In recent years, employers and self-employed Americans have been migrating to high-deductible health plans (HDHPs) in order to save money on insurance premiums. The percentage of workers covered under an HDHP has more than tripled over the last decade, rising from 8% in 2009 to 29% today, according to the Kaiser Family Foundation.
But those short-term savings are coming at a steep cost, says Benjamin Prinzing, CEO of Kadalyst, a Portland, Oregon-based company that helps employers manage long-term health costs: “More and more data shows that middle-class families frequently can’t afford the high deductibles – and are skipping needed medical care as a result. That’s a problem,” he says.
HDHPs provide some modest short-term premium savings. But they can still leave families facing at least $2,700 in potential deductibles, and up to $13,500 in out-of-pocket medical expenses per year. In 2018, the average HDHP deductible was $4,133 per year for family coverage and $2,166 for single coverage.
For millions of Americans, that’s too high.
Here’s the math:
- In 2009, just 7 percent of large employers had an HDHP as their sole group health plan option. Today, that figure is 39 percent, according to the National Business Group on Health.
- Meanwhile, in 2009, just 22 percent of U.S. workers had to meet deductibles of $1,000 or more before their insurance plans would begin to cover health care costs, according to the Kaiser Family Foundation. Today, more than 50 percent of workers have to meet that hurdle before their insurance plans will help them pay for treatment.
- That’s HDHP still leave families facing at least $2,700 in potential deductibles, and up to $13,500 in out-of-pocket medical expenses per year. In 2018, the average HDHP deductible was $4,133 per year for family coverage and $2,166 for single coverage.
- But according to Bankrate’s Financial Security Index, more than 60 percent of Americans are unable to meet an unexpected $1,000 expense. 44 percent of people can’t even handle a $400 expense without having to borrow money or sell something, according to a report from the Federal Reserve.
- 69 percent of those surveyed said their deductibles were difficult to afford, according to a study from CarePayment, a health care financing company. 22 percent said their deductibles were “very difficult” or “impossible” to afford.
As a result, people are putting off treatment, rationing medication doses and skipping medication altogether — leading to more serious and expensive medical problems down the road. CarePoint also found that 44 percent of those they surveyed said they would skip medical care — even if it put their health at risk — due to cost.
In theory, it should not be a problem: If workers are contributing to their health savings accounts, the deductibles should be offset by these tax-advantaged contributions.
“But that’s not what’s happening,” says Prinzing. “What’s happening is that too many employees either misunderstand the HSA’s benefits and don’t take advantage of it – or even if they understand it, they can’t afford to contribute!”
This has serious ramifications for both workers and employers: A study in Oncologist found that 20 percent of cancer patients took less medication than prescribed, 19 percent partially filled prescriptions and 24 percent of cancer patients skipped filling drug prescriptions altogether.
Furthermore, another study published in the Journal of Clinical Oncology found that women newly diagnosed with breast cancer, who had high insurance deductibles, were more likely to put off diagnostic imaging, biopsies and treatment. According to the Dr. J. Frank Wharam, the study’s author, they delayed beginning chemotherapy by an average of seven months[AL2] .
Such delays soon result in massive productivity losses for employers – and worse, potentially lethal consequences for workers.
In the short-term, employers may see some short-term cash flow savings from lower premiums. But absenteeism, presenteeism, lower productivity and increased turnover costs are almost invisible – but very real, Prinzing explains. “So those costs can eat away at your profits for years, and then Wham! You’ve got a six-figure medical event — or multiple six-figure events – and you lose much more than all that money you thought you were saving!”
More employers are seeing that high-deductible health plans are not a one-size fits all solution: According to the National Business Group on Health, the percentage of employers who offer a consumer-directed plan (HDHP + savings option) will fall for the first time in five years in 2019, from 39% to 30%, as nearly a third of those employers move to provide more or different options to their employees.
And more are rolling out employee wellness programs to help manage long-term medical costs – especially the costs of lifestyle-related chronic disease management, such as diabetes, heart disease, obesity and hypertension. This year, almost half of the employers surveyed in the Aflac WorkForces Report said their companies are actively implementing formal employee wellness programs – an increase from just 30% in 2012.
“High-deductible health plans can make terrific sense – for the right people,” explains Prinzing. “They’re terrific for healthier people, and more affluent people who can afford to contribute the max to their HSAs. But if an employee is choosing an HDHP because they simply can’t afford the premiums for a more comprehensive plan – that’s a pretty good indicator that they can’t afford to contribute to their HSA.” He says.
“They’re gonna need help.”
What to Do
Employers and plan sponsors who offer HDHPs should emphasize a culture of health and wellness in the workplace to prevent costly claims. They also need to work to bridge the gap between high deductibles in HDHPs and what employees can actually afford. Otherwise the short-term savings is likely to be overwhelmed by absenteeism, presenteeism and future medical costs.
- Implement or expand workplace wellness programs. A study from Health Affairs found that well-executed wellness programs generate an ROI of $3.27 per dollar invested.
- Create a culture of health and wellness in the workplace. Even modest improvements can make a difference: A weight loss of just 10 percent reduces average lifetime medical costs by $2,200 to $5,300, according to the Centers for Disease Control.
- Invest in worksite vaccination and screening programs designed to identify and help at-risk workers – before a $20 per month high blood pressure and statin medication becomes a $100,000 hospitalization for a heart attack.
- Speak with your health insurance carrier or broker about allocating wellness dollars from the plan designed to help employers reduce long-term medical costs. Some carriers may reimburse employers for certain expenses related to an employee wellness or screening program.
- Consider contributing to or matching employee contributions to health savings accounts (HSAs). This is especially critical for middle-class workers and families with incomes of less than $100,000 per year (more or less, depending on the cost of living in your area).
- Beef up flexible spending account benefits (FSAs) to help workers with current health issues, encourage regular checkups and ensure employees don’t have to put off medical care so long it affects productivity and potentially causes you to lose a good worker.
- Consider placing your HSA within a Section 125 cafeteria plan. This would exempt contributions from payroll taxes, providing an additional incentive of 7.65% to save. Otherwise employees must contribute using after payroll tax money.
- Offer critical illness insurance. This pays a significant cash lump sum to any insureds who are diagnosed with a covered illness – just when they’re needed most.
- Educate employees about the appropriate places to seek medical care. That is, don’t go to the ER for a simple sprain or a case of strep throat[AL3] .
High-deductible health plans are nice, and they do save some cash in the short term, says Prinzing. But smart employers are taking some of those current savings and reinvesting them it in wellness education, intervention, screening and employee health coaching. Why? Because when diabetics and other at-risk groups are skipping meds and putting off treatment employers will pay for it in the long run – and so will workers.