Starting in the early 2000’s, carriers began offering HSA-compatible health plans, known as High Deductible Health Plans, or HDHPs. These plans proliferated throughout the market because the premiums paid by employers were dramatically lower, and in many cases, the employer would also contribute to the HSA for each employee. Between 2007 and 2018, enrollment of people under age 65 on private insurance in an HDHP increased from 17% to 46%.
But as these have grown in popularity, we’ve also been able to observe whether the purported benefits of an HDHP and HSA pan out for the employer and employees. And from our perspective as benefits consultants, the plans do not always deliver on their promise to employees and the employer offering the plan due lack of transparency, claims, and the strain that is placed on employees.
Rather, we believe that self-funded health insurance plans can deliver on the promise of HDHPs and HSAs to reduce healthcare costs on employers, improve employee health, and reduce strain on employees.
HSAs Don’t Reduce Healthcare Costs or Prices
When an employee moves into an HDHP with an HSA, they don’t suddenly begin paying less for healthcare services or prescriptions. While the promise of the HSA is that with transparency, the employee will become a smarter healthcare consumer, many issues arise when we look more closely.
First, transparency in healthcare is still a work in progress. While some hospitals are posting prices online or offering price estimator tools to patients, few offer one set price to any patient on account of having contracts with multiple payers and carriers. Furthermore, few hospitals are complying with the national transparency regulations passed in 2022, which have minimal benefit to employees even if hospitals fully comply with them.
Limited Insight on Outcomes – There’s no Yelp for Healthcare
And even if employees could easily see the price for different services, they would struggle to compare prices with outcomes and quality. Few quality measures exist for patients to understand the differences between medical groups and health systems.
It’s Hard to Plan Healthcare in Advance
Second, only some healthcare services are truly planned in advance and therefore shoppable. Certainly, employees can shop providers and vendors for certain services such as prescriptions, diagnostics and tests, and pregnancies. But many services are difficult to truly shop for and consider the qualitative and quantitative impact of where they seek care.
Cutting Healthcare Waste or Valuable Care?
Finally, research has found that upfront medical costs can dissuade patients from seeking care, thus delaying intervention and increasing acuity of symptoms when they first present to a provider. People with HDHPs are much more likely than other insureds to forgo or delay care due to financial difficulties, as the National Center for Health Statistics has reported. And researchers reported to Health Affairs how patients with HDHPs use less care overall, not just unnecessary and wasteful care but including high-value care that is needed to preserve and improve health.
This shouldn’t be surprising because an HDHP may have a $2,000 or higher individual deductible and a $5,000 out-of-pocket maximum, while the median employee at a company may be making $35,000 to $50,000 a year. On top of this, 4 in 10 adults in the US report being unable to meet a $400 unplanned expense. We have to be honest about the fact that high-deductible plans and HSAs may be exacerbating poor health and chronic conditions and driving greater healthcare claims year over year for employers.
If employers want to reduce their healthcare spending, they need to reduce the frequency and severity of their healthcare claims. While HDHPs and higher cost sharing are supposed to address the cost of claims, the aforementioned research finds greater impacts on utilization, and not necessarily low-value utilization. From this perspective, high deductible health plans do not get the job done.
Self-Funded Health Insurance as the HSA Alternative
We work with groups with fully insured health plans and self-funded medical benefits, either strategy may be right for a company given its demographics, current state, and expectations about the future.
We acknowledge that many Americans struggle with making ends meet and one of the sources of strain is healthcare costs, and as such, we see it as our responsibility to help employers offer higher-quality and lower-cost healthcare to their workforces. Research and anecdotal evidence has shown that High Deductible Health Plans and Health Savings Accounts have not delivered on their original promise to creating change for the typical worker and American business.
From our perspective, a self-funded medical plan is the only way for most groups to offer better benefits, improve employee health and outcomes, and spend less overall in the long term. With the various cost containment solutions in the market and the numerous risk shifting and risk transfer strategies available, more groups than ever before are benefiting from a self-funded health plan.