Nationwide, more than 25 million people, or 14.6 percent of those enrolled in private insurance, were enrolled in high-deductible plans or another form of consumer-directed plan in 2012 — up from about 13 percent in the previous year, according to the Employee Benefit Research Institute.
The plans, which come with higher deductibles in return for lower premiums, have allowed employers to curb the rising cost of providing health insurance by shifting more of the burden to their employees who are typically responsible for the first $3,000 to $5,000 of yearly medical expenses before they meet their deductibles.
And a provision in the Patient Protection and Affordable Care Act has given employers even more incentive to switch to high-deductible plans to avoid hefty taxes under the health care law, commonly referred to as Obamacare.
Beginning in 2018, employers will be subject to a 40 percent excise tax on plans that cost the company $10,200 per individual employee and $27,500 for families.
Unless it is repealed, the so-called “Cadillac tax” will push employers towards less-costly, high-deductible plans for years to come, said Grant Bailey, president of Bailey and Company Benefits Group, a Cincinnati-based employee benefits broker .
“We have clients whose costs are already in that range today,’’ Bailey said, referring to the excise tax thresholds. “You start compounding those numbers by 40 percent…and I think you’ll see them really reducing benefit levels at that point to try to keep costs as close to where they have been in the past.”
Impact on small employers
In addition, the excise tax could have unintended consequences for small businesses otherwise immune to the coverage requirements in the health care law, Bailey said.
Unlike their larger counterparts, companies with fewer than 50 employees will not be required to offer health insurance starting in 2014. But they still have to deal with rising costs, Bailey said, and the health care law would prohibit small employers from offering health plans with deductibles higher than $2,000 for individuals and $4,000 for families, beginning next year.
The law could force many small employers, who can only afford to offer high-deductible plans, to drop coverage altogether. HPIO estimates that 1.3 million Ohioans have lost employer sponsored health insurance over the past decade.
“The under-50 market is about to be turned on its head from a pricing standpoint, starting in 2014,’’ Grant said. “Many of their costs are going to just skyrocket.”
Most large and mid-sized firms still offer two or three options for health insurance in addition to high-deductible plans, but the choices are likely to be limited in years to come as more companies move toward high-deductible plans as the only option, said Mike Suttman, president of the Dayton-based brokerage, McGohan Brabender.
“It’s still fairly rare, but you’re seeing more of that,” he said. “I don’t know if the (Cadillac tax) is the driving factor, but it’s certainly a factor. I think the move toward high-deductible health plans is primarily driven by the continued uncontrolled cost of health care and employers asking, “How do I manage this?”’
One way to address the problem is to build financial incentives into employee benefits packages that encourage less risk-averse workers to opt for health coverage with lower out-of-pocket costs, Suttman said.
“If I say you can have a $1,000-deductible plan that costs you $2,000 a year or I can give you a $2000-deductible plan that costs you $1,200 a year, what you get is some employees saying if I don’t have any claims this year it will only cost me $1,200 versus $2,000,” he said. “So you get the healthier population selecting high-deductible health plans.”
But that can be an expensive gamble, even for young, healthy workers, said John Bowblis, a Miami University economics professor who specializes in health care.
“If you break your leg and go to the emergency room, you’re paying for it yourself pretty much,” he said, referring to workers covered by high-deductible plans.
Originally, high-deductible plans were tied to health savings accounts, which allow enrollees to save pre-tax dollars to pay for such expenses.
But in 2007, only about 68 percent of employees with high-deductible plans and about 81 percent of individually purchased high-deductible plans had health savings accounts, leaving individuals to bear the full cost of their high deductibles, the HPIO reported.
Even if they have savings accounts, taking full advantage of their plans not only requires enrollees to have the financial discipline to put money away, it also requires that they have the time to build up those reserves, Bowblis said.
“I’ve had one (high-deductible plan) for four years now, and I’ve saved enough money so that if I had to spend all my deductible in one year, I have the money saved,” he said. “For other people, if they’ve just started, and they get sick immediately, the costs can be daunting.”
The cost can be so prohibitive that many people with high-deductible plans just skip visits to the doctors, Bowblis said.
“When we look at studies that talk about how much a consumer must pay, the more the cost burden is on the consumer, the more likely the consumer is to delay care or not get care at all,” he said. “And that can be associated with high-deductible plans for some people.”
Kat Mat, a single mother in Cincinnati with an employer-sponsored, high-deductible health plan, said she’s been putting off a trip to the doctor for weeks because she cannot afford the $150 it would cost her to be treated.
“I’ve been suffering with a urinary tract infection for several weeks, trying every home remedy I can find on-line,” she said. “Who has $150 lying around when sometimes you can barely put food on the table?”
The original intent of high-deductible health plans was to help lower overall health costs by giving enrollees a financial incentive to be more cost-conscious in shopping for health care services, Bowblis said. But few patients are willing to question their doctors about the most affordable care options or opt for less-expensive generic drugs rather than brand-name medications.
“The average consumer is just not use to making choices based on cost,” he said. “They think I’ve got to do whatever the doctor says no matter the cost.”