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Cost-shifting health care plan strategies can backfire

High-deductible theory may fail in practice

Cost-shifting health care plan strategies can backfire

Poorly managed high-deductible health plans may do the very thing they were designed to avoid — increase their sponsoring employers' long-term health care costs.

The significant out-of-pocket costs that HDHPs require can deter plan members from seeking health care services when they need them and lead to much higher treatment costs down the line.

To head off that possibility, experts advise that employers plan ahead and seed health savings accounts and strategically use other tools associated with consumer-driven health care, such as managing chronic disease treatment programs, among other things.

Last year, one in five U.S. employees receiving health care from their employers was enrolled in a high-deductible health plan, the vast majority of which are linked to tax-favored health savings accounts regulated by the Internal Revenue Service, according to the Kaiser Family Foundation's most recent national survey of employee health benefit plans.

Along with lower employer premiums compared with traditional health plans, studies have shown that HDHPs can be effective in reducing overutilization of costly medical services such as emergency room visits.

Additionally, HDHPs would likely allow employers to avoid the scheduled 40% excise tax on high-cost health plans under the health care reform law that's due to take effect in 2018.

However, industry experts say the savings employers realize by offering HDHPs — particularly HSA-linked plans — could be short-lived without a thoughtful strategy to help employees with chronic diseases effectively manage their own health care.

Studies show that many HDHP plan members with chronic conditions are financially unable or unwilling to meet their plan's annual deductibles, and instead elect to delay or forgo needed medical services and treatments.

According to a 2012 study in the Journal of General Internal Medicine, 26.6% of adult plan members enrolled in an HDHP delayed or did not get medical care due to the cost, compared with 9.9% of members enrolled in traditional health plans.

A separate study, published in March by the Kaiser Family Foundation, found that 24% of households enrolled in health plans with annual deductibles of $1,200 for single coverage and $2,400 for family coverage do not have the liquid assets available to meet those thresholds.

The average HDHP deductible this year is $2,200 for individual coverage and nearly $4,440 for family, according to the Kaiser research.

By forgoing or delaying recommended medical care and prescriptions, employees in HDHPs with chronic conditions — and their employers — risk incurring higher medical costs over the long term as their conditions worsen and more expensive procedures and treatments become necessary.

Experts say the biggest barrier to more effective disease management within an HSA-linked high-deductible plan are the tax rules the IRS applies to HSAs.

Specifically, the regulations broadly prohibit employers from providing first-dollar coverage for “any service or benefit intended to treat an existing illness, injury or condition, including drugs or medications.”

In practice, that means that until employees with chronic conditions reach their annual deductible, the costs associated with the secondary preventive health care services and treatments they rely on to manage their conditions — such as insulin and glucose monitoring supplies for diabetes — are their own responsibility.

“It's a pretty big hole,” said Bruce Elliott, benefits manager at the Society for Human Resource Management in Alexandria, Virginia.

For now, Mr. Elliott said SHRM makes regular contributions to its 340 employees' HSAs to reduce the financial burden of the high deductibles, as do approximately one-third of employers, according to SHRM research.

Eventually, though, Mr. Elliott said the contributions to SHRM's employees' HSAs likely will begin working against the organization's long-term interests.

“It puts a bandage on the issue for several years, but at some point the math is going to work against me,” Mr. Elliott said. “If medical cost inflation and renewals are running at 6% and (overall) inflation is running at 2%, that leaves me with a 4% delta. Eventually, my plan premiums are going to get captured by the excise tax threshold, which means I'm either going to have to raise the deductible in these plans or decrease the employer contribution.”

Still, experts encourage employers that offer HDHP coverage to begin contributing to employees' HSAs, health reimbursement accounts and/or flexible spending accounts if they have not already done so, in order to move from a traditional health plan to one with a high deductible.

Another critical issue that employers offering any type of HDHP must address, experts say, is their employees' lack of experience navigating the medical care marketplace and actively managing their own health.

“A lot of our members see HDHPs as part of an overall consumerism strategy,” said Brenna Shebel, director of health care cost and delivery at the National Business Group on Health in Washington. To that end, experts say there are a range of tools and resources available that can improve employees' access to and understanding of the health care they need to manage chronic conditions.

“One thing we've seen a number of employers do is provide personal health assistants for employees,” Ms. Shabel said. “Employees with chronic conditions are going to be the higher health care users within your workforce, so they're going to need more help deciding where and when to seek care, and which treatment to choose.”

Another employer strategy is adopting a more focused approach to intervention and disease management, experts say.

“Traditional disease management programs, which we see people moving away from, were basically educational interventions designed to teach patients about their disease and what to do about them,” said Dr. David Kaplan, global clinical leader at Mercer L.L.C. in San Francisco. “In the Mercer Health Advantage program, what we have instead are disease-specific case management interventions, which are different in the sense that it focuses on the actual issues that patients are having and helps them work with a nurse practitioner or their doctor if need be to identify the appropriate action.”

Experts say employers also should take a more active role in communicating with employees about the structure and mechanics of their high-deductible plan, both prior to enrollment and regularly thereafter.

“Not all employers are doing it, but we are starting to see more companies providing some kind of user training for employees after they've enrolled in a (consumer-driven health plan),” Ms. Shebel said. “Very early on after the plan year starts, you need to be connecting with the employees in the CDHP and walk them through what their next steps are and what it means to be in the plan. Ideally, employers should try to get to these members before they go to the pharmacy for the first time, because that's where employees really feel the pinch of the deductible.”