High Deductible Health Plans: Not for Everyone

I’m in the third month of my high deductible health plan (HDHP) experience. And we’ve had some big bills to pay—I’m thinking that we may actually reach that family deductible early in the year. No surprises, though. I’ll let you know how it turns out. (If you’d like to read my earlier series on this subject, find the link to our blog site at www.cgr.org.)

A good friend sent me a column penned by someone who feels differently. The title tells it all: “I regret enrolling in an HSA.” Author Kelley Butler is having a major case of buyer’s remorse.

Kelley Butler is the editor of Employee Benefit News and her article can be found at http://ebn.benefitnews.com/news/regret-enrolling-hsa-2670271-1.html.

Kelley liked everything about her old health plan—except the price: “I knew we couldn’t afford the premiums we’d have to pay to keep our beloved PPO.” So she signed up for the high deductible health plan with a health savings account (HSA) and “hoped for the best.”

The best would mean that she wouldn’t get sick until she’d accumulated a tidy sum in her health savings account. That didn’t happen. And paying full price has been an eye-opener. Kelley tells us “I harken for the days when I could just put down my $30 copay and keep moving.”

Nowhere does she tell us if she still expects to save money over the year. She isn’t saving money now and she’s unhappy. This is a problem others will confront. Even if the plan is cheaper over time—much cheaper for someone who is healthy—it may not be cheaper in the beginning. And the plan may require that the consumer find some cash at an inconvenient time. Kelley also reports that she is reluctant to spend down her health savings account in case she needs the money in the future. That’s not surprising. She will spend health care dollars differently if they are the insurance company’s dollars instead of her own.

Nor does she like what the high deductible health plan (HDHP) encourages—she’s shopping for health care by price. “Rather than select the best doctor, I simply try to find the least expensive.” I doubt that she makes every other spending decision by looking only at the price tag. Does Kelley always buy the cheapest car on the market? Or the cheapest cut of meat? Frankly, I doubt that she always picked the “best” doctor under her PPO, either. We juggle lots of considerations when selecting a product or a service provider. When picking a health care professional we consider convenience, courtesy, professionalism and, as best we can, competence. With an HDHP, we must also consider price. Just like a car purchase, it isn’t a one-dimensional decision.

Kelley also seems to blame her health plan for the fact that her specialist doesn’t know what he charges. “I asked a specialist what he charged for a certain procedure and got a blank stare in response.” Me, I’d be angry with the specialist. Perhaps his look said “if you have to ask the price, you can’t afford me” and she was embarrassed. And Kelley may have been one of the first patients to ask the question. Health care professionals resist posting prices—even charging the same price to every patient—but that will change as consumers take charge of their care and begin to add cost to the other considerations.

Ms. Butler isn’t alone in her dissatisfaction, as she points out in her column. The Employee Benefit Research Institute and the Commonwealth Fund released a survey indicating that consumer satisfaction is lower with an HDHP than with a traditional plan—only 38% planned to stay with their plans when the time came to make a switch, compared to 61% of enrollees in traditional plans. HDHP consumers were less likely to report that their plan had provided them with health cost and quality info. And HDHP customers were more likely to pay attention to cost issues when making health care decisions.

High deductible health plans are designed to address the high and rising cost of health care—they are intended to force Kelley to consider the cost impact of her decisions. HDHPs put more of the burden of decision on the consumer. This has been uncomfortable for Kelley, particularly when she has been blissfully ignorant of the $170 charge for a specialist office visit or the $230 prescription drug. It would be naïve to expect consumers to be happy about assuming more responsibility.

In the printed article, Employee Benefit News highlights this quote: “I know high-deductible plans . . . are a source of cost savings for employers, but is that the only measure of their success?” Here’s a challenge for employers. Kelley was not forced into an HDHP. She could have stayed with her PPO but chose the HDHP because she wanted to save money. I suspect that her employer, Source Media, is like my employer—it probably pays the same amount toward her health care regardless of the plan she selects. She was offered a cheaper alternative and she took it. Would Source Media have a happier employee if they had not offered Kelley the cheaper alternative?

Decisions to save money have consequences. If I book a room at a Red Roof Inn instead of a Hilton, I don’t expect to be equally satisfied. Kelly booked the Red Roof and wished she was staying at the Hilton. She shouldn’t blame Red Roof for not providing Hilton quality at the Red Roof price.

Kelley’s reaction explains why “all inclusive” resorts and cruises are popular. Many of us would rather pay more in a lump and not have to make decisions. That’s a good reason for employers to offer different health plans. Forcing all employees into an HDHP is likely to be unpopular with some, even if the employees get all the savings.

Moreover, when employers offer high deductible health plans, they should help employees understand the responsibility they are assuming for their health care. Kelley Butler reports that she has delayed getting care “when she knows she should.” That’s not smart. Maybe Kelley’s right—perhaps she should switch to a more costly plan that doesn’t leave these decisions to her judgment. I don’t believe that it is irresponsible to offer HDHPs. But clearly some employees are better able to handle this responsibility than others. Employers and insurers must recognize that some level of orientation needs to be part of the package.

Kent Gardner, Ph.D. President & Chief Economist
Published in the Rochester (NY) Business Journal April 10, 2009