell, a football coach, says she is “actually shocked at how much I love our high-deductible plan.”
The Walkers were offered a choice of plans by Bluefield College, a small Christian college in Virginia, where her husband works. The couple was attracted by the new plan’s lower premiums, about $350 a month. That is less than half of the premium for a traditional plan, known as a P.P.O., or preferred provider option.
The couple decided that they could sock away the $4,200 or so that they would save to spend if out-of-pocket costs arrived. And even with two boys, regular visits to specialists and prescriptions, the idea has worked.
“For this year, it’s worked out very well,” Ms. Walker said. But she knows if one of her boys were to break an arm and end up in the emergency room, “We’re going to pay for it.” The Walkers invest the money tax-free in a health savings account that allows them to accumulate funds year after year.
Still, the move to high-deductible plans has left many employees facing sticker shock. With a large deductible, they may pay full price for a costly test or medication, uncovering the real cost of health care.
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Mikka Hunt
Parents, for example, were in an uproar over the $600 price tag for the EpiPen, the injector used to deliver lifesaving epinephrine to reverse severe allergic reactions, because they were having to pay for it with their own money.
“If everybody was still in P.P.O.s, and low deductibles, nobody would have ever heard of it,” said Brian Marcotte, the chief executive of the National Business Group on Health, which represents large employers.
Companies are often happy to let employees take the risk. They are viewed as a way of warding off the so-called Cadillac tax, a controversial new charge under the Affordable Care Act that would make employers pay an excise tax on the most expensive health plans. The tax, which has been delayed until 2020, is calculated on the cost of a plan’s annual premiums and is aimed at discouraging overly generous coverage that may lead to people getting too many tests and procedures.
In addition, the lower monthly cost offered by high-deductible plans is one of the most direct ways to mitigate the bite taken out of workers’ paychecks for insurance — a pressing issue — as premiums continue to outpace wages.
“The absolute dollar amounts coming out of their paychecks is very noticeable right now,” said Edward Kaplan, a senior vice president at the Segal Group, a benefits consultant. He said companies were looking at a wide array of cost-sharing techniques to bring down the share of premiums their employees pay.
The encouragement of these plans varies, however. Large employers are offering high-deductible insurance in increasing numbers, according to Mercer, but the overall share of employers offering them has remained relatively steady in recent years.
As long as people are healthy, though, the high deductibles won’t hurt. That is why they are particularly popular among younger people, who are less likely to incur high medical bills and like the lower monthly premiums. Benefitfocus, a benefits technology firm, estimates that about 44 percent of millennials working for large employers, who have a choice, are enrolling in these plans, compared with 36 percent of baby boomers.
The risk is that people with high-deductible plans avoid care because they do not have the out-of-pocket money to cover it.
A recent analysis showed that low-income workers were more likely than higher earners to avoid certain kinds of care when they were enrolled in high-deductible plans coupled with savings accounts. The analysis from the Employee Benefit Research Institute, a nonprofit organization, found that low-income people even skipped free preventive services like flu shots and cut back on doctors’ visits.
And there is widespread evidence that people have trouble understanding the subtleties of any plan. Many people liken the process of open enrollment and picking a plan to the pleasures of a root canal, said Shan Fowler, an executive at Benefitfocus. “The understanding of a P.P.O. versus high deductible is not good at all.”
As a result, some policy experts worry that these plans benefit some people more than others. People with chronic health conditions who may be older or simply do not have the resources to pay for their care may end up paying too much for a plan with a lower deductible, even when the high-deductible plan makes more sense.
“They’re much more likely to choose the most expensive plans with seemingly higher coverage,” said Saurabh Bhargava, an economist at Carnegie Mellon University, whose research has demonstrated that individuals may not make the right choices.
He worries that the high-deductible plans, which allow some employees to accumulate large sums tax-free, can also widen the gap between the better-off and everyone else.
“It can lead to pretty large transfers to the sophisticated from the less sophisticated,” he said.
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