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High Deductible Health Plans: Is the Landscape Changing?

The introduction of high deductible health plans in 2003 drastically changed the employer sponsored health care plan landscape. A change in the tax code encouraged employers to experiment with offering these plans. In addition to reducing costs to employers, the idea behind these plans was that by educating employees and have them bear increased costs at the point of care, they would become more attuned to the price of these services and shop carefully for coverage. Large employers, as many as 39%, offered only high deductible health plans in their suite of employee benefit programs.

Although employer sponsored health care costs continue to rise with no end in sight, some large employers are taking a second look at providing only a high deductible health care option to employees. In fact, according to a survey released in August 2018 by the National Group on Business Health (NBGH), for the first time in four years in 2019, the number of employers who offered only a high deductible plan is projected to decrease from 39% to 30%. Why the change? Wouldn’t this impose an even bigger employer health care expense?

In the years since their 2003 introduction, high deductible health care plans haven’t worked out as well as employers had hoped. Certainly high deductible plans are health insurance, they don’t guarantee that people can afford to get sick. Half of all workers now have insurance with at least a $1,000 deductible for an individual, up from 22% according to new data from the Kaiser Family Foundation (KFF). The KFF data also revealed that one in four covered employees now have an individual deductible of $2,000 or more. Between monthly premiums and deductibles, many people can’t afford to pay anything further towards health care expenses.

While employers continue to educate employees in the hope that they would become more astute medical consumers, the ability to compare and research doctors and hospitals isn’t always possible. Often medical treatment is unplanned, so individuals are unable to properly determine the costs of alternatives. Price comparison tools are frequently hard to use. And given the general complexity of the health care system, people find it is too difficult to navigate.

Large employers were also looking to avoid the “Cadillac” tax, a 40% excise tax on high cost employer coverage to be assessed to employers, initially scheduled to take effect this year. By offering only a high deductible plan, they wouldn’t incur the tax. The effective date of this tax has been postponed several times. It is now scheduled for 2022, but it is hard to say whether it will ever happen, which may contribute to an employer adding back more attractive alternatives to high deductible health plans.

Stay tuned!

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