IMHO: On High-Deductible Health Plans

High-deductible health plans or HDHPs became all the rage earlier in this decade (yes, a decade begins in a year that ends in 1 and ends in a year that ends in 0). Many have called them consumer-driven health plans as the consumer has a higher financial incentive to choose as a financial buyer.

Their use was supposed to do lots of great things:

• Slow health care inflation
• Provide an incentive to stay healthier
• Generally slow the tide of chronic health conditions such as hypertension, high cholesterol, etc.

Now, understand that I am not a health care expert and I have not taken a formal survey, but I am a consumer of health care services and I do have a fairly large network of people that I talk with. I have been in an HDHP as often as not this decade. Many of my network have as well.

My strong opinion is that HDHPs lead to increases in health care inflation. Yes, you read that correctly. Here is my reasoning. Under HDHPs, initial care is paid for by the consumer, or the patient if you prefer. So, where patients used to go to see their physicians at an early sign of a problem, now they tend to delay. And, that delay, again in my opinion, allows conditions to fester making them worse, and more expensive to treat.

What evidence do I have? I have personal evidence, evidence from family, evidence from friends, and evidence from co-workers. In fact, I have yet to experience a single person from that group who likes being in an HDHP.

But, they do save employers money. How? Through significant redesign and re-packaging, larger percentages of total health care costs are being passed on to the employees and their families. Several companies on which I have seen real data are picking up the inflationary (not health care inflation, but general inflation which has been exceedingly small) costs of health care and passing on the other increases to employees. So, while employees get pay increases (some years) that barely keep up with inflation, their benefits costs increase far more rapidly. 

In technical terms from an employee standpoint: this ain't good (excuse my diversion into poor English).

What works? Again, this is not my area of expertise, but common sense should provide the answer. Give employees an incentive to engage in proper behaviors. While generally it is not permissible to charge higher health premiums in an employer-provided plan for higher-risk individuals (smokers being the exception), it is permissible to charge less for employees who are either lower-risk or who are taking appropriate steps to control their existing risks.

My evidence suggests that this works.

Just like a company saves money by having employees in tip-top physical condition, it also saves money by providing an incentive for those in less ideal physical condition to control their chronic conditions. For example, if an employee's blood pressure is 170/120, this is considered to be hypertensive. Perhaps there is nothing from a behavioral standpoint that the employee can do to control this. But, in most cases, medication can control that hypertension. It is in the employer's best interest that this employee take appropriate medication for that hypertension. To the extent that the employee does take steps to control the hypertension, he or she should be eligible for the appropriate discounts.

So, again, in my opinion, wellness works and HDHP doesn't.