Health Insurance Quotes
Why your employer wants you to take the high-deductible health plan
When you opened your annual health insurance enrollment package from your employer this year, you may have noticed something new: A high-deductible health plan (HDHP) linked to a health savings account for your medical expenses.
"More and more employers are offering them as a choice and, in some cases, they may be the only choice," says Paul Fronstin, director of health research and education for the Employee Benefit Research Institute (EBRI) in Washington, D.C.
HDHPs linked to health savings accounts (HSA) or health reimbursement arrangements (HRA) are also known as consumer-driven health plans because they force people to be more aware of their health care habits and choices.
Numbers likely to rise
This fall, when Aon Hewitt surveyed nearly 800 large and mid-size employers covering more than 7 million employees, it found that more than half (56 percent) are offering consumer-driven health plans as an option. It also found that another 30 percent are considering offering one in the next three to five years.
Another survey earlier this year by the human resources consulting firm Towers Watson and the National Business Group on Health found that 66 percent of companies with 1,000 or more employees offered at least one high-deductible health plan. According to the surveyors, that number could be nearly 80 percent in 2014.
Not only are more employers offering consumer-driven health plans (CDHPs), but they are also encouraging their employees to choose the CDHP if it's an option, says Mim Minichiello, senior partner and chief operating officer of the employee benefits firm EBS Capstone in Newton, Mass.
"Employers are trying to design the high-deductible plans so it makes it obvious which is the better choice for you," agrees Fronstin.
Many employers are making high-deductible insurance plans more attractive by subsidizing the HDHP's premiums at a higher level than they do for the other options, observes Maureen Fay, senior vice president at Aon Hewitt.
HDHP enticements vary
Still other employers are enticing employees by offering to make contributions to the employees' HSAs, which they can use to pay for their deductibles. Employees may be eligible for even bigger contributions if they complete wellness activities, Minichiello says. "They may offer four health seminars and say if you participate in three, you can earn money that will be put into your HSA. Or you might be rewarded for getting your cholesterol checked, getting a gym membership, or going to a smoking-cessation class."
Contributions to health savings accounts are tax-free and, unlike flexible spending accounts, the balances roll over from one year to the next. Both the employee and the employer can contribute -- up to $3,300 for individuals and $6,550 for families in 2014.
The key to getting employees to choose an HDHP over more-familiar traditional plans is communication, Minichiello says. It helps if employers present examples of what the employees' expenses might be under the different plans so they can compare side-by-side.
Bottom line is savings
Employers are pushing their employees to choose HDHPs to save money.
The premiums for HDHPs are not only less for the employee but also for the employer, Fronstin says. A study by EBRI of one employer in the Midwest that adopted a high-deductible health plan with an HSA for all its employees found its spending was reduced by $527 per person in the first year. Spending also declined for laboratory services (36 percent) and for prescription drugs (32 percent) when employees had HDHPs.
Fay explains that HDHPs have lower costs because "they motivate people to take ownership for their health and act more like consumers in the way they purchase their health care."
When people have to pay for their drugs, she says, they might be more inclined to choose the less expensive generic over the brand name. If they have a $2,000 deductible and know that an MRI is expensive, they are more likely to ask the doctor if it is absolutely necessary. Would a plain X-ray, which is less costly, do as well?
When employees have high deductibles, they don't forgo preventive care.
"For example, we're not seeing them missing their necessary diabetic eye exam," Fay says. As a result, the employers' claims are reduced. For employers that are self-insured, the reduction in claims can result in significant savings, Fay says.
And if employees are focused on staying healthy, it can mean fewer sick days and less absenteeism, Fay adds. Higher productivity affects the company's bottom line, she says.
Minichiello says offering an HDHP may be considered cutting-edge for some employers, but the option "has been pretty well received so far by both employers and employees."
Fay notes that some employers are making an HDHP the default choice if an employee fails to choose another option. That's another way of getting more of their employees enrolled in them.
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