High-Deductible Health Plans Are Growing Rapidly

High-deductible plans are gaining market share.

Here’s another important fact from the Kaiser Family Foundation’s recent survey of the employer health insurance market. As shown in the chart above, health insurance plans with high deductibles and a saving option (HDHP/SO) have been gaining market share rapidly. Only 1-in-25 enrollees were in such plans in 2006; today that figure is more than 1-in-6.

The increased popularity of these plans–which involve Health Savings Accounts (HSAs, created by the 2003 tax law) or Health Reimbursement Arrangements (HRAs)–has come at the expense of health maintenance organizations (HMOs, down from 21% in 2005 to 17% in 2011), preferred provider organizations (PPOs, down from 61% to 55%), and point-of-service plans (POS, an unfortunate acronym, down from 15% to 10%).

When paired with HDHPs, HSAs and HRAs are often called consumer-driven health plans because they give the patient / consumer more direct responsibility for health spending. In return for lower premiums, beneficiaries face higher cost-sharing. To help cover those out-of-pocket costs, beneficiaries make contributions to tax-advantaged saving accounts.

Bottom line: The employer market is moving toward more consumer-driven plans. Big question: Will translate into lower health spending?

5 thoughts on “High-Deductible Health Plans Are Growing Rapidly”

  1. Donald,

    I think these plans will lead to lower health spending. The importance of consumer discretion is not mentioned often enough in coverage of health policy, but is a critical driver of utilization and thereby costs. These plans transform health insurance from a prepaid, discount method of paying for care into a more ‘true’ form of insurance, where catastrophic events are covered but smaller events paid out of pocket.

    In terms of better or worse health, that remains to be seen, but the odds should be on “better”, especially if we see less inappropriate, complication-prone care being given under the shared-costs plans.

  2. I have one of these plans and am not convinced they will have the desired effects of saving the health plans money or promoting better outcomes. First, the only area where consumers/patients can truly be competitive shoppers is prescription drugs, and in that area, these plans incentivize purchases of generics over brand names, which saves everyone money (except the brand manufacturers — sorry, someone has to lose out!) and the desired effect is achieved. But for other medical care, if people are sick, they should not forego the standard office visit because of an expensive out-of-pocket payment (which goes towards the high deductible). That’s exactly the situation we have with people who have no insurance, who then wind up with more serious illnesses in the ER, etc., because they didn’t seek treatment promptly. (Or people won’t forego the office visit — which is how my family operates — so what money are we saving in terms of total dollars spent between my insurer and me?)

    Second, if the insured and her family consistently have high costs that are unavoidable, such as maintenance medications for various conditions, they will also consistently exceed the maximum deductible and after that point, they will have zero incentive to refrain from an extra doctor’s visit, test, procedure, etc., whereas under the co-pay model, that co-pay was always a factor (even if not terribly significant).

    The other problem is that even with the accompanying HSA, if your medical expenses are high in the first part of the year before your contributions to the HSA have built up, you can have high out of pocket expenses that are hard to bear. I earn a relatively high salary so we’ve been able to manage, but for most people, having to pay $500 or $1,000 before the insurance kicks in (without enough in the HSA to cover it) is a real challenge.

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