By Eileen Ambrose, The Baltimore Sun
November 4, 2012
There's a good chance during open enrollment this fall that you will be offered a high-deductible insurance plan with a savings account — if you haven't already been nudged into one.
Increasingly, employers are offering this as a way to rein in their health insurance costs. The high deductible means lower premiums, benefits experts say. And employees — confronted with the prospect of potentially paying thousands of dollars before insurance kicks in — are less likely to run to the emergency room for minor problems, which also keeps costs down.
The plan frequently is paired with a health savings account, in which workers may set aside pre-tax money to cover the deductible and other medical costs. Employers sometimes chip in, too, to encourage participation.
This year, 19 percent of workers with insurance from an employer were enrolled in a high-deductible plan, more than double the percentage from just three years ago, according to the Kaiser Family Foundation. And these plans now have edged out HMOs as the second-most-popular option offered by U.S. employers, benefits consultant Aon Hewitt reports.
Studies suggest that these plans reduce health care costs — at least initially.
"They are seeing a savings. The question is why and if it's sustainable," said Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute. "The jury is still out."
With employers seeing health care costs rise year after year, though, more are willing to try high-deductible plans. Some employers are beginning to make this their only choice.
M&T Bank, for example, is doing just that for next year, using its current insurance provider. The bank also will contribute to employees' health savings accounts on a sliding scale.
"Employees who make less get more of a contribution," spokesman Phil Hosmer said.
As with all plans now, preventive care is fully covered, so M&T workers don't have to pay any deductible for physicals or cancer screenings. In recent years, the bank also added wellness initiatives, such as cash incentives for workers and their families who take health assessments or undergo counseling sessions with a health coach.
"We feel by increasing the focus on employee health now, [we] can manage the cost of the growth of health care over time," Hosmer said.
High-deductible plans sprang up in the late 1990s, partly in response to the public revolt against health maintenance organizations, which were seen as limiting access to needed care, according to a report released last month by the Robert Wood Johnson Foundation.
Health savings accounts started to appear in 2004. Employees can contribute untaxed money into this account and use it later to pay deductibles and other medical expenses. About one-third of employers add money to workers' accounts, according to an Aon Hewitt survey.
For 2013, the most that can be contributed to a health savings account is $3,250 for an individual and $6,450 for those with family coverage.
Any money unused at the end of the year remains in the account, where it can earn interest or be invested. When employees leave the company, they can take the money with them.
(Health savings accounts are different from so-called flexible spending accounts, another popular option in which employees set aside money for health expenditures but the cash must be spent annually or it's forfeited.)
Under federal rules, plans paired with a health savings account must have a deductible next year of at least $1,250 for an individual and twice that for family coverage. Kaiser reported this year that the average deductible for a plan with a health savings account was $2,190 for an individual, and $4,068 for a family.
Some plans will pick up the full cost of coverage once the deductible is met, while others require workers to pay a certain percentage of their medical bills until they hit a cap. Next year, the maximum out-of-pocket expense will be $6,250 for an individual and twice that for families.
(Some employers offer a health reimbursement arrangement instead, which follows different rules. The employer contributes money annually on behalf of workers, and the company keeps any balance left over once employees leave. Baltimore-based T. Rowe Price started offering HRAs this year with plans that have modest deductibles. The company kicks in up to $400 in the HRA and adds $50 to $150 extra for each healthy action workers and family members take, such as getting a physical.)
High-deductible plans often are called consumer-directed health plans, a name that implies patients will question their doctors on whether a test is really necessary or insist on generics over brand-name drugs.
Initial surveys suggest the plans do change behavior somewhat — although maybe not as intended.
The RAND Corp. reported in a study released last year that compared to others, consumers spent on average of 14 percent less on health care the first year that they switched to a high-deductible plan.
Most of the savings comes from people going to the doctor less often, while the rest came from consumers managing their care, such as asking for generic drugs, said Amelia Haviland, an associate professor at Carnegie Mellon University and an author of the RAND study.
One troubling sign: The study found that consumers in high-deductible plans cut back on preventive care, such as childhood vaccinations and cancer screenings, even when these services were fully covered by insurance. The study concluded that there may be confusion over the plans.
That could signal problems in the future.
"It might seem like you have lower costs in one year," said Cheryl Fish-Parcham, deputy director of health policy for the advocacy group Families USA. "Your employees haven't used services that year. It doesn't mean that their health didn't get worse. You might have higher costs showing up down the line."
For now, high-deductible plans tend to attract young, healthy workers.
That's the case at KEYW Holding Corp., a cybersecurity company based in Hanover that offers a variety of plans, including a high-deductible option with a health savings account. The four-year-old company employs more than 1,000 workers, and roughly one out of 10 opted for in the high-deductible plan.
Most of those participants are younger and single, said Emily Ringer, KEYW's benefits manager.
The deductibles are $2,400 for individuals seeking care in network and $5,400 for families. But participants don't expect many medical expenses other than preventive care, which is fully covered, Ringer said.
And they like the interest-bearing, tax-friendly savings account that will stay with them to pay future medical bills, she said. KEYW doesn't contribute to the account.
Unfortunately, there are no simple rules of thumb for workers to know whether they are better off in a high-deductible plan or more traditional one. Workers just need to do the math on each plan.
Experts said workers should look at the deductible and make sure they can afford to pay it all at once, which could happen — even to young, healthy employees — if an accident occurs. This, of course, could be offset significantly by a generous employer contribution to the health savings account.
One critical measure to look for and be sure you understand: the maximum your plan requires workers to pay out of pocket annually.
"The bottom line: If you get really sick, you want to know how much you have to pay," said Gary Claxton, a vice president with the Kaiser Family Foundation. "That's what insurance is really for."
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