High-deductible Health Plans Turn 20: Where Do We Go from Here? Summus October 5, 2023

High-deductible Health Plans Turn 20: Where Do We Go from Here?

Woman in green shirt contemplates health plans at computer.

By: Sarah Baker, MPH, Summus Sr. Director, Product Marketing 

High-deductible health plans (HDHPs) turn 20 this year. Ushered in by the Medicare Modernization Act (MMA), the impact of HDHPs on healthcare is undeniable. While HDHPs are a proven mechanism to reduce premiums, employees and providers express significantly less satisfaction with their HDHP compared to traditional health plans. Employer interest is waning for high-deductible health plans as healthcare costs continue to rise. 

In high-deductible health plans, employees and plan members struggle with out-of-pocket costs. Only 35% express satisfaction with this aspect of their plan. HDHPs can increase levels of medical debt in the United States. More than 44% of people on high-deductible health plans say medical debt has caused them financial distress.1 People in high-deductible health plans are also more likely to skip necessary visits, including preventive screenings. 

For providers, high-deductible health plans require them to collect significant amounts of money from their patients. This often involves hospitals and physician offices resorting to sending patients’ medical debt to collections agencies. This sours the patient-physician relationship and stops individuals from accessing care in the future.

The good news is that we’ve come a long way in 20 years. Healthcare coverage options exist that can reduce premiums without the friction. If you’re not ready to leave your HDHP, 20 years of learnings can help improve satisfaction and maximize value for plan members and employees.

Direct primary care and reference based pricing

An alternative to high-deductible health plans is to combine direct primary care with reference based pricing. For years, large employers have explored direct primary care, such as on-site clinics. Primary care doctors have increasingly turned towards alternatives to the fee-for-service and health insurance model that has caused burnout. As the provider landscape has evolved toward primary care clinics taking on financial risk, primary care practices have become sophisticated with their business capabilities. What has emerged is a market of virtual-first and hybrid virtual and brick-and-mortar primary care practices that are able to deal directly with patients and employers and assume financial risk. 

Direct primary care

In a direct primary care model, patients, or their employers, pay a monthly subscription fee to the primary care practice. The fee usually covers unlimited appointments with a primary care physician for on-going and urgent care. The fee may also cover messaging and prescription refills. This model can effectively eliminate one of the primary criticisms of high-deductible health plans: patients avoid seeking needed care because of costs. With direct primary care, a patient has fast access to medical advice with little or no out-of-pocket cost.

Referenced based pricing

For healthcare services beyond primary care, such as imaging or specialty care, some employers are combining direct primary care with reference based pricing. In a reference based pricing model, employers use analytics to create benchmarks, or a “reference price” for what they will pay for each procedure. Procedure cost is usually based on Medicare pricing. If a person goes to a provider that charges more than the reference price, they will have to pay the difference. Removing the opaque price negotiations that happen between health insurers and providers creates pricing transparency and premium stability for the employer. Employees also know the amount covered. 

If not carefully designed, reference based pricing can create issues like today’s high-deductible health plans. For example, employees need clear information about which providers accept the reference price and which do not. Without good pricing tools, employees can face the same high out-of-pocket costs.

Alternative health plans

In contrast to high-deductible health plans, alternative health plans are one way employers can reduce premiums and out-of-pocket costs for employees. In an alternative health plan, the plan uses cost and quality data to create tiers of providers and then uses financial incentives to encourage members to use lower-cost and higher-quality providers. For example, a tier one provider might have a $10 office visit copay, a tier two provider a $50 copay and a tier three provider a $100 copay. 

This differs from high-deductible plans. In these plans, the employee or member is on their own to research costs and request quotes from different providers for procedures and services. With an alternative health plan, the plan has done the work through their analytics. This benefit structure provides welcome clarity to out-of-pocket costs. Employers using these types of plans can see a 10–30% reduction in premiums compared to traditional plans. Traditional insurers, among others, are offering alternative health plans.

Both direct primary care and alternative health plans can take time to design and implement. Without thoughtful design, they can have similar issues to high-deductible health plans, namely pushing costs onto patients and providers. They also are not right for every employer. For example, direct primary care with reference based pricing is only available to self-insured employers. 

Summus can help

If your high-deductible health plan is your current benefit offering or plan for the next one to two years, download our ebook. Our ebook will help you discover ways to improve satisfaction and access to care.

1 https://www.medicaleconomics.com/view/half-of-patients-with-high-deductible-health-plans-have-received-a-surprise-medical-bill

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