Health Insurance and You!

Research institution the RAND Corporation recently conducted a study comparing high-deductible health insurance plans (HDHPs) to traditional plans with lower deductibles. The researchers looked at whether switching to an HDHP reduced monthly health care costs and affected quality of care.

HDHPs are structured much like fee-for-service and traditional managed care plans, but have much higher deductibles of at least $1000 per year. To balance out the cost, these plans have much lower monthly premiums. Introduced in 2003, HDHPs and their associated health savings accounts (HSAs) have become popular over the last few years. As of 2009, about 20% of Americans with employer-sponsored coverage was enrolled in an HDHP. Customers must have an HDHP in order to open an HSA.

According to RAND’s news release on the study results, “while [HDHPs] significantly cut health spending, they also prompt patients to cut back on preventive health care.” RAND analyzed enrollment and claims data from over 808,000 households covered by 53 large employers. They found that families newly enrolled in an HDHP spent an average of 14% less than similar families in lower-deductible plans, but began forgoing preventive care such as cancer screenings and vaccines.

In other words, these families reduced their use of both necessary and unnecessary care. This study looked at only the first year of enrollment in an HDHP, so they were not able to assess the long-term impact on health or health care costs. Annual checkups and other preventive measures keep people healthier in the long run, so it’s possible that the families cutting back on preventive care in the first year may end up with higher health costs over their lifetime. The study authors suggest more research into that and other questions.

Interestingly, the reduction in health care spending was significant only for plans with deductibles of $1000 or more, rather than for those with moderate deductibles between $500 and $999. Why is this the case? Even for healthy people – the targeted users of HDHPs – enrolled in low-deductible plans, one year’s basic health costs are likely to exceed a deductible of a few hundred dollars. After reaching the deductible, their health care costs are covered and they have little financial incentive to reduce their use of care. Healthy HDHP enrollees, on the other hand, don’t always reach their deductible. Since a larger portion of their costs are out-of-pocket, they may think twice about any health care that is not urgent, even if it is likely to pay off in the long term.

To learn more about HDHPs, managed care, and other options for affordable health insurance, visit our frequently asked questions page.