High Deductible Health Plans and Risk

Those with national health insurance can read this and chuckle. For the rest of us . . . .

An article appeared today in Employee Business News regarding consumer bias against high deductible health plans (HDHPs), and that these plans represent a better value than traditional plans for many people.(1)

That may be true if

  1. You have a choice about the type of plan.
  2. You have access to a Health Savings Account or other tool to pay the expenses the HDHP doesn’t.
  3. You have the money to put into a Health Savings or Health Reimbursement Account without impacting what you need for rent or food.
  4. And/or you have a pile of cash and can self-insure against what HDHPs don’t pay.

In other words, if you healthy and rich, an HDHP may make sense. Or concierge care. Or self-insurance.

When people talk about how good a health insurance plan is, they are talking about what the plan pays relative to the average amount that consumers spend on medical care. Averages describe a group of people, but may not characterize any individual or household in the group. What your family spends depends on what happens to you, and could be below or way above the average.

For example, a common generic drug used for treatment of multiple sclerosis has a copay of more than $600 per dose, and most users require three per week. Could you afford to spend $6,000 out-of-pocket for medication each month? Admittedly, the first month will take care of the HDHP deductible for the year, but how many people can afford to shell out $6,000 on top of the monthly insurance premium? Several studies have shown that many US families have less than $500 in cash available for emergencies.

For the healthy younger consumer, an HDHP is frustrating. If the consumer visits a doctor for a checkup, the full cost will be applied to the deductible — which means that the consumer will be paying the full price out-of-pocket. In fact, in this case, the HDHP policy may never pay anything over the course of the year because the consumer may never exhaust the deductible. That’s a disincentive for consumers getting checkups that they really should have.

That brings us back to the often overlooked point of the Affordable Care Act. The cost of dealing with a disease at early onset is generally less than 20% of the cost of treating it at an advance stage. If we could ensure that everyone gets checkups and that most diseases are caught early, we could reduce overall spending on healthcare nationally by perhaps 1/3 or more. This would reduce health spending, health insurance rates and improve adequacy of health resources.

Why is saving money controversial?

Sources:

  1. https://www.benefitnews.com/news/voya-research-shows-employees-are-biased-toward-hdhps?position=editorial_1&campaignname=EBN_Weekly_Healthcare-04202021&utm_source=newsletter&utm_medium=email&utm_campaign=EBN_Weekly_Healthcare%2B%27-%27%2B04202021&bt_ee=8aeiy76yGZL%2Fvgslm1jF%2F3pMtYWV0NUUvvQfOtab5vX2AxXPnEuHghl8ULIzb%2Fz%2B&bt_ts=1618934571679

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