High-deductible health plans have become an increasingly popular means for employers to keep health care costs under control. According to data released last summer by the Centers for Disease Control and Prevention, between 2007 through 2017, the percentage of adults 18-64 with employer-provided health insurance who were enrolled in an HDHP with a health savings account increased from 4.2 percent to 18.9 percent, while the percentage enrolled in an HDHP without an HSA rose from 10.6 percent to 24.5 percent.
Over the past three years, however, our benefits research at Gartner shows that their popularity has been leveling off, as deductibles for individual plans have actually been trending downward. (Gartner Total Rewards Leadership Council clients can view our full report on medical plan trends and observations for 2018 here.) This trend suggests that employers are having second thoughts about whether the benefits of HDHPs outweigh the downsides.
A new survey published last month by the nonprofit Employee Benefit Research Institute (EBRI) and research firm Greenwald & Associates provides some insight into these pros and cons. The survey found that people enrolled in HDHPs were more likely to compare cost and quality when selecting non-emergency health care and to make cost-conscious decisions like choosing generic prescription drugs over brand names. HDHP enrollees also more likely to be offered and to participate in wellness programs through their employers, including programs that involve biometric screenings.
On the other hand, this cost-conscious behavior may not be entirely voluntary: 30 percent of HDHP enrollees said they delayed care in the previous year because of costs, compared to 18 percent of respondents covered by traditional health insurance plans. While the EBRI study does not clarify whether this care was essential or non-essential, another recent study of diabetics found that switching to a high-deductible plan increased their likelihood of delaying essential care.
EBRI also found that people with HDHPs were more likely to worry about finances than those with traditional health plans, who had higher incomes and levels of education on average than high-deductible plan participants. In fact, HDHP enrollees were “more likely than traditional plan enrollees to report that they worry a lot about their finances and that debt is negatively impacting their ability to save for retirement”:
When it came to the top financial concerns, HDHP enrollees were more likely than traditional plan enrollees to report that they were concerned about not being able to retire when they want to, running out of money in retirement, not having enough money to cover out-of-pocket health care expenses not covered by insurance, and being laid off from work. Overall, a large majority of traditional plan and HDHP enrollees reported having major financial concerns.
By their very nature, HDHPs are most beneficial to young, healthy employees who consume very little health care, and for those with more disposable income to more easily handle higher out-of-pocket costs. Employers are increasingly pairing HDHPs with HSAs, according to the Society for Human Resource Management’s 2018 Employee Benefits survey — though the rate of increase has been slowing. That survey also found that 37 percent of employers contributed to their employees’ HSAs; SHRM’s Stephen Miller notes that benefits consultants recommend providing HDHP enrollees with HSAs and then matching employees’ HSA contributions to encourage them to contribute through automatic salary deductions.
Employees can maximize their benefit from these triple-tax-advantaged accounts by treating them as long-term savings vehicles rather than spending them on immediate health care costs. Unfortunately, previous EBRI research found that low-income employees were less likely to take full advantage of HSAs, possibly because their employers weren’t helping them understand the tax benefits and how to get the best value out of their HSA. Regardless of the information gap, however, many low-income employees also can’t afford to pay out of pocket for health care today in order to grow their HSA for tomorrow.
This is one reason why economists Austin Frakt and Gilbert Benavidez argued in a recent piece at the New York Times that “active” health care instruments like wellness plans and HSAs, which require employees to take action to use them, are less useful than “passive” ones that help them (or encourage them to help themselves) automatically, such as auto-enrollment in 401(k) plans:
Scarcity is an especially tough problem for those struggling every day to make ends meet. In addition to time and money, some Americans might also lack educational opportunities and social support. That’s why active policies haven’t proved very helpful for the 50 million U.S. citizens who live in poverty. Work by the University of Southern California economics professor Leandro Carvalho and colleagues showed that low-income people were more “present-biased” after payday, worrying about the immediate more than the long-term effects of their decisions. …
[S]tudies have shown that health savings accounts are used primarily by wealthy people less in need of help with medical expenses. In financial literacy quizzes, a national survey found that college graduates and those making more than $75,000 per year did much better than other groups. This explains why people with an abundance of opportunity — those with higher incomes and more education among them — are likelier to make sound financial decisions, like investing in health savings accounts.