APRIL 13TH, 2021
When it comes to health insurance plans, high-deductible health plans (HDHPs) can get a bad rap. The “high deductible” part of the name is enough to deter those worried about rising medical costs. Then there’s the widely held belief that high-deductible health plans are only financially beneficial for young, healthy individuals.
It’s no secret that high-deductible health plans are favored by employers -- they usually come with lower premiums, which means employers pay less per employee compared to lower-deductible plans with higher premiums. Some employers are choosing to only offer high-deductible plans for this very reason, while many others have added high-deductible options to their existing offerings in recent years.
But higher deductibles doesn’t have to mean higher overall medical costs for employees. With the exception of individuals with chronic illness, far more individuals would benefit from choosing the high-deductible plan option -- especially if they had more flexibility in how they pay for their out-of-pocket costs.
Here’s an overview of the pros and cons of HDHPs, and how offering Paytient can help make the HDHP a viable option for more employees, so that everyone can save.
Compared to POS or PPO plans, high-deductible plans typically come with lower premiums. Depending on how the plan is structured, this might mean that employees get to take home more of their pay than with a lower-deductible plan. And because premiums are sunk costs (you don’t get them back even if you don’t use your plan), this can make HDHPs more attractive to some employees.
Unlike HMO plans, which often come with fewer options for providers, high-deductible plans typically have similar network availability to lower-deductible plans.
Unless you have a chronic illness, it’s impossible to predict whether or not you will have greater medical expenses from one year to the next: An otherwise healthy person can have a skiing accident that leads to costly surgeries, physical therapy, etc. An overweight smoker might have a year without any major health issues. This is part of the inherent stress in choosing a health plan.
However, for employees that are able to swallow the potential out-of-pocket costs of a high-deductible plan, the savings (in the way of lower premiums) can be worth the risk. Employers, then, should be incentivized to help employees afford their out-of-pocket expenses: Such as by adding offering Paytient as a benefit (more on this later).
When you choose a high-deductible plan, you do have to cover your medical expenses out-of-pocket until you reach your deductible. However, the rates that you pay for that care are not the market rates: They’re the negotiated rates between the healthcare provider and the insurance company. For example, if you have a prescription that would cost $400 per month without insurance, you aren’t paying $400 for it; you’re likely paying $20 or $30 for it instead. So while your medical costs aren’t completely covered by your high-deductible plan, they are greatly reduced.
Finally, HDHP policyholders are eligible to open a health savings account (HSA) to help save up for out-of-pocket expenses. This triple-tax-advantaged account can also be used to save up for retirement, if you are able to contribute to it and not dip into it.
Of course, if your out-of-pocket medical expenses are high, you might not be able to afford to let money sit in an HSA.
We’ve already touched on a few of the reasons why the HDHP might not be the best choice for certain individuals: Policyholders managing chronic illness would have higher out-of-pocket costs on a HDHP. Older individuals at higher risk of illness might not want to risk having to pay out-of-pocket for prescriptions, office visits, and diagnostic tests. Those who already cannot afford their out-of-pocket costs might not be able to contribute to an HSA, making the HDHP a less desirable option.
Employers need to be careful to not force their employees into a health insurance plan that isn’t right for them, because this could backfire: If employees defer or postpone their care because they cannot afford the out-of-pocket costs, they might be at higher risk for more expensive claims down the road.
There is a way that employers can make the HDHP work for more people, without jeopardizing the health or financial wellbeing of employees: By helping them afford their out-of-pocket costs.
There are a few categories of people for whom the HDHP is simply not the right choice. But many people fall into a grey area: No one in their family has a chronic illness, and they’re enticed by the idea of spending less on premiums. They’d be willing to risk having to pay more out-of-pocket, especially if they had more flexibility in how they can cover those costs.
Some employers will offer to contribute to their employees’ HSAs to help fill the gap, but there’s a better way: By offering Paytient as a benefit to employees, those same dollars can go a lot further in helping to cover medical expenses.
For just a few dollars a month per employee, Paytient gives employees access to up to $3000 to use towards co-pays, prescriptions, or other medical, dental, veterinary, or vision care.
Offering Paytient as a benefit encourages employees to select high-deductible insurance options by making it possible for them to afford the out-of-pocket expenses. After implementing Paytient, this employer saw HDHP adoption increase from 50% to 85%, resulting in a 12x return on investment for implementing Paytient.
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