High deductible health plans (HDHP)s are supposed to incentivize consumers nee patients to shop more effectively for their care and choose only high value care at good prices. As we looked at yesterday, there is a significant problem in that most people in the health insurance market sphere aren’t touched by the phase transition from high actuarial value plans with low cost sharing to lower actuarial value plans with higher deductibles. The amount of money at risk due to the incentive changes of a HDHP regime is not a plurality of total spending.
More importantly, we also need to exclude people from the previous calculation who don’t have resources to actually fund their HDHPs. Academy Health has an interesting poster with the promise of a paper that I want to read as soon as it comes out. It looks at the conversion of people from low deductible to high deductible plans who have a common chronic condition. It then sees if there are savings and changes in utilization patterns. It then splits the sample into “low income” and “high income” groups.
We used a controlled interrupted time series design to examine employer-mandated HDHP transitions, minimizing selection bias. The intervention group comprised 26,674 HDHP members with diabetes age 12-64 included between 2003-2012. HDHP members were enrolled for 1 year in a low deductible (≤$500) plan followed by 1 year in a HDHP (≥$1000) and propensity score matched 1:1 to diabetes patients with low deductibles. Low income HDHP members (n=9641) were a subgroup of interest….
Principal Findings:
HDHP members experienced small pre-to-post reductions in ED visits (-3.1% [-3.9,-2.3]), hospitalizations (- 4.2% [-5.5,-2.8]), and total healthcare expenditures (-3.6% [-4.3,-3.0]) relative to controls, and no changes in measures of adverse outcomes. However, low income HDHP members experienced relative increases in high severity ED visit expenditures (8.1% [3.0,13.2]) and high severity hospitalization days (26.1% [19.7,32.5]) at follow-up compared to baseline.
People with higher incomes seem to have had very good results. They shifted consumption dollars towards out of pocket spending. Here they were price sensitive with no adverse impacts. However people with low incomes but employer sponsored insurance saw dramatic adverse events. My theory and speculation is that they did not have the readily available resources that could easily be shifted. They are resource constrained and the implied income of health insurance covering maintenance medication was an important part of the family budget.
There are a couple of important policy caveats that we have to take from this study as we think through current legislation. The first is the size of the deductible shift. Here the researchers are defining a large deductible as more than $1,000. In ACA terms, a $1,000 deductible plan is a 2018 Platinum plan assuming no other cost sharing. When this study was started, a $1,000 deductible was probably a weak Gold plan. That is not the type of plan under discussion.
A 2018 58% AV plan has a deductible of $7,000 before any claims are paid. This is, in my opinion, a significant difference past that of degree and towards a difference in kind. People who could absorb an additional $500 or $1,000 annual net income shock as they transitioned from a low deductible plan to a $1,000 deductible plan will find it far more difficult to come up with several thousand more dollars for their maintenance medications.
The second policy caveat that we have to draw out is the population. This is a population that received their insurance through work. We know that the employer sponsored insurance (ESI) covered population tends to be healthier than the general population and also tends to have more income. They have fewer complex co-morbidities and a greater ability to absorb a fiscal shock. And yet, even the low income segment of this subgroup is in trouble in a shift from small to still fairly small deductibles in the context of the BCRA.
How does this generalize to the Medicaid population? We know that the Medicaid population is income and asset constrained by eligibility requirements. We know that the Medicaid population tends to have more complex care needs for the same diagnosis for a variety of reasons. So how does this generalize?
My bet is that we would see the same negative impacts of increased adverse events and lower adherence to care plans because adhering to the care plan and avoiding adverse events requires resources that people on Medicaid are far less likely to have compared to people who have ESI insurance.
The BCRA even in its most generous potential implementation with states fully funding their portion of the stability funds and then dedictating the entire pool to enhanced cost sharing subsidies that match the ACA in actuarial value bumps (24% for people under 150% FPL for example) will still move people from Medicaid with de minimas deductibles to plans with $1,850 deductibles or higher. If the Medicaid population is anything like the low income ESI population, we should expect more adverse events from this financing regime change.
Finally, I just want to re-iterate my fundamental prior on HSA/HDHPs:
High deductible plans are appropriate choices for some people. They are not appropriate for everyone if we value appropriate as a means of providing effective, efficient care that meets the medical needs of an individual without bankrupting them or their family.
If I was the health insurance dictator in this country, I would allow high deductible plans to be sold. They would only be sold to individuals and families who are reasonably young (age is a pre-exisiting condition) without any signifcant claims history. The policies would not be automatically renewed until the most recent claims and medical history was reviewed. Furthermore, the potential buyer pool would be limited to people who have the ability to absorb a one-time shock of several thousand dollars without it being a crisis. This sub-population is fairly small, and can absorb the risk shifting that is inherent in a high deductible plan design.
O. Felix Culpa
As the former CFO of several small nonprofit organizations, I was responsible for selecting the insurance provider and plans for our employees. One year I added a high-deductible plan and and HSA as options alongside all the usual plans. After careful consideration, I chose that plan for myself, which seemed a reasonable gamble as a middle-aged healthy person (no prescriptions, no surgeries, no ailments since childhood asthma) who had some financial reserves and a little slack to add to a HSA. No one else opted for it. My gamble worked for me, but I can see it being extremely risky for people without a savings cushion – which is a lot of people in this country.
I hate that weighing one’s health insurance options comes down to gambling on future health prospects (will I be sick? will I get injured?) and one’s financial means. Not an original insight, but our society puts a ridiculously unfair burden on people’s means and capacity to predict the future.
David Anderson
@O. Felix Culpa: Agreed, under the criteria that I set, a HDHP/HSA combination is a reasonable bet for me at this point in my life. My wife, kids and I are all relatively healthy. We have reserves and we have the ability to switch to a low deductible plan once a year during ESI open enrollment. That was not the case for 2009 Me where a HDHP would mean it is hit by a bus and then prep a bankruptcy threat to work things out with the creditors insurance.
d58826
At the end of the day most non-policy wonks view healthcare and heath ins. as ‘when it hurts make it better’ and ‘don’t let my child die’ and I don’t care what it costs.
I realize at the policy level all the things David talks about are important but most people look at it like they look at the ‘in case of emergency break glass’ fire extinguisher. They aren’t really into the details.
David Anderson
@d58826: Exactly — it is the job of people like me to make sure the fire extinguisher works when needed and it does not bankrupt people if it is used.
cynthia ackerman
What about the HDHP with employer making up a pirtion of the deductible (Health Reimbursement Arrangement)?
For an employer with a fairly diverse employee pool, HDHP/HRA can save money overall.
But I wonder if there is a slippery slope towards the insurance industry preferring HDHP’s more broadly and selling them as appropriate for higher risk employees.
O. Felix Culpa
@d58826:
You’re right. I know from personal experience that most people’s eyes glaze over when you try to explain the most elementary aspects of their plan options. Frankly, mine do too, even though I’m trained in policy and finance. Unfortunately, willful – albeit understandable – knowledge avoidance comes back to bite folks when shit happens. Another reason why our system sucks. It places too high a burden on people to understand and weigh complex information in advance of unforeseeable needs. (Retirement funding too – but that’s a different topic.)
Jon H
“The amount of money at risk due to the incentive changes of a HDHP regime is not a plurality of fees”
In English please?
Also: “People with good incomes”
“good” is not a good way to put that. Use ‘high’ or ‘above average’ or whatever.
O. Felix Culpa
@David Anderson:
Exactly. Case in point where consumer “choice” is not a choice at all. Ted Cruz is an ass.
Barbara
This is totally unsurprising. HDHPs don’t make care cheaper they just shift costs to enrollees.
Kirk
I’m wondering if the studies account for time?
That is, at the lower end income positions the insurance may cover the four visits per year for monitoring and maintenance of diabetes, but if an employee’s “sick hours” are limited and the same regardless of condition, aren’t they less likely to take the preventative maintenance times?
Trying to clarify, “I can’t have my diabetes checkup. I took my hours when my kid was sick last week.”
Higher income positions seem likely to have more flexibility in that regard.
Kent
My wife had I had been using HDHP plans for our family for years. Works out perfectly for us and we are tens of thousands of dollars ahead of where we would have been otherwise. Both of us have jobs that have insurance options so we are lucky there. We chose to use my wife’s employer for our insurance. She basically has only two options.
1. HDHP spouse and family plan provided at no cost
2. Traditional gold plated low deductible spouse and family plan costing about $550/mo ($6,600 per year)
She also has a low fee HSA available through her employer with investment options in Vanguard funds to which we have been contributing the maximum of $6,750 for the past 5 years. In other words our monthly cost of insurance of the low deductible traditional plan is going into an HSA rather than to the insurance company.
Since this is tax deductible at our bracket we get about $2000 back in taxes each year meaning our actual HSA contribution is about $4750 and then government is giving us a free $2000.
As it turns out for us, the amount of our deductible, the, annual out of pocket cost of insurance of the non-HDHP plan, and our annual HSA contribution are all pretty close to the same number…about $7,000. So not counting the tax benefits, if we were to go through our whole deductible every year we would basically break even BEFORE getting back $2000 on taxes
At this point we have saved about 3 years worth of deductibles into our HSA so we are totally good to go if we have a bad year. So far the only medical usage we do is annual well child checks and annual preventative care checkups for my wife and myself which are covered without out of pocket costs anyway. Plus some minor cheap acne prescriptions. The only thing we had used the HSA for in the past 5 years was braces for two kids. Otherwise it has been untouched.
So we are making out like bandits using the HDHP plans combined with an HSA. We are getting free insurnance through my wife’s employer and using the HSA as a stealth tax deductible IRA that we don’t plan to touch until retirement if possible.
For healthy families in higher tax brackets with good subsidized HDHP options it is an incredible deal. Yet another example of inequity in this country I guess.