Do High Deductible Health Care Plans Hurt Workers?

How HDHPs Create Financial and Health Problems for Consumers

HDHP Employee Benefit Costs
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In terms of having access to affordable health care services, a large number of consumers are choosing high deductible health care plans (HDHPs), which typically offer low monthly premiums at the cost of higher out-of-pocket deductibles. For those who are generally healthy and want to live on a budget this looks like a win-win situation. But could something designed to help keep people healthy actually be bad for them?

Recent studies indicate that some employees are being hurt by high deductible health care plans offered by their employers, which could cause many people to consider skipping out on necessary health care needs and even declining offers of employment. Plans with high deductibles usually charge large amounts of out of pocket fees. This means that people are forced to consider what type of ailment is worth spending their money on. 

The Internal Revenue Service (IRS) determines the out of pocket minimums for individuals and families each year. For calendar year 2016, the out of pocket maximum limits are:

  • $6,550 for self-only coverage (up from $6,450 in 2015)
  • $13,100 for family coverage (up from $12,900 in 2015)

Let's take a closer look at how HDHPs are hurting the average health care consumer. 

High Deductible Plans Becoming More Popular

There are some specific shifts in the health insurance market that are causing hardships for many consumers of high deductible health plans.

First off, as health care costs continue to increase, employers are putting more of the burden on their employees. According to a new survey from the National Business Group on Health, close to one-third of employers will provide their employees with high-deductible coverage as the only option. This is an increase from 22 percent in 2014.

The survey included 136 large companies that employ more than 7.5 million people.

The survey also found that 81 percent of the companies surveyed said that they will offer at least one plan that comes with a high-deductible for their employees. This is an increase from 53 percent in the survey from 2010. When registered in a high-deductible plan, employees must pay for their health coverage until they meet the yearly deductible.

Health Savings Accounts

A major concern of employees today is that they will not be able to handle the large medical bills associated with high-deductible plans. These bills can arrive with balances of tens of hundreds of dollars, which means that many people will struggle to make ends meet trying to pay these bills. Even a single overnight hospital stay can produce a bill that's over $25,000. 

In many instances, these high-deductible health plans are associated with health savings accounts. In order to qualify for health savings accounts, plan participants must have deductibles that exceed $1,300 for individuals and $2,600 for families. If these requirements are met, the employers and the employees will be able to deposit pre-tax money into health savings accounts.

The money that can be contributed is set at a limit of $3,350 for individuals and $6,750 for families in pre-tax dollars (as of 2016, according to the Internal Revenue Service). 

However, consider that a simple out-patient surgical procedure can total around $20,000 or more, which can max out an individual's health savings account in one fell swoop. 

Health Savings plans do offer tax benefits that help employees. These benefits include the accounts earning interest at a tax-free rate and so long as the money is used for medical benefits, withdrawing the money will not be taxed either. The money in the accounts rolls over from year to year as well, which is a major upside compared to health savings accounts.

Healthy Employees Not Impacted as Much

Healthy employees, for the most part, are not affected negatively by a high-deductible health plan.

Why? These employees will usually only visit their doctors for preventive appointments, such as yearly well visits or flu shots. Any emergency visits to the office, for the flu or an asthma attack, might run the employee less than $500.

Low-Income Employees Feel the Strain the Most

Many low-income employees who are on high-deductible health plans experience trouble paying for health coverage because of their low paychecks. For example, if they need emergency surgery and the bill totals $25,000, the employee might not be able to pay that bill. They will let it sit around for a couple of months and then it heads to collections, which means their credit will take a hit. This is not a good situation for the employee, who might not have this type of money in the bank for emergencies.

The bottom line here is that employees, no matter their paycheck size, are being hurt by high-deductible plans. Having to cover $2,000 out-of-pocket as an individual or $6,000 out-of-pocket as a family prior to insurance footing the rest of the bill can put major financial strains on employees.

Updated 4/15/16

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