Why High-Deductible Health Plans Are More Common Than Ever
And why this trend means you’re likely paying more for health insurance
A high-deductible health plan is a health insurance plan with a higher deductible than a traditional health insurance plan.
If you have a high-deductible plan, you pay a lower monthly rate, or premium, than you would with a traditional plan. But, you also pay more for healthcare costs before your insurance company starts to help cover some of your costs.
The IRS defines high-deductible plans as those needing individuals to pay at least $1,400 a year (or $2,800 on a family plan) before insurance benefits help.
High-deductible plans are a relatively new issue, skyrocketing from lukewarm subject to hot-button issue following the 2008 recession.
Here’s a look at some notable events that have led to the high-deductible plan increase and where the trend stands now.
The stage is set
- Most Americans get their health insurance through their employer, and quality healthcare is an expected benefit of employment.
- Healthcare costs go on rising, though not at the rate they did from 1970 to 1990. These increases are due to five factors: a growing population, aging seniors, disease prevalence or incidence, medical service utilization and service price and intensity.
- Many businesses begin to think about new coverage options for employees as a way to save money. High-deductible plans are relatively rare, but these plans are an option for saving on costs while still covering for employees.
- The Medicare Prescription Drug Improvement and Modernization Act of 2003 sets up tax-advantaged spending accounts called Health Savings Accounts (HSAs).
- You can open an HSA if you’re covered under a high-deductible plan, according to federal guidelines. Together, the HSA and high-deductible plan allows you to pay for certain medical expenses with money that won’t be federally taxed.
- The HSA at once shines because of the potential savings it gives patients. The now-connected high-deductible plan star rises too.
The 2008 recession accelerates HDHP popularity
- The Great Recession barrels into full view and businesses see a dismal future ahead. In efforts to slash spending, many companies turn to cost-cutting opportunities. Enter: high-deductible plans, perfectly primed to join the conversation as an alternative to layoffs.
- Eight percent of covered workers are enrolled in employer-sponsored high-deductible plans, according to a Kaiser Family Foundation survey.
- Employers are trying to increase deductibles in order to lower premiums. But the foundation also finds that, since 1999, family premiums have experienced a 131-percent increase and individuals 105 percent. Similarly, many predict large increases for decades to come.
- More than 80 percent of large employers add high-deductible plans to their list of health insurance offerings, an increase of 53 percent in just five years.
- Nearly one-third of these large employers offer only high-deductible plans to employees, an increase of more than 10 percent from the year before.
- 29 percent of workers are enrolled in employer-sponsored high-deductible plans. The plans have become markedly more popular than Preferred Provider Organization, or PPO, plans. Since 2014, enrollment in high-deductible plans with a savings option has jumped by 8 percent while PPO enrollment declined by 10 percent.
The percentage of adults enrolled in a high-deductible plan increased from 25.5 percent in 2011 to 43.2 percent in 2017.
Consumers seek more protection, but the HDHP trend continues
- New IRS guidelines update the list of preventive services covered pre-deductible on a high-deductible plan, while also keeping HSA eligibility for patients. These updates include beta-blockers for congestive heart failure and coronary artery disease, SSRIs for depression, and more.
- On Jan. 1, the Know the Lowest Price Act and the Patient Right to Know Drug Prices Act went into effect. This move allows pharmacists, if asked, to tell a patient when a cash price for a prescription would cost less than if they use insurance.
- High-deductible plan amounts keep climbing. The IRS defines a high-deductible plan as any plan with a deductible of at least $1,400 for an individual or $2,800 for a family (up $50 and $100, respectively, from 2019).
- The total yearly out-of-pocket expenses — including deductibles, copayments and coinsurance — can’t be more than $6,900 for an individual or $13,800 for a family (up $150 and $300, respectively, from 2019). Out-of-network services don’t count as part of this limit, so consumers could end up paying more than this out-of-pocket total.
What began as a cost-saving measure in a moment of crisis, the HDHP has become standard for many increasingly strapped consumers.
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 “Health Insurance Coverage — 1993” U.S. Census Bureau, Statistical Brief
 “How has U.S. spending on healthcare changed over time?” Peterson-Kaiser Family Foundation, Dec. 20, 2019
 “Trends in healthcare spending,” The Journal of the American Medical Association, March 2019
 “PPO enrollment remains high, but location is a key factor,” Managed Care Magazine, 2009
 “Health Insurance Premiums Up 131% in Last Ten Years,” Time Magazine, 2009
 “High Deductible Health Plan Deductibles Weigh Down More Employees,” The New York Times, 2014
 “2016 Employer Health Benefits Survey,” Kaiser Family Foundation, 2016
 “2018 Real-Time Benefit Check National Adoption Scorecard Key Findings,” CoverMyMeds, 2018
 NOTICE 2019-45, Internal Revenue Service, 2019
 High Deductible Health Plan (HDHP), HealthCare.gov, 2020
This article was last updated March 03, 2020