Workers with High Deductibles Curb Health Care Spending

Survey finds rise in cost-conscious, information-seeking consumers

Stephen Miller, CEBS By Stephen Miller, CEBS January 17, 2019
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Employees enrolled in high-deductible health plans (HDHPs) are more likely than enrollees in traditional plans to consider health care cost and quality when selecting nonemergency care, new research shows.

Those enrolled in plans with deductibles of at least $1,350 for self only and $2,700 for families were more likely to take costs into account when making health care decisions, according to the 14th annual Consumer Engagement in Health Care survey report, released in December by the nonprofit Employee Benefit Research Institute (EBRI) and research firm Greenwald & Associates.

The 2018 survey, conducted Aug. 10-23, received responses from 2,010 adults in the U.S. who had private health insurance coverage. Among survey participants, 85 percent received coverage through an employer. Key findings are shown in the chart below.



HDHP enrollees also were more likely to take preventive measures to preserve health, including enrolling in wellness programs.

[SHRM members-only toolkit: Managing Health Care Costs]

Factors Driving Behavior

Higher income and college or postgraduate education are correlated with HDHP enrollment when other plan options are available, EBRI found. For instance, nearly 30 percent of those in an HDHP had an annual household income of $150,000 or more. Only 17 percent of respondents who were enrolled in traditional health plans said their income was comparable.

"HDHP enrollees have a higher level of education than traditional plan enrollees, consider themselves to be in very good health and receive a higher level of income," said Paul Fronstin, EBRI's director of health education. "It is important to remember that these advantages may drive people to select the HDHP option" in the first place and then make greater effort to ensure that they spend their health care dollars wisely.

Skipped Care

While EBRI noted many positive behaviors associated with high-deductible plans, it also found that more than 30 percent of HDHP enrollees said they delayed health care in the past year because of costs. Only 18 percent of those in a traditional plan did the same. It wasn't clear whether the avoided services were tests or procedures that could be essential or were those that are often over-prescribed and frequently considered unnecessary.

Lending some credence to fears that workers are skipping essential care, the journal Annals of Internal Medicine recently published a study in which diabetics who were involuntarily switched from a traditional to a high-deductible plan were more likely to delay necessary care.

Benefits consultants recommend providing HDHP enrollees with health savings accounts (HSAs) so they'll have money available for necessary services not covered by the HDHP before the deductible is met. Matching employees' HSA contributions can encourage participants to fund their accounts with pretax dollars through automatic salary deferral.

Also vital is the need to improve preventive care compliance. Employers "need to show that the focus of health care is to prevent future medical issues," advised Craig Hasday, in a recent blog post. He is president of Frenkel Benefits, an insurance brokerage firm based in New York City.

Under the Affordable Care Act, plans must cover a set of preventive care services outside of the plan deductible, but employees often don't realize that they can receive these services without first meeting the deductible.

Hasday suggested tying employers' premium contributions to employees' compliance with preventive guidelines.

"If employees don't want to take care of themselves," he wrote, "they should pay more."

HDHPs Plus HSAs

From 2007 to 2018, the percentage of people under age 65 enrolled in HDHPs increased from 17.4 percent to 46 percent, according to the federal Centers for Disease Control and Prevention. By 2018, nearly half of the people enrolled in an HDHP were in a plan that was paired with an HSA funded by employers and employees or a health reimbursement arrangement (HRA) funded by an employer only.

HSAs are employee-owned, so account holders can save and invest unspent dollars for future health care needs, such as during retirement. This can motivate employees to consider costs when selecting care.

While HRA growth has been flat in recent years, more employers are offering HSAs with their HDHP plans, according to the Society for Human Resource Management's (SHRM's) 2018 Employee Benefits survey. The share of employers providing HSAs increased to 56 percent in 2018, up from 45 percent in 2014, although the rate of increase has leveled off.

SHRM polled a random sample of its members during the first quarter of 2018 for the survey and received more than 3,500 responses.

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Among Society for Human Resource Management members polled in 2018, 56 percent said their organizations offered their employees HSAs coupled with high-deductible health plans and 37 percent contributed to their employees’ HSAs.

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HSAs can't promote cost-conscious spending if employees don't use them, however. The primary reason employees gave for not enrolling in their company's HSA was that they didn't see any benefit in doing so, a 2018 Willis Towers Watson survey of 2,155 full-time employees showed.

Not having enough money to contribute was another important factor.

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"Employers have an opportunity to do more to help employees understand HSAs' numerous tax advantages and encourage more people to use them to save money for medical expenses now and for retirement in the future," said Trevis Parson, chief actuary for health and benefits, North America, at Willis Towers Watson.

A 2017 Willis Towers Watson survey of 689 U.S. employers found that nearly half (43 percent) of all employees enrolled in employer-sponsored HSAs did not contribute any of their own money to these tax-advantaged accounts. To encourage greater participation, a majority (62 percent) of employers that offered HSAs gave their employees a head start by contributing seed money to those accounts, Parson noted. Median employer contributions were in the $300 to $750 range for employee-only coverage and $700 to $1,400 for family coverage.

"If HSAs are a good idea, how do we make this a better experience without patients avoiding necessary care?" asked Hasday.

"The clear answer is education and improved engagement," he noted.

If employees are not taking advantage of their HSAs, now might be the time to up your communications game to boost enrollment and contributions, said Helen Calvin, chief revenue officer at Jellyvision, a provider of benefits administration software. She advised employers to:

  • Be concrete and tell stories. "Give real numbers, listing how many actual dollars people stand to save on taxes if they make various HSA contributions," Calvin suggested. Share real (if you have them) or hypothetical scenarios that demonstrate the advantages of using HSAs.
  • Reframe the message around loss aversion. "Focus on what employees will miss out on if they don't act," Calvin said. "Describe their HSA tax savings as something that is theirs to lose."
  • Make it easy for employees to take action. "Instead of writing a paragraph of HSA-related instructions, list out the steps in bullet points or check boxes, with links to take immediate action," she advised.
  • Use Year-round reminders. Employees can enroll in—and contribute to—their HSA at any time, "so don't just talk about HSAs around open enrollment," Calvin recommended. "Reach out consistently, whenever your employees are best primed to care: at the beginning of a new plan year; in March and April when tax savings are front of mind; or after a pay raise or promotion."

Offering Options

Consumer-directed health plans (CDHPs)—high-deductible plans linked to an HSA or HRA—"are a good financial option for many, especially as payroll [premium] contributions are usually much lower than for a traditional plan," said Barry Schilmeister, a principal in Mercer's health and benefits business in New York City. However, to be effective in reining in health care overspending while covering essential care, CDHPs "require behavior change and an understanding of how one needs, uses and accesses care," and they may not be the best fit for all employees.

A 2018 Mercer survey of more than 2,400 employers found that while 68 percent of midsize and large employers offered a CDHP, nearly four out of five of them offered employees the choice of a more traditional option, too.

"Employers will likely continue to offer options while improving the communication, tools and programs that can make CDHPs work best for many of their employees," Schilmeister said.

Offering a CDHP won't by itself turn people into health care consumers, cautioned Kim Buckey, vice president of client services at DirectPath, a benefits education, enrollment and health care transparency firm.

"We have not educated people on how to shop for health care," she said. "You can't be a better consumer if you don't know what it is you're consuming or how to shop for it."

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