High Deductible Health Plans

The fervent national debate about health care reform is a testament to the exorbitant costs of maintaining health insurance, for both businesses and employees. As open enrollment season for insurance plans commences, more businesses will be looking for options to help lower expenses – one of which will be high-deductible health plans, experts say.
 
High-deductible health plans are just that – enrollees pay a higher annual deductible for their insurance in exchange for a lower monthly premium. The plans, which start at $1,200 for single payers and $2,400 for families in 2010, are often accompanied by a health savings account (HSA), which employees can set up to have tax-free dollars deducted from their checks – and sometimes contributions from the employer – stashed away to aid in paying the deductibles.
 
In addition to lower premiums, the rationale behind HDHP savings is this: by making employees more financially responsible for their own health care, they will be more vigilant in staying healthy and seeking the right treatments, which can reduce the frequency of unnecessary doctors' visits.
 
The HSA also makes the plan potentially more cost-efficient for employers than say, an H.M.O. or P.P.O., since the company often ends up forking over less money in the HSA than it would paying a high share of each medical bill. In addition, the HSA deposits help the employee offset the future cost of medical care because it rolls over from month to month – a possible incentive for employees to join the plan.

According to a study on employer health benefits by the Kaiser Family Foundation, the number of companies enrolled in HDHPs has grown from four percent in 2006 to eight percent in 2008, and has held steady in 2009.
 
"I believe that we will continue to see small businesses and large companies adopting high deductible health plans," says Dan Prince, health care analyst and president at Nashville-based Catalyst Healthcare Research. "Having money in that account gives employees piece of mind," he says.
 
However, despite the cost-saving potential of HDHPs, says John Schneider, general manager of U.S. health economics at Bethesda, Maryland-based Oxford Outcomes, there is plenty that small businesses should consider before adopting the plan, including the age and health of the staff.
 
"If I have a healthy employee, and I put them on an (HDHP with HSA), it might not make any [financial] difference" for the employee, says Schneider. "If I have a less healthy employee, it's equivalent to cutting their salary by the amount of the deductible. That's a huge difference, especially in this economy."
 
It's also important to consider the labor market in which the company operates, because the amount the employer saves on an HDHP might not be worth switching insurance plans and potentially alienating top-tier talent, says Schneider.
 
"A lot of small businesses that have high-tech, high-skilled workers are already paying a lot of money in salary," he says. "A high deductible plan is going to pale in comparison to that."
 
Prince, of the Catalyst Healthcare Research, says that by switching his 25 employees to Blue Cross/Blue Shield's HDHP (with an HSA) four years ago, the company was able to slash premiums by 50 percent, which allowed them to reinvest funds into each employee's HSA. However, as the economy's stability began to crumble, monthly premiums began to rise, and they stopped investing funds into the accounts.
 
"We elected to stay with the same plan," he says. "We figured that anybody else would be charging the same amount of money (for health insurance), if not more."