7 Things about High Deductible Health Plans

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Health costs have risen. That’s pretty obvious. And if you’re reading this article you’re probably wondering if a high deductible health plan is something that you should consider. Maybe it’s because your health plan just became more expensive, maybe your costs are actually pretty low but you want to save some extra cash. Regardless of why you’re considering a HDHP, there are a few things that you may not have considered yet.

1. Employees may not be able to afford a high deductible

60 % of the American population has less than $1000 to spend on healthcare. Yes, even you Mr. CFO of a successful accounting firm. Your employees may not be able to handle that deductible even if you do reduce their monthly premium. The good news is that you can help your employees reach deductibles if they have to (see item number 2).

2. Check out HRA accounts

Most companies turn to Health Savings Accounts (HSA’s for those lucky enough to be “in the know”) to help fund their plans. People like them, you can contribute to them and everybody gets to take it with them to their next job! How about the HRA (health reimbursement account) though, you know, the evil twin brother to the HSA? These can actually be really helpful because the company gets to keep the unused money at the end of the year, put it back into the health plan, and help the higher claimants reach that deductible. This can encourage the “good” behavior of getting more preventative care, and help those with chronic conditions (the people that can’t typically afford a HDHP). Looks pretty good when you compare it to full HSA accounts that, in practice, are often used as more of a retirement account.

(check out our blog on HSAs + HRAs here)

3. A lot of employees won’t reach your deductible

The simple fact is that a lot of people won’t really need a lot of care this year. About 70%, actually. You’ve probably considered this when making the move to a HDHP. If only a few people hit the deductible, shouldn’t I bring down the premium costs for everybody else and raise that deductible? Sort of. You can raise the deductible but make sure that those that are hitting it, are equipped to do so (see number 2).

4. Expect healthcare habits to change, and not for the better

Even though HDHPs are designed to reduce unnecessary care, you may be encouraging bad habits. There is a pretty ferocious debate taking place as to whether or not HDHP’s reduce expenses from waste or from necessary care (check out this health brief for more info on that). The good news is that either way you’ll be saving money. That is, for now. If your plan encourages avoiding all care (good and bad), you may be stuck with some pretty hefty rate increases when people actually have to get the care that could have been prevented in the first place.

5. Income is not increasing as fast as rates and contributions

Over a period of years, Americans have experienced a much higher increase in their healthcare contributions than they have with their salary. You don’t need to be in the industry to know that people don’t like this. Can a HDHP help with this? Yea, sure. Can it also hurt? Yep. This is because your overall (group) rate may continue to go up if the plan isn’t properly funded (see 6).

6. Lower the out of pocket max – put more into deductible than coinsurance 

One thing that people often forget to think about is the “out of pocket max” that a person has to pay after they’ve reached their deductible.  Even though they’ve met that sky-high rate in the first place, they’ve still got to chip in a hefty percentage of their care. One option that you’ve got is to step up your deductible (like we’ve been talking about) but bring down that out of pocket max. This way your higher users can truly get their chronic conditions, pregnancies and other massive claims paid for. See how much we can help if we fund plans correctly?

7. Think about company morale 

Now, even though your health plan is a big benefit for people, you still want to make everyone feel like its in place to take care of them (it is, isn’t it?). Pushing your deductible way too high isn’t going to make them feel loved. But providing an over-funded, mega rich plan isn’t going to make them happy either. Why? Because if you go too far in any one direction your premiums are going to be astronomical.