The Growing Problem of High Deductible Health Plans
According to a recent Health Beat blog entry, special “high deductible health plans” (HDHPs) that are tied to health savings accounts (HSAs) are gaining popularity in the US. The number of Americans enrolled in these health plans doubled in the last 2 years, to 6 million. Even more alarming is the fact that some see these plans as the way to expand health care coverage. As Maggie Mahar’s blog points out, however, this is far from the truth. The average HDHP deductible for a family in 2005 was $4000 – a huge barrier to access to care. People with high deductibles are more likely to delay or skip care due to cost, leading to greater health needs and higher health care costs in the long run. And, just like for other insurance coverage, premiums for HDHPs are rising quickly.
HDHPs are not a solution to expanding coverage to the low or moderate income. According to Mahar, the only beneficiaries of the advent of HDHPs are the wealthy who can use HSAs as tax shelters. And, as HDHPs gain popularity, Mahar worries that they’re becoming a barrier to system-wide health care reform, by creating a rift between the rich (who benefit from the plans often touted as an alternative to reform) and poor (who need real reform):
“As a gift from the government (actually a remarkably generous present from other,less fortunate taxpayers), the HSA can’t be beat. A family that tucks $5,800 into an HSA for 30 years, and earns 7 percent a year on their investments, will wind up with a nest egg worth well over half a million dollars—tax free. You can then leave the HSA to a spouse, again without paying taxes…. HDHP/HSA plans are a sweet deal for the rich. They pay for care only when they need it—a risk that they can afford thanks to their deep pockets—and they have a new tax shelter to boot.”
In MA, the Connector Board last year decided to exempt HDHPs from the Minimum Creditable Coverage standards. This is a huge loophole to the guarantee that everyone has adequate insurance coverage and one that can’t be readdressed too soon.
Lisa Kaplan Howe
May 21st, 2008 at 8:43 am
First, your link to Health Beat Blog is broken.
Second, the criticism from that Health Beat Blog is that HSAs type structures and high deductible plan are inappropriate for the poor simply because of the high deductible.
Possibly true, but no reason to reject them as being simply boondoggles for the rich.
A benefit for the rich isn’t in this case a detriment to the uninsured. Certainly, the high deductible plans are beneficial to the young “I never get sick” uninsured rich or poor adult.
Back to the HSA. An HSA simply makes direct health expenditures deductible. i.e. health insurance premiums provided by an employer are already deductible, so with an HSA, the direct health payments are also deductible.
And since the wealthy have more money than the poor, it makes sense that they’ll get the larger benefit. It’s not unfair, nor does it harm the poor, unless of course you’re of the mind that the wealthy should pay more tax. At that point, it’s a wealth-redistribution argument, not an policy argument about health insurance.
May 21st, 2008 at 10:55 am
To gbridgman,
RE “At that point, it’s a wealth-redistribution argument, not an policy argument about health insurance.”
It never was an argument about health insurance because HSA’s are not health insurance.
Improved Medicare-For-All Single Payer Health Care is the only way to do health reform if the actual goal is to provide comprehensive health insurance for all that covers quality affordable care in the most cost effective way.
HSA’s, nor the MA Individual Mandate Law disaster, never were about health insurance reform. What they’re about is keeping the insurance industry, the drug companies, and the rest of the medical industrial complex in control of our obscenely expensive and grossly inequitable health care system.
May 22nd, 2008 at 8:20 pm
Gee, I thought that the mandate was to prevent one from dumping a $100,000 bill on the public’s lap. A high deductable plan would do just that. But even that’s not enough to satisfy MA politics.
Proof positive that the mandate is designed to rob from the healthy uninsured and pay the bill of others. Case closed.
May 23rd, 2008 at 6:13 pm
“The average HDHP deductible for a family in 2005 was $4000 – a huge barrier to access to care.”
Pretty funny (as in ‘funny -irnoic’) comment from an organization that seems to to think the $4000 deductible on a Commonwealth Choice plan is just spiffy.
May 23rd, 2008 at 6:15 pm
I forgot to add that if, because of the $4000 deductible in a fmaily that this is true
“In MA, the Connector Board last year decided to exempt HDHPs from the Minimum Creditable Coverage standards. This is a huge loophole to the guarantee that everyone has adequate insurance coverage and one that can’t be readdressed too soon.”
Then the Commonwealth Choice palns are NOT adequate either!
June 6th, 2008 at 4:47 pm
Modern “health insurance” has become a combination of catastrophic insurance and paying for normal health expenditures. When we confuse the two we get into trouble.
As a consumer of high deductible plans, why would I want to have insurance to pay for my normal visits to the doctor? It’s a whole lot easier just to pay for them myself than to pay an insurance company to pay the bill. Additionally, I don’t have to pay for mandated coverage I neither want or need.
All I want is for someone to cover me in the case of ruinous medical expenses. I don’t buy insurance to pay for oil changes on my car. Why buy it for normal visits to a doctor?
Most of this argument is about wealth transfer to people who cannot pay for health care. This is interesting social policy but it’s about giving a benefit to people who can’t afford a service themselves. It has nothing to do with insurance.
June 17th, 2008 at 12:18 pm
The reason Government is BROKEN is due to this type of intellectual thinking combined with the absence of “common sense”.
The principle of a HDHP is that health care consumers (sick people) will make better decisions when they have to weigh both the costs and benefits. (instead of only weighing the benefits)…
Another principle of a HDHP is that the “health care system” we be more efficient when the intermediaries are removed from the process (i.e. accounts, insurance, legal, brokers)… to the extent that a doctor gets paid up front for the service performed by the patient… then the costs of the brokers, insurance carriers, accountants, and clerks can be reduced or eliminated.
September 17th, 2008 at 10:04 am
Mark B., IMHO, you hit the nail on the head.
“I don’t buy insurance to pay for oil changes on my car. Why buy it for normal visits to a doctor?”
The argument here, as with socialized medicine, is this is a choice. If you don’t want to make this choice, don’t.
There is oftentimes an uproar over socialized medicine with arguments along the lines of, “why should the government tell me when I can go to the doctor.” That’s actually not the case. All that would happen in socialized medicine is the government would tell you what costs will be covered under the plan — just as with the private sector. Sure, in an effort to control costs, a socialized plan may not be as comprehensive as what is offered from health insurance companies, but it does not prevent a person from purchasing extra coverage on the private market.
As for the argument in the article, “HDHPs are not a solution to expanding coverage to the low or moderate income.” A solution, maybe not. An option, most definitely. As someone who had to find health coverage on my own (I’m an independent contractor), a HDHP was a godsend. Pay about $4800 a year in premiums instead of $14,000. Even if I were to reach the high-deductible, it’s still cheaper.
You see, since I am not low-income, I don’t qualify for Medicaid. In the one time I had to deal with someone who has Medicaid I walked away somewhat jealous of the coverage they are getting. Don’t get me wrong, I wouldn’t take on her other financial problems just to qualify for Medicaid. Still, the coverage is pretty comprehensive compared to what you can find as an individual on the open market.
The thing that is frustrating here is the “wealth redistribution” argument. Just because somebody has worked hard to improve their lot in life doesn’t make them a bad person. My ultra-liberal friends operate on this theory that poor people are poor because of bad luck. While this is often true, there is also a number of people who are poor because they would rather be lazy and collect welfare. Or perhaps with Medicaid and other social programs available to the poor it is more cost-effective to stay poor than move into the lower-middle class. In other words, there isn’t enough incentive to get off of welfare, but I suppose that is another argument for another place.
Sorry for losing the plot there at the end.
May 21st, 2009 at 11:02 am
When I looked into buying health insurance for my husband and child (I’m ineligible because of a pre-existing) I ran the numbers for HDHP vs. traditional plans in my state and found out that for the very sick a High Deductible Health Care Plan would be the best option.
So although I couldn’t get the best option for me I was able to get it for my son and husband, and if they ever become very ill they are better covered. Also, this plan is Health Savings Account compatible, so we can save for those times when they are truly sick.
You can see the numbers I ran here: http://carolynnmarie.net/health_insurance_blog/?p=248