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A High-Deductible Future

Originally posted by United Benefit Advisors

A robust benefit package with lots of choices has served as the hallmark of quality employee-sponsored offerings for decades. Swelling health care costs and administrative headaches, however, are driving some employers to make a major shift from that model.

Today, consumer-driven plan design — and no other choice — is becoming the gold standard for corporate health benefits, according to new research.

A survey co-sponsored by the National Business Group on Health (NBGH) and Towers Watson finds that even large companies are chucking their menu of benefit options for a single, high-deductible health plan (HDHP) choice, according to a report by The Washington Post. Sixty-six percent of companies with more than 1,000 workers currently offer at least one HDHP tied to a medical savings account, and experts see that figure rising to nearly 80 percent next year. Nearly 15 percent of polled large employers offer an HDHP as the only option – a jump from 7.6 percent in 2010.

As the big companies go, so do the smaller ones, another survey suggests. A poll by the Kaiser Family Foundation revealed that nearly a quarter of workers at companies with 200 or fewer employees are covered by an HDHP, according to the Post report.

While the HDHP trend certainly is gaining momentum, some experts warn that these plans are not a cure-all to cost control. Data from the 2012 United Benefit Advisors (UBA) Health Plan Survey suggest that HDHPs aren’t achieving long-term savings greater than traditional plans, such as PPOs.

The secret to successful plan design — whether it’s HDHPs (also called consumer-driven health plans, or CDHPs) or traditional plans — is making sure the deductible is high enough to influence employee behavior, according to the UBA report. A high deductible (greater than $1,000) on nearly any plan type will generate some savings, according to the organization’s press release. The UBA survey found that PPOs actually achieved the greatest savings compared with a HDHP when the PPO deductible ranged from $2,000 to $2,999. In that scenario, the PPO’s cost per employee was $7,811, compared to the HDHP per-employee cost of $8,859.

“Employers are turning to CDHPs as a cost-cutting solution against the relentless upward spiral of health care costs,” said Thom Mangan, UBA’s CEO. “However, our research shows that small to midsize businesses . . . [that] may be considering these plans may first want to consider increasing the deductible on the plans they already have to achieve the same initial savings.”

Beyond tweaks to deductibles, employers could find savings if they focused more on “value-based” models, according the Catalyst for Payment Reform, a nonprofit group. A new study by the organization found that nearly 89 percent of payments made by commercial health plans to providers were still based on the traditional “fee-for-service” model and were “not tied to improving quality outcomes or reducing waste,” according to a report in HealthLeaders Media.