The Rise of High-Deductible Health Plans

At the Massachusetts Health Policy Commission’s annual Cost Trends Hearing, CHIA Executive Director Ray Campbell spoke about a trend in insurance coverage in the Commonwealth: the continued growth of enrollment in high-deductible health plans (HDHPs).

CHIA’s 2019 Annual Report noted 2018 enrollment in HDHPs increased by 3.0 percent, up to 31.5 percent, while enrollment in tiered-network and limited-network plans remained stable. This increase mirrored national developments that have seen the number of commercially insured consumers enrolled in HDHPs increase from 25.3 percent to 47.0 percent between 2010 to 2018, with a 3.3 percent increase from 2017 to 2018.    

HDHPs are health insurance plans with lower premiums and high deductibles. In other words, individuals need to pay out of pocket at least $1,350 annually before coverage kicks in. In theory, they are designed to incentivize consumers to make cost-conscious decisions about the health care they receive. HDHPs are often considered catastrophic coverage, protecting individuals against a potential high cost, but low likelihood event. Despite the potential for high out-of-pocket costs in HDHPs, the appeal of lower monthly premiums has led to their increasing popularity. Furthermore, for employees working for smaller firms, HDHPs are sometimes the only option. In 2016, the Health Policy Commission reported that 69 percent of small businesses offered only one plan to their employees, with almost half of those being HDHPs.  

In theory, HDHPs help consumers avoid unnecessary health care, as there are strong financial incentives to avoid unneeded medical appointments and procedures and to seek out low-cost providers. However, in reality, research has found that compared to those enrolled in traditional plans, consumers in HDHPs are more likely to avoid and delay needed preventive medical care due to cost, are more likely to have problems paying medical bills and make similar healthcare decisions as those enrolled in plans with low cost sharing. Despite the ACA mandate that preventive services be covered by all plans at no additional cost to the consumer, enrollment in HDHPs appears to lead some consumers to avoid preventive care, even in situations where little or no cost sharing would be required. 

The growth in HDHPs also has implications for our broader healthcare landscape. A 2017 white paper from the Massachusetts Medical Society (MMS) points to the reduction in usage of high-value care among HDHP enrollees and greater burdens among providers. Specifically, individuals who face high cost sharing use fewer necessary preventive services, have poor adherence to treatment regimens, and are less likely to access highly coordinated care, all factors that contribute to the need for more expensive and comprehensive care as health conditions worsen. The growth in popularity of HDHPs also leads to physicians taking on “bad debt”, as patients with significant cost sharing are less likely to pay their medical bills on time.   

The rise of HDHPs in Massachusetts should be a cautionary sign for consumers, providers, and policymakers alike. While incentivizing consumers to be more cost conscious when seeking health care is an important part of addressing rising health care costs, doing so by increasing HDHPs appears to decrease usage of both high and low-value care and create financial burdens for enrollees. Carriers should consider value-based insurance designs as a viable alternative when structuring plans, and Massachusetts policymakers should consider how to best address the rise of HDHPs.