In 2003, the move toward High-deductible Health Insurance Plans (HDHPs) was given impetus by a provision in the Medicare Modernization Act granting tax preferences to funds set aside to pay for out-of-pocket medical expenses – conditional on enrollment in a plan having a minimum deductible of $1,000 for individuals and $2,000 for families. At the time, only 8% of privately insured adults under age 65 (7 million people) had deductibles of $1,000 or more.
Even then, experts like The Commonwealth Fund worried that HDHPs “could undermine the two basic purposes of health insurance”¹:
- Reducing financial barriers to needed care, and
- Protecting against financial hardship.
In the years since those concerns were raised, HDHPs have proven them valid.
Health Savings Accounts (HSAs), when first unveiled as a means to fund the high front-end deductibles and out-of-pocket costs associated with HDHPs, were largely funded by the plan-sponsoring employers. HDHPs were so aggressively priced by carriers that the premiums saved by moving to the HDHP more than paid to fully fund the deductibles.
But two things quickly occurred: Carriers began to realize that employer-funded HSAs destroyed any hope of increasing employee “consumerism” in seeking healthcare services (subsequently, many carriers prohibited full employer funding) and the premium advantages of HDHPs began to erode (making the plans less attractive).
However, those high deductibles were here to stay…
Enter a horrible economy with its associated job losses and reduced family incomes and those high deductibles became insurmountable for many workers and their families.
Since balances in HSAs were woefully insufficient for even the moderately ill, large expenses hit particularly hard early in the year. We began hearing story after story of employees who chose to forego necessary care because they couldn’t afford it (just as The Commonwealth Fund predicted) and patient compliance began to drop. When money is tight, even middle-class families can be faced with a “Bread or Med™” decision. And when it comes down to buying bread for their family or meds for themselves, bread always wins. And health suffers.
Insuring people who can’t afford to buy their medications or follow their doctor’s treatment plan, is a “death spiral” waiting to happen. Sooner or later, noncompliant patients accelerate healthcare costs. Costs go up. Benefits get reduced. And compliance suffers even more… And that’s exactly what we’ve seen.
The bottom line is that High-deductible Healthplans (HDHPs) are a cost shift and, as such, are ineffective in addressing the compliance needs of those members who are fighting chronic disease or who are at-risk of developing disease in the future.
While healthcare price sensitivity has a role, healthcare cost containment requires supporting diseased and at-risk members while holding them accountable to be good, compliant patients.
¹How High Is Too High? Implications of High-Deductible Health Plans, Karen Davis, Ph.D., Michelle M. Doty, Ph.D., and Alice Ho, The Commonwealth Fund, April 2005
Photo courtesy of Pink Poppy Photography.
