Consumers still struggle with health insurance deductibles

Perhaps the biggest frustration consumers have with their health insurance these days is cost – and one of the most significant areas of growth many have faced in recent years is the size of their deductibles. This all comes as overall costs for health insurance rise, and the employers that provide such coverage have shifted more of them onto workers rather than bear the brunt themselves.

For decades, there has been a slow but steady crawl among employers away from providing traditional health care – which used to see them split costs with employees at a roughly 80/20 rate – more or less regardless of who was providing that care, according to the Pharmacy Times. However, following the HMO Act of 1973, these health maintenance organizations rose in popularity because they helped keep costs down, and later, Preferred Provider Organizations also became quite common.

As of 1988, about 73% of workers were still covered by traditional health insurance plans, but by 2000, that number had declined into the single digits (8%), the report said. That wasn't necessarily a bad thing, because HMOs and PPOs typically help people carry low deductibles all the same, but within a few years, as costs for that kind of coverage ticked up, the prevalence of high-deductible health plans came with them. Around the time the recession ended in 2010, about 1 in 8 workers nationwide was covered by an HDHP, and that number continued to rise, hitting a high of 29% in 2016 before taking a slight step back the following year, to 28%.

Deductibles are a major problem for employers and employees alike.

What's the issue?
Simply put, the dollar figure for the average deductible in the U.S. today has ballooned at a rate that should be alarming to both employers and employees, according to the latest data from the Kaiser Family Foundation. The most recent data (from 2018) shows that in the previous decade, these costs ballooned 212% – more than triple what they were in 2008 – and that leads to many difficulties for the average worker.

For instance, 7 in 10 people polled about these costs said they tried to reduce their expenditures in other ways, including nearly half who sought generic prescriptions instead of name-brands. The data further showed that 1 in 6 shopped around for the most affordable care they could find in their area, and 1 in 11 said they tried to negotiate with a provider to get a lower price. Furthermore, the percentage of people who say they choose their health insurance based solely on cost grew to 36% from 21% in 2003.

As it specifically relates to covering the cost of ever-growing deductibles, however, more than half of respondents said they would not be able to come up with that kind of money on short notice.

The employer's role
Increasingly, companies are recognizing where their health care expenditures actually go is truer than they might have realized, according to Employee Benefits News. The most recent industry data shows 84% of the nation's health care spending goes to just 20% of people, and in fact, just 10% of people accounted for 70% of those costs. However, there's plenty of anecdotal evidence in addition to the rising costs overall that suggest employers are not doing enough to approach this issue creatively.

The disparity in who's responsible for most health care costs leads to a major issue for employers and employees alike: If businesses are raising health care costs for everyone through high deductibles, they may be making a decision that increases difficulties for all involved, the report said. Experts instead recommend doing more to increase employee health in other ways, such as by expanding other health-related benefits as a means to keep costs down.

While many larger employers do this – giving relief to potentially hundreds or even thousands of employees – the vast majority of businesses in the country are smaller firms, with only a handful of workers on the payroll. If they were to alter their approach with less traditional methods, they may find more success in helping employees reduce health care costs overall. For that reason, experts say engaging with new approaches to reduce deductibles should be at the top of any benefits manager's to-do list.

To that end, a growing number of companies are now developing voluntary benefits programs that promote wellness or add extra layers of coverage, according to Plan Sponsor. For instance, critical illness insurance provides extra peace of mind for some employees, and fitness programs from insurers could be used to bring down premiums, giving more flexibility to employers when it comes to covering costs on their end.

Certainly, these are all issues companies need to monitor carefully to avoid overburdening employees with high deductibles that could leave them in the lurch when critical health emergencies arise – or if they have chronic illnesses. The more that can be done to find workable solutions for all involved, the more satisfied and financially protected employees are likely to be.