Top 10 Things to Know About High-Deductible Health Plans

BY Marilyn Werber Serafini and Kaiser Health News  April 27, 2012 at 2:13 PM EDT

High-deductible health care plans are no longer a novelty — they are becoming mainstream. According to the industry trade group America’s Health Insurance Plans, the number of people with this kind of coverage reached more than 11.4 million in January 2011 — up from 10 million in January 2010.

A survey from the Kaiser Family Foundation found that about half of all workers in “small” businesses (up to 199 workers) who have health insurance have these plans.

On Friday’s PBS NewsHour, health correspondent Betty Ann Bowser explored this “quiet revolution” in the health insurance industry. Watch the full report here.

But first, here is a brief guide to this type of health insurance:

  • These plans are generally defined as insurance policies with lower premiums and a hefty deductible — the amount you have to pay before the insurer picks up any of the cost. Federal rules require these plans to have deductibles of at least $1,200 for an individual and $2,400 for family coverage for 2012.

  • Another term for these is “consumer-directed health plans.”

  • Because of the health law, even high-deductible plans are now required to cover, usually for free, basic preventive services such as vaccinations and wellness exams.

– Consumers and employers like the cost control that comes with the plans — largely because the premiums are lower than standard insurance premiums by an average of $1,000 to $2,000 per year.

  • Even with the high deductible, patients’ out-of-pocket costs are capped at $6,050 for an individual and $12,100 for a family. Out-of-pocket costs generally include the deductible, the patient’s share of the cost of seeing a doctor, prescription medicines and hospital costs.

  • Health savings accounts (HSAs) sometimes accompany high-deductible plans. These accounts allow beneficiaries to contribute, tax-free, up to $3,100 for an individual and $6,250 for a family.

  • The money in an HSA belongs to the consumer. Funds left over at the end of the year are rolled over to the next year. If an employee changes jobs, the HSA stays with that individual. Some employers make tax-free contributions to their employees’ HSAs.

  • Health policy experts say the popularity of high-deductible plans is the byproduct of the steep rise in health costs. A RAND Corporation study notes that high-deductible plans, especially those associated with HSAs, “create a strong financial incentive for the employee to manage health care costs carefully, because the account balance is owned by the employee.” Deborah Chollet, a senior fellow at Mathematica Policy Research Center in Washington says that consumers “tend to be young, healthy males who (generally) avoid the health care system and only go to the doctor when necessary.”

  • The plans are problematic for low-income individuals, especially those with chronic conditions such as diabetes. Paul Fronstin of the Employee Benefit Research Institute says HSAs and high-deductible plans have a “straitjacket design” in which consumers are responsible for paying the full dollar amount of their medical expenses until they meet their deductible. People with health problems can have the toughest time meeting the deductible, because their illnesses can keep them from working.

  • The IRS determines what medical expenses qualify toward the deductible. Recently, the IRS dropped over-the-counter medications from its list.

Kaiser Health News is an editorially independent program of the Henry J. Kaiser Family Foundation, a nonprofit, nonpartisan health policy research and communication organization not affiliated with Kaiser Permanente.

Do you have specific questions about the benefits and drawbacks of high-deductible health insurance plans? Submit them in the comments sections, by email at onlinehealth@newshour.org, or on Twitter @jasokane. We’ll have financial experts from the insurance and consumer-protection worlds answer those questions next week on our Health Page.