Trouble Ahead For High Deductible Health Plans?

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Trouble Ahead For High Deductible Health Plans?

Benefit plans with high cost-sharing do much more than simply shift costs from employers and health plans. Conventional wisdom suggests that they help lower overall medical expenses by making patients more selective and cost-conscious consumers. However, studies are beginning to ask if high deductibles could actually result in adverse consequences in the long run due to avoidance of necessary care in the short run.

There is not much comprehensive or definitive knowledge about this potential trend yet. This post outlines a few observations based on the current state, and recommends actions that health care leaders can take while time tells us what high deductible plans really have in store for costs and outcomes.

The Kaiser Family Foundation reports that average annual out-of-pocket costs per worker rose almost 230 percent between 2006 and 2015, based on its annual survey of employer health benefits coverage. Key findings from this survey were also featured in a Health Affairs Web First release last month.

As employers cut back on health care spending, more small and large employers are offering high deductible health plans (HDHPs) among their benefit options, often paired with a tax-free spending account to pay medical bills that both employers and employees can contribute to. In 2015, 24 percent of all workers were enrolled in a HDHP with a savings option. This is a dramatic rise since 2009, when just 8 percent were covered under such plans. The latest survey also suggests that 46 percent of employees have annual deductibles of over $1,000.

This trend appears to be justified by the results of a widely publicized study this year by the National Bureau of Economic Research (NBER), which indicated that employers who offered high deductible plans did indeed reduce health care costs over three years, compared to those that did not.

Besides shifting a larger portion of the cost to consumers, plans with significant cost-sharing can curb utilization of medical services, since patients may think twice about spending money on care deemed avoidable, deferrable, or unnecessary.

There are growing concerns, however, that this may pose problems. Patients may be forgoing important care and potentially costing the health care system more in the long run. An NPR article earlier this yearsummarized the concerns, correctly stating that everybody on the health care playing field is worse off if people choose not to have important preventive care. One in five persons mentioned avoiding preventive care due to cost concerns in a study cited in the article. This behavior may well hinder early diagnosis and result in increased cost of chronic care management, according to a recent PWC report.

Current State And Research

In truth, are HDHPs really worrisome? While we do not have a definitive answer to this question yet, there is a fair amount of commentary on potential issues, as well as qualitative and quantitative studies that have attempted to understand the effects of these benefit plans. Listed below are some observations based on market trends and research thus far.

1. Consumer-Directed Health Plans Appear To Be The Way Of The Future, So The Scope Of The Problem—If There Are Indeed Negative Consequences—Is Large.

PwC’s Health Research Institute found that 44 percent of employers are expected to offer HDHPs as the only benefit option for employees in the next three years, in their continued effort to reduce health care spending. Therefore, more patients who rely on employer-based coverage have to pay significant amounts out of pocket or from a health savings account (HSA) to buy health care services. This trend is supported by a 2014 census report released by America’s Health Insurance Plans (AHIP) illustrating the growing popularity of HSA-eligible insurance plans, which typically have high deductibles. As of January 2014, 17.4 million people were enrolled in these plans, a 74 percent increase over 2010 levels.

Higher out-of-pocket costs also appear to be the reality for consumers who purchased health insurance through federal and state-run marketplaces. According to an April 2014 Department of Health and Human Services (HHS) report, 65 percent of enrollees chose silver plans, in which 30 percent out of total health care costs would have to be covered by the consumer. The average deductible amount in these plans is $2,907 per person.

Hence, whatever the effects of these benefit plans, they are borne by a large—and growing—consumer base.

2. Survey-Based Studies Suggest That There Is A Broad Lack Of Consumer Understanding Of How These Plans Work.

Many high deductible plans feature little to no out-of-pocket expenses for preventive screenings and office visits. Yet, a recent study in California found that most patients did not know this information.

With greater shifting of costs to consumers, the design of benefit plans has become more creative and complex, and the growing complexity may be limiting consumers’ understanding of coverage even as health plans and employers ramp up education efforts. A Health Affairs article recently suggested that this lack of knowledge may lead to consumers avoiding care due to cost concerns, even if it is in fact exempt from out-of-pocket spending.

3. There Is Ample Evidence That People Are Forgoing Medical Care Due To Cost.

A Thomson Reuters phone survey of 12,000 households in 2009 found that 20 percent of people cited delaying or postponing care due to cost concerns. Survey data from Families USA published this yearsuggests similar behavior: 25 percent of people avoided needed care—tests, treatments, follow-up care, and prescription drugs—because they could not afford it. At least equally important is the observation that lower to middle-income individuals appeared more likely to forgo care. This is further confirmed by aRAND study that found lower-income people more likely to defer or avoid care.

These pieces of evidence shine a new spotlight on the perception of health care services as more elastic than they should be. Hence they compete with other household priorities that require out-of-pocket expenses.

4. Not Complying With The Recommendations Of Care Providers Is Problematic.

That not following doctors’ orders is detrimental may be an obvious statement. This notion is worth reiterating in the context of HDHPs, however, especially since noncompliance was neither the driving philosophy of these benefit plans, nor a desired byproduct.

In some plans, including those consumer-directed health plans with a health savings account, out-of-pocket expenses apply to prescription drugs as well, which may result in patients not filling prescribed medications. This phenomenon is especially troubling among the chronically ill, for whom following through with necessary medications and tests is vital for disease maintenance. Indeed, a recent Deloitte white paper suggests that provider-initiated disease management programs and the improvement in quality ratings may suffer, when patient compliance is challenged by high cost-sharing.

The RAND study cited before also articulated a potentially hazardous vicious circle: individuals in poorer health tend to be ordered more medical services that can result in comparatively greater financial burden, leading to noncompliance, which in turn sustains adverse health.

5. Some Studies Suggest A Negative Impact To Utilization In The Long Run Due To Avoidance Of Necessary Care In The Short Run.

A 2013 study published in Med Care by Katy B. Kozhimanill et al. sheds light on how HDHPs can affect emergency room utilization and hospitalizations, based on the behaviors of over 10,000 patients one year before and two years after switching from a traditional health maintenance organization (HMO) plan to HDHPs. The results showed that compared to a control group, female and male patients in the study reduced emergency room (ER) use by 11 percent and 19 percent, respectively.

The reduction in female ER use was mostly in low-severity visits—generally indicative of patients avoiding discretionary care due to high personal costs—while males avoided both low-severity and high-severity utilization. Typically, high-severity visits represent essential care that should not be deemed optional, thus the authors identified the trend among male patients as a cause for concern. Not surprisingly, the authors cited that hospitalizations among males increased by 30 percent in the following year, possibly illustrating the negative consequences of putting off necessary services.

In another study, Paul Fronstin et al. explored medication utilization and adherence in chronically ill patients enrolled in consumer-directed health plans with a health savings account (HSA). When compared to a control group of preferred provider organization (PPO) members, medication adherence fell in the first year of enrollment for patients with hypertension, dyslipidemia, diabetes, and depression.

The Challenges Of Imperfect Information

Proponents of HDHPs claim that growth in these benefit plans will induce consumers to seek high-value care. In fact, one motor driving cost control opportunity in high deductible plans is the empowerment of patients to make better choices about the medical care they seek.

It is important, however, to note that this motor is fueled by perfect information, which, as current research and commentary suggest, is simply not a reality. Many consumers appear to have incomplete or inaccurate understanding of benefit structures, like the deductible amount to be paid for different types of services. In addition, consumers often have varying perceptions about what kind of care can be considered discretionary, and the possible health outcomes that result from their decisions.

Unfortunately then, it appears as the optimization of care decisions, as hoped for by high-cost-sharing proponents, may be unrealistic. On the contrary, NBER states in its research findings that the key reason behind the slowdown in seeking medical care may be imperfect information, rather than consumer mentality to optimize. This is especially problematic given that recent observational studies suggest that enrollees in consumer-directed plans often forgo preventive and chronic care.

Despite the potential problems caused by imperfect information, the growth of HDHPs continues to accelerate.

Short-Term Recommendations

One logical takeaway from this discussion is to mitigate imperfect information through continued emphasis on educating consumers about benefit plan design. While this crusade is under way, and given the limited foresight on long-term effects of HDHPs, and the concurrent, rapid growth in HDHP offerings, what else can we do in the meantime?

First, clinical staff should develop a sustainable strategy for additional follow-up with patients to ensure that doctors’ orders are being fulfilled appropriately. Provider teams have to look beyond the physician to provide this service, perhaps by deploying dedicated patient navigators within the care team. Such resource additions may be well-justified among provider groups that are increasingly entering accountable care arrangements and thus bolstering their population health management efforts. In traditional fee-for-service arrangements, payers may opt to partner with providers to ensure the resources for such follow-up.

In addition, some of the research that has focused on effects of consumer-directed plans on prescription drug utilization points to the need for drugs to be exempt from high deductibles. Both innovations in curative medications and the increase in medication adherence have produced substantial savings in the health care system, therefore such barriers to fulfilling prescribed orders should be curbed to the extent possible. There are other existing cost-sharing practices for prescription drugs—like tiered copayment systems among commercial health plans—that may prove to be more innocuous while maintaining some extent of cost-sharing.

Finally, due to the lack of definitive knowledge about the long-term effect of HDHPs, further research is needed and especially warranted given the possibility that it may confirm adverse consequences ahead. Studies similar to the ones cited here that involve longitudinal follow up of patients with high deductibles may better influence our understanding by providing empirical evidence about patient behavior across a range of socioeconomic backgrounds. While this information may not change the course of consumer-directed benefit plans, it is particularly necessary to drive strategic decisions in the medical insurance, policymaking, and provider communities to ensure care compliance and affordability.

High deductible health plans are here to stay. With prospect of trouble ahead, providers, payers, and researchers must do their parts to curb the unintended consequences of a possibly shortsighted phenomenon in health care.


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