The January 2017 issue of Consumer Reports features an article entitled, “How to survive a high-deductible health plan.” And a recent CNBC headline reads, “Health savings accounts may flourish under Trump.” These and similar news reports signal a move toward the ubiquity of consumer-driven plan designs.
In 2006, fewer than five percent of insured workers had a high deductible plan, but that number reached nearly 30 percent in 2016, according to the Kaiser Family Foundation. This has helped keep a lid on premiums for employers and employees alike, but the tradeoff is a health plan design that puts more out-of-pocket responsibility on the shoulders of covered employees and their families.
Looking ahead, more than four out of ten employers are likely to limit their offerings to high-deductible plans by 2020. And Americans will hear more about health savings accounts in the upcoming months because the tax-advantaged accounts are a focal point of President-elect Donald Trump’s plan to replace the Affordable Care Act.
Health savings accounts: A silver bullet?
In an ideal world, all individuals with a high deductible as defined by the Internal Revenue Service (not less than $1,300 for self-only and $2,600 for a family), would take advantage of the opportunity to contribute to a health savings account (HSA) or have access to an employer-funded health reimbursement arrangement (HRA) so they are prepared to pay for health services until reaching their deductible.
Although nearly 20 million Americans have HSAs, one report indicates that many are underutilizing their plans, putting aside less than half of the contribution limit. For 2017, the limits are $3,400 for self-only coverage, and $6,750 for family coverage, and this amount changes annually.
What’s ahead? It’s likely that HSA rules will be loosened, with higher contribution limits, more “catch-up” opportunities and other changes as outlined in House of Representatives Speaker Paul Ryan’s “A Better Way” health care policy paper.
The goal, the reality
Consumer-directed health plans, defined as a high-deductible plan paired with a savings account, give individuals more “skin in the game.” In theory, this will turn patients into true consumers—they will shop for care and use only health services that are necessary. As they become better stewards of health care dollars, there should be less overall waste in the health care system.
Unfortunately, it’s not as effective as anticipated. Lack of information and economic realities have created hurdles that are difficult to surmount.
A report from Robert Woods Johnson Foundation indicates that many people aren’t aware of price variations among providers for the same services. It also highlights the confusing nature of health care prices: The amount an individual will pay varies on where the service is provided, plan design, their deductible balance and other factors. It’s difficult, therefore, for patients to ascertain the financial impact of a given test or procedure.
Then there’s the economic factor: Nearly 30 percent of people with high deductibles are postponing care they need because they can’t afford the out-of-pocket costs, according to a 2015 report from Families USA. As a result, these individuals end up requiring more care, and costlier care, later on.
Embracing the challenge
Payers and employers can join forces to help employees understand their plans and make appropriate use of their coverage. Suggestions include:
- Educate eligible employees about the triple-tax benefits of health savings accounts and how to use the accounts to their advantage.
- Remind employees to use the no-cost preventive care available in all non-grandfathered plans.
- Emphasize the importance of seeing a primary care provider for routine checkups.
- Encourage employees to see a doctor promptly for symptoms instead of waiting until a health crisis sends them to the emergency department.
- Promote Choosing Wisely, an initiative that helps consumers understand what tests and procedures should be questioned based on recommendations from more than 70 specialty partners.
- Create plan-specific, easy-to-understand transparency tools, and then educate employees about how to compare the relative cost and quality of health care services.
- Be sure employees understand their cost-sharing responsibilities, what kind of medical care won’t apply to the deductible, and their out-of-pocket limits.
As high-deductible health plans and health savings accounts become more prevalent in the future, it’s incumbent upon employers to ensure their employees are equipped to manage the complexities of their coverage.