High-Deductible Health Plans: for Many, Too Costly

Consumer-driven health plans have larger deductibles than most uninsured households can afford.

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If there can be such a thing as buzz in health policy circles, for the past few years "consumer-driven healthcare" has been hot, hot, hot. Although only a little more than 1 in 10 adults is enrolled in one of these types of plans so far, it's the current big idea that everyone's focused on to reduce the number of uninsured and bring healthcare costs down.

Fundamentally, the idea is that if consumers have a bigger financial stake in their own healthcare—meaning they pay more for it, basically, because their plans have higher deductibles—this will lead them to make more fiscally prudent decisions and save the system money. (You know, you'll cut back on all those frivolous doctor visits that you schedule "for fun" because you like the gowns.) Since these high-deductible health plans have lower premiums than traditional plans, the thinking goes, coverage will become more affordable, and we'll make a dent in the 47 million people who are currently uninsured.

Sounds good in theory, but the reality is more complex. A study published online in the journal Health Affairs this week concludes that many uninsured people don't have the financial resources they would need to cover the deductible in a consumer-driven plan if they got sick. "A lot of people without health insurance would struggle to meet cost-sharing requirements under these plans," says Gary Claxton, the study's coauthor and a vice president at the Kaiser Family Foundation, a healthcare research and education organization.

Though definitions vary, a consumer-driven health plan (CDHP) often combines a high-deductible health plan with a tax-advantaged health savings account (HSA). In order to qualify for the HSA tax advantages, plans had to have deductibles of at least $2,000 for families and $1,000 for individuals in 2004, the year on which the data used in the study were based. (In 2008, the minimum deductibles for federally qualified plans are slightly higher: $2,200 for families and $1,100 for individuals.) The study drew from the triennial Survey of Consumer Finances by the Federal Reserve Board.

The study found that in 2004, only a third of uninsured households had at least $2,000 in financial assets, like savings accounts and stocks; the rest didn't have enough to meet the deductible if they got sick. Median assets for uninsured households (defined as having at least two people uninsured) was just $600 that year, compared with $5,500 for insured households. (Because medical expenses are generally unexpected, researchers didn't factor in illiquid assets like houses and cars.)

Since a high-deductible policy provides catastrophic coverage to protect people in a worst-case scenario, it's probably worth the money even if someone doesn't have the resources to cover the deductible, says Claxton. But with limited assets, those who are uninsured might very well run the math and decide it's not worth paying $100 a month, or whatever the premium might be, for a policy that doesn't seem as if it will cover their bills.

For example, in this story, I wrote about a study by researchers at the Kaiser Family Foundation and the Georgetown Health Policy Institute who found that families enrolled in consumer-driven health plans paid significantly more for maternity care than those who were in a traditional plan. In general, people in consumer-driven health plans are less satisfied with their costs than those in traditional plans. A Towers Perrin study (.pdf) last year found that less than half of employees in CDHPs said they were satisfied with their access to affordable healthcare, while two thirds of those in traditional plans felt that way.

So, maybe it's not too surprising that consumer-driven healthcare has made only limited inroads among the uninsured. According to a study released in March by the Employee Benefit Research Institute, only 7 percent of people enrolled in CDHPs with a tax-advantaged account were uninsured before they got their current plan, and just 15 percent of those with a high-deductible plan but no savings account were uninsured pre-signup. "People in consumer-driven plans are...no more likely to have been uninsured prior to enrolling than people in traditional health plans," said study coauthor Sara Collins of the Commonwealth Fund in a press release announcing the study's results. "These plans are not yet solving the problems they set out to address."