Will HDHPs rule the medical insurance landscape?
As health care coverage costs continue to increase, a high deductible health plan (HDHP) may be presented as one of the best ways to help your employees control medical coverage costs. As these plans grow in popularity, it’s important to know how they could affect the medical coverage landscape as a whole.
The Rise of the HDHP
Since 2010, average family premiums have increased 55%, at least twice as fast as wages (27%) and inflation (19%).1 One way employers are combating these rising costs is by making the switch to a HDHP and foregoing a more traditional kind of coverage. The idea with a HDHP is that families are able to keep their coverage costs down every month. An individual with a single HDHP saves, on average, $83 per month on coverage or contributions compared to an individual with a more traditional plan.2 The adoption of these HDHPs is continuing to rise with employers as they see what savings are possible. In 2019, 30% of covered workers were enrolled in an HDHP.3 While HDHPs could take over the medical coverage landscape as rates continue to increase, some companies have found that they’re not all they hoped for.
Impact of HDHPs on the Insurance Industry
Many organizations have embraced HDHPs in the past decade. Proponents claim these plans encourage consumers to take more responsibility for their health, helping them to be more conscious of the costs when seeking medical care. However, 43% of insured patients say they delayed or skipped physician-recommended tests or treatment because of the high associated out-of-pocket costs.4 If high deductible costs are deterring people from actually using their benefits, some companies offering HDHPs are rethinking them because of concerns that employees will neglect necessary treatment to avoid high out-of-pocket costs. Furthermore, when the burden of payment falls onto the consumer, providers may be left with bad debt if people with HDHPs can’t afford to pay their out-of-pocket medical fees. High deductible plans can work well for employers and employees with the proper education, though.
Education Is Key
HDHPs can often be underused by employers because their employees don’t completely understand how they work. For employees to adopt an HDHP and appreciate the savings it can bring, they must be fully educated. HDHPs can give employees the opportunity to build up a health savings account (HSA), which can provide pre-tax savings that can help pay for eligible medical expenses, like their deductible when it comes time to use their benefits. Their money works hard for them in an HSA. It earns tax-free interest, any unused funds roll over to the next year, and it can be used on eligible health care expenses or saved for the future. With more individuals taking control of their wellbeing more than ever, an HSA can cover a wide variety of medical expenses that improve their overall health and wellness
An HDHP with an HSA is great way for your employees to take ownership of their health plan, but it all leads back to education. If your employees don’t see or appreciate the value of an HDHP, they will be less likely to participate. Communicating and educating on the benefits of an HDHP is the only way you and your employees will find the savings it offers.
Why HDHPs Are Here to Stay
Despite the negative effects some people have found from HDHPs, it’s safe to say they are here to stay. Employers are drawn to them to help reduce health insurance coverage costs. It is predicted by the Centers for Medicare and Medicaid Services (CMS) that national health spending will grow at an average rate of 5.4% per year until 2028 and reach $6.2 trillion by 2028.5 HDHPs offer one way for employers to address high coverage costs, even if it typically means employees are having to spend more when it comes time to use their benefits. As healthcare spending continues to grow at a steady rate, high deductible health plans will continue to increase in prevalence.6
This blog is up to date as of April 2021 and has not been updated for changes in the law, administration or current events.
