Nearly a quarter of workers at companies with fewer than 200 workers were covered by high-deductible health plans last year, compared with 17 percent of workers at larger firms. Courtesy Flickr/Tax Credits
Monday, April 1, 2013
Historically, one of the perks of working at a big company has been generous health benefits with modest out-of-pocket costs. But increasingly, large companies are offering their employees only one option: a plan with a relatively high deductible linked to a savings account for medical expenses.
According to the annual health benefits survey by Towers Watson and the National Business Group on Health, 66 percent of companies with 1,000 employees or more offered at least one such plan this year. This figure is expected to grow to nearly 80 percent next year, according to the survey. At nearly 15 percent of companies surveyed, an account-based plan was the only option—an increase from 7.6 percent in 2010.
"I do think a lot more large companies are getting comfortable" with the idea of shifting from a traditional plan to one with a higher deductible and a savings account, says Alexander Domaszewicz, health care consumerism practice leader for benefits consultant Mercer.
Workers at smaller companies are even more likely to have coverage through a high-deductible health plan with a savings account, according to the Kaiser Family Foundation's annual employer health benefits survey. Nearly a quarter of workers at companies with fewer than 200 workers were covered by such plans last year, compared with 17 percent of workers at larger firms.
Switching to this type of plan may be relatively simple for smaller firms, since their deductibles in traditional plans are typically higher than those of larger employers, says Gary Claxton, vice president at The Kaiser Family Foundation. (KHN is an editorially independent program of the foundation.)
Matt Grove and his wife, Annie, own a bagel business in Upstate New York. They stopped offering a traditional health plan to their 14 full-time employees last year, leaving in place only a plan with a $5,000 deductible and a health savings account. The change reduced the premiums significantly, enabling the company to trim the amount employees paid for coverage from $173 a month to $43. The Groves deposit about $200 annually into each worker's HSA account to help cover their medical expenses.
The Groves have family coverage through the same plan. Even though Annie has a heart condition and the Groves have to pay for her regular echocardiogram and MRI tests out of pocket up to the $5,000 deductible, Matt Grove says it's still cheaper than the $12,000 premium they paid annually for traditional coverage.
"We paid for all of that out of pocket, and we still saved money [last year]," he says. "It was crazy. The other insurance was just so expensive."
The health-care overhaul has spurred interest in these types of plans, says Domaszewicz. Starting in 2014, most employers have to offer health insurance that is considered affordable (individual premiums that are no more than 9.5 percent of income) and adequate (a plan that covers at least 60 percent of allowed medical expenses) or face a penalty.
"Imagine a retailer or a restaurant," Domaszewicz says. "They may want to offer a very basic plan as a protection that provides the least value that's allowable" without triggering a penalty for inadequate coverage.
"The company says, 'Maybe we'll make that an HSA plan.'"
Under federal law, the Internal Revenue Service sets the standards for these plans. In 2013, a health plan with a linked health savings account must have a deductible of at least $1,250 for individual coverage and $2,500 for family coverage; among other requirements, the maximum out-of-pocket expense will be $6,250 for an individual and $12,500 for a family.
The money put into the savings accounts is also limited, but both workers and employers can contribute. The money is tax-free as long as it's used for medical expenses, and it belongs to the worker even if he leaves his job.
About two-thirds of employers that offer health plans with savings accounts put money into those accounts for their workers, according to the KFF survey.
According to the Towers Watson survey, much of the growth in account-based coverage has been in HSA plans, eclipsing an older type of savings account called a health reimbursement arrangement, which can be funded only with employer money and belongs to the employer if the worker leaves the job.
In addition to saving companies money, shifting to health plans with higher deductibles and savings accounts is supposed to help workers become more cost-conscious in choosing health care. But the extent to which this is occurring is unclear.
An analysis by the Robert Wood Johnson Foundation that synthesized research findings on consumer-driven health plans (another term applied to plans with relatively high deductibles and a consumer spending account) found that, on average, they reduced total health-care spending by 5 to 14 percent.
The reductions were concentrated among healthier enrollees and were mainly due to lower spending on prescription drugs and outpatient care. Results were mixed on whether people in such plans cut back indiscriminately on both necessary and unnecessary care, as earlier research has found.
As employers try to nudge employees toward healthier behaviors, they're increasingly tying their contributions to employee health expense accounts to healthy behavior. They may require employees with chronic conditions to participate in health coaching, for example, or to keep their blood pressure and weight within recommended levels, says Sandy Ageloff, a senior consultant at Towers Watson.
At the same time, because account-based plans often expose workers to higher out-of-pocket spending, experts say the onus is on employers to give employees information they need to compare cost and quality and make good health care choices.
"Educational materials are definitely an issue with these plans," says M. Kate Bundorf, an associate professor of health research and policy at Stanford University who authored the RWJF analysis. For example, "Price information has been very opaque, and plans are developing tools to deal with it."
This article was produced by Kaiser Health News with support from The SCAN Foundation.
Comments
hotrodrobert 11 years ago
Unfortunately we are headed toward single payer ,socialist type of health care. It has never worked anywhere it has been tried,and everyone who has health care now will soon find out that the ,"pass the bill so we can see what's in it" was the "trick" in trick or treat. Many in congress are trying to figure out how to get this monstrosity off the back's of their constituents with out getting in trouble with their own party. They are now writing regulations to manage this bill which was a behemoth of 2800 pages plus 1700 legal pages of explanations to start with. Amazingly no one read the bill before voting on it which is just downright criminal. So now the regulations, so far exceed 20,000 pages!! and stack up over 8 feet tall!! It assault's Christian values by requiring funding for birth control even if it is against your religion. It is causing businesses to restructure employee's hours and keeping many from new hires. And we have yet to find many of the taxes and penalties associated with it's implementation. This may have been a good idea initially but was poorly thought out, snuck past us like a thief, and now is more like a shotgun blast to cut a Key Lime pie. What a mess.
Knowledge06 11 years ago
hotrod you're funny......YOU say the Affordable Care Act is an assault on Christian values. YOU say the bill is a behemoth of 2800 pages plus 1700 legal pages of explanations. YOU say no one read the bill before voting on it. YOU have just given an interesting parallel:
The Bible has been said by many to be an assault on the values of those who don't believe in it. The Bible is a behemoth of thousands of pages (depending on the version you count) plus hundreds of pages of explanations (it's called the Concordance). Most people haven't read the Bible in it's entirety before choosing to believe in it and placing their faith in it as words inspired by God. I'm sure there are many who believe that the Bible was poorly thought out. I'm not one of them. But just because YOU don't understand something doesn't make it a mess for everyone!!
richaoj 11 years ago
I, as a Catholic, am outraged by the Corporatist nature of the bill, and think that it is a moral duty to care for the poor--so I am outraged that this bill didn't do more to push towards a universal health care system (by eliminating the public option).
Since I can't say it better, I'll quote the American Council of Catholic Bishops: "Affordable and accessible health care is an essential safeguard of human life and a fundamental human right. With an estimated 47 million Americans lacking health care coverage, it is also an urgent national priority. Reform of the nations health care system needs to be rooted in values that respect human dignity, protect human life, and meet the needs of the poor and uninsured."
hotrodrobert 11 years ago
Tom_Head 11 years ago
hotrodrobert writes: "Unfortunately we are headed toward single payer ,socialist type of health care. It has never worked anywhere it has been tried..."
That's categorically false.
Your homework assignment is to look at this list of countries by life expectancy (we rank #40)...
http://en.wikipedia.org/wiki/List_of_...">http://en.wikipedia.org/wiki/List_of_...
...and count the number of countries in the top 39 that have a "single payer, socialist type of health care [system]" (hint: nearly all of them).
We can disagree about how the Unites States can catch up with the rest of the industrialized world in healthcare outcomes, but it really is a matter of catching up. We're no superpower when it comes to healthcare, despite a GDP and per capita income that suggests we really should be.
It makes sense to look at countries that are doing a better job of this than we are, then go and do likewise—unless we're happy with the prospect of http://news.harvard.edu/gazette/story...">killing 45,000 people every year out of sheer racial resentment. (And please don't pretend that isn't where the opposition to Obamacare comes from, because we both know better.)
kdavis 11 years ago
Tom, I think it is extremely naive to think that government health care will make the United States zoom up this list from#40 to the top 10. There are so many factors that affect life expectancy like genetics, literacy, diet and lifestyle. Also, the US population is much larger than all of the countries above it on this list that designing a health care system controlled by the government is far different for a country like the US than a country like Norway.
My main beef with ACA is that it does nothing to lower the cost of health care and it will likely increase costs. In fact, it is already increasing costs. I know that in my business we have seen healthcare costs skyrocket and we have had to take actions like those described in this article: increase deductibles to try to keep our premiums where the company can pay for a percentage of the costs and the employees can still afford the coverage.
Pilgrim3 11 years ago
Hotrod - lose the wall of text with no paragraph breaks. On a good day its passive aggressive. With the spelling and grammar errors, its painful.
A few questions for you -
tstauffer 11 years ago
Here is, perhaps, a more balanced perspective on Canadian healthcare than the one hotrod is presenting: http://www.aarp.org/politics-society/...">http://www.aarp.org/politics-society/...
hotrodrobert 11 years ago
tstauffer 11 years ago
@hotrod -- No, I didn't make your point. What I linked to shows exactly how well single payer works in Canada. It's not perfect, but it works; in fact, the AARP link I posted pretty much contradicts everything you've said about healthcare so far.
richaoj 11 years ago
Actually, I consider myself more of a libertarian than anything else, so I don't think that I am part of the "socialist cabal" or whatever. I do not think that supporting national social programs is at all at odds with libertarian principles: after all the right to life is the first thing in the list in the declaration of independence. Life cannot be mere existence—it is the right to actually live rather than just survive. Supporting individual liberty (the right to choose your own destiny) means actually providing people with a real choice.
I believe in free markets and if free markets actually performed to their theoretical yields, perhaps we wouldn't have these problems; but I know enough to know that this will never happen. Free market principles are based on unrealistic assumptions such as perfect information, zero transaction costs etc. So inevitably the free market will have holes and people who fall through these holes. Certainly we can do better than we are currently doing, and it is certainly not a moral hazard for as part of the cost of compassion to provide these people with a soft landing.
Do I want to destroy the private market for healthcare? No? But can we provide a basic level of care to keep people from dying on the streets from curable diseases, while allowing for people who want better care to be able to buy it.
DrPullen 10 years, 8 months ago
I'm a big supporter of high deductible health care plans for individuals who can afford the high deductible. They are lower total cost at every level of spending on medical expenses if the individual is responsible for the full cost of insurance. When an employer is paying the cost of insurance other plans may cost the employee less, but the total cost of care, i.e. premium plus cost of care is higher for plans other with lower deductible costs. I post about this at http://drpullen.com/catastrophichealt...">DrPullen.com
js1976 10 years, 8 months ago
@kdavis, the increases you have witnessed so far are just the tip of the iceberg. The majority of increases will take effect in 2014. The insureds that will feel the biggest pinch are individual healthcare plans. BCBS of Ms is expecting a 65% increase on these plans, and Humana is around 85%. The ACA does prevent them from increasing these premiums overnight, but this will be the final numbers.
I"m already spending around $800 a month for mediocre coverage.
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