What is a high-deductible health plan?
Healthcare.gov defines a high-deductible health plan as a plan with a lower-than-usual monthly premium but a higher deductible than a traditional plan. HDHPs require consumers to pay for more health care costs on their own before their insurance starts covering costs.
HDHPs are often combined with health savings accounts (HSAs), which allow beneficiaries to set aside tax-exempt money for medical expenses. Because HDHP-HSAs require consumers to make more decisions about their care, they are sometimes referred to as consumer-directed health plans (CDHPs).
What are the deductibles for high-deductible health plans?
In 2020, the Internal Revenue Service (IRS) defined an HDHP as any plan with at least a $1,400 individual deductible or a $2,800 family deductible. The Kaiser Family Foundation’s 2020 Employer Health Benefits Survey found that a significant portion of Americans’ health care plans fall under this definition. About half of single beneficiaries had a deductible between $1,000 and $1,999, and about 1 in 5 single beneficiaries had a deductible that exceeded $3,000. For families, the average aggregate deductible was $4,601 for HSA-qualified HDHPs and about 1 in 5 had a deductible of $6,000 dollars or more.
What are the benefits of high-deductible health plans?
HDHPs are intended to make consumers more cost-sensitive about health care services in order to help lower overall healthcare spending. HDHPs also offer a way for healthier consumers to lower their monthly health insurance costs.
What are the challenges of high-deductible health plans?
An HDHP may pose little challenge to beneficiaries who have few healthcare needs or high incomes. However, high upfront costs to meet the deductible can create barriers to access for people with lower incomes or who need more health care services, such as those with chronic conditions.
Patients with chronic diseases who require regular care or medications can end up paying thousands of dollars in health costs at the beginning of the year to meet their deductible, leading some to avoid needed care, which ultimately leads to worse health and productivity. Delaying preventive or needed care generates larger health system costs over the long term as patients wait to get care until they experience acute, costlier-to-treat conditions.
NPC research with VBID Health revealed that providing pre-deductible coverage for medicines and services used to prevent exacerbation of common chronic conditions could benefit the health of millions of Americans and lower health care costs.
The VBID Health issue brief Financial Impact of HSA-HDHP Reform to Improve Access to Chronic Disease Management Medications showed providing this pre-deductible coverage could lower patient out-of-pocket costs and increase medication adherence for patients.
A subsequent issue brief found that allowing pre-deductible coverage for services or drugs intended to treat an existing illness, injury or condition could be cost-neutral to the U.S. government, or potentially even offer cost savings.
How does research inform policy?
In the VBID Health issue brief, the researchers recommended that the IRS change its guidance on "prevention" to provide HSA-HDHPs with greater flexibility in designing health insurance plans better tailored to the needs of the chronically ill and those at risk. NPC, among other stakeholder groups, offered public comment on IRS rulemaking efforts.
In July 2019, IRS issued a new rule allowing HSA-HDHPs the flexibility to cover 14 medications and services used to prevent the exacerbation of chronic conditions prior to meeting the plan deductible.
An NPC-funded issue brief by the Employee Benefit Research Institute, Employer Uptake of Pre-Deductible Coverage for Preventive Services in HSA-Eligible Health Plans, shows that about 3 in 4 large employers (76%) have expanded pre-deductible coverage for medications and health services used to prevent exacerbations of common chronic conditions.
The study found that most employers (81%) would offer pre-deductible coverage for additional drugs and health services if allowed by law. Additionally, depending on the medication or service, between 25% to 40% of employers not only provided pre-deductible coverage, but they also eliminated all patient cost sharing.
Research from NPC and Gallagher Research & Insights reveals employer-identified good practices for designing HDHPs to help enrollees better maximize the value of their benefits.
NPC also collaborated with the National Alliance of Healthcare Purchaser Coalitions on an Action Brief, Better Value, Smarter Deductibles in HSA-HDHPs: Improving Health, Equity & Engagement, which highlights steps that employers can take to enhance their benefit design.