February Edition
In 2018, high-deductible medical insurance plans were the only option offered by 39 percent of the country's largest companies, up from 7 percent in 2009.1 This year, however, the National Business Group on Health (NBGH) predicts that figure will drop to 30 percent, as companies become more concerned about the financial impact of high-deductible plans on employees.2 Some companies have resumed offering more traditional plans – amid a healthy job market that gives workers bargaining power over compensation and benefits.2 But due to higher costs, industry experts say few employers will return to the more generous medical plans offered a decade ago. According to the Kaiser Family Foundation, half of all workers now have health insurance with a deductible of at least $1,000.1 Deductibles have increased far faster than wages, even as paycheck deductions for premiums have also soared.2 This year, employers are projected to pay $14,800 per employee for health coverage, an increase of 5 percent from 2018. For the past five years, employee health insurance costs have also increased by the same amount every year. Employers pay for about 70 percent of the cost, which leaves employees on the hook for $4,400 that goes toward premiums, copayments and other expenses.3 The rush to high-deductible plans began a decade ago when experts theorized companies could save money by empowering employees with the freedom to "shop" for their own medical care. Employees would naturally seek out lower-cost providers and cut back on unnecessary spending.1
Easier said than done
No one, however, predicted the financial crisis of 2008, which left many American families unable to pay skyrocketing health insurance deductibles. The high-deductible plans didn’t really do what employers hoped they would do, which is create more sophisticated consumers of healthcare. The healthcare system is just too complex.2 As a consequence, the financial crisis forced many families into bankruptcy, exacerbated by out-of-control medical bills. Instead of shopping for better healthcare options, which the high-deduction plans encouraged, employees saved money by skipping treatments and not taking prescribed medications. In a study, 41 percent of families claimed they couldn’t pay an unexpected $400 emergency room visit. People are skipping trips to the ER and urgent care because they can’t afford to get sick.1 When one large employer switched all its employees to high-deductible plans, medical spending dropped by 12 percent to 14 percent, according to an analysis by economists at the University of California, Berkeley and Harvard. But the workers weren’t learning to shop more effectively for health care. They just reduced the amount of medical care they used, including preventative care.1
Risky decisions
In high-deductible plans, women are more likely to delay follow-up tests after mammograms, including imaging, biopsies and early-stage diagnoses that could detect tumors when they're easiest to treat, according to research in the Journal of Clinical Oncology.1 Middle-income workers are typically more at risk of skipping surgeries, physicals and other procedures. That's also why a few companies are eliminating deductibles for employees making less than $60,000 annually.2
Unsustainable cost increases
As healthcare costs continue to rise due to specialty drugs and the high treatment costs associated with some diseases such as cancer, experts warn the increases are unsustainable. Fortunately, for large S&P 500 corporations with earnings and profit margins at record levels, rising healthcare costs increases can beabsorbed.1 But for employees and many smaller businesses, higher health costs are unsettling. Premiums for family plans have gone up 55 percent in the past decade, twice as fast as worker pay, reported the Kaiser Family Foundation.1 Yes, 91 percent of employers still offer at least one high-deductible plan, but some companies are beginning to write contracts directly with health systems and providers as a bulwark against future increases.3
1 "Some Big Employers Moving Away from High-Deductible Health Plans," John Tozzi and Zachary Tracer, Insurance Journal, June 26, 2018.
2 "High-deductible Health Plans Fall From Grace in Employer-based Coverage," Jay Hancock, Employee Benefits News, November 23, 2018.
3 "Employers Curb High-Deductible Plans, Even as Insurance Costs Rise," Shelby Livingston, Modern Healthcare, August 7, 2018.
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