From The Archives: Deductibles And Out-Of-Pocket Costs

Welcome to "From the Archives," a new Health Affairs Blog series, where we take a timely topic and delve into the literature and history, from a Health Affairs angle, of course.

We recently published a Web First with results from a Kaiser Family Foundation (KFF) survey of employers, showing that employer premiums increased 4 percent this year. But the real story was deductibles, which have increased 67 percent since 2010. This created quite a buzz in the media about how employees are taking on an increased share of health costs through deductibles.

But this topic certainly isn't new. High deductible plans have been increasing in popularity, and out-of-pocket costs have been growing in both the nongroup and group markets.

So what do we know about high deductibles and high out-of-pocket costs?

Trends Over The Past Two Decades

Past surveys and analyses of health spending show that the growth in deductibles and out-of-pocket spending is a trend across the system.

Overall out-of-pocket spending has been on the rise for some time, growing nearly 40 percent from 1996-2005. While it has since slowed due to enactment of the Affordable Care Act (ACA) coverage provisions, National Health Expenditure projections call for increased growth over the next decade. Analyses in Health Affairs of the employer market found increases in out-of-pocket costs and less generous plans from 2007-2011 and identified the growing trend of high deductible employer plans. As of 2013, nearly one-third of workers were covered by a high deductible plan.

While the KFF study focused on employer plans, higher deductibles and out-of-pocket costs are a reality in the nongroup market as well. Federal marketplace plans generally have lower premiums but higher deductibles and cost sharing for prescription drugs. Plans at the bronze metal level in the marketplace have deductibles similar to those of high deductible employer plans.

Nearly 10 million people have coverage through the marketplace and the majority of those are federal enrollees. This number is expected to grow to 23 million people by 2019. Employer-sponsored insurance is the coverage source for nearly 150 million people. This number is expected to drop slightly, but remain the coverage source for the majority of Americans.

Consumer-Driven Health Plans To High Deductible Health Plans

High deductible health plans were once known as "consumer-driven health plans," although that name is less commonly used now. This name connoted an increased role for consumers in shopping for services and reducing the use of unnecessary care. These plans have been around since 2001 and increased in popularity with the creation of Health Savings Accounts (HSAs) in 2004. In fact it was a study published in Health Affairs that predicted large savings (and the large growth) from consumer-driven health plans in the employer market.

It's important to note that "High deductible health plan" is also a legal designation for HSA eligibility. In 2015 the qualifying deductible is $1,300 for an individual and $2,600 for a family, but the deductibles are usually higher. Plans can still have significant deductibles and out-of-pocket costs without being designated a high deductible health plan. In fact, part of what is significant about the KFF findings is that the average deductible for a non-high deductible employer plan ranges from $958-$1,230.

Impact Of Out-of Pocket Spending

The conventional wisdom is that higher out-of-pocket costs mean less use of care, but what does the research say? And what impact does this spending have on specific populations? High out-of-pocket costs are of concern for people with chronic conditions, mental health disorders, and other conditions that require expensive prescription drugs or long-term service use.

Families with chronic conditions in high deductible plans have higher levels of financial burden than those in traditional plans. Almost half reported problems paying medical bills or other bills due to health care costs. Having just one chronic condition has a huge impact on out-of-pocket spending, two conditions even more so. Enrollees in high deductible health plans are also more likely to stop taking their medication for a chronic illness. But we also know that better adherence to prescribed medications for some chronic conditions results in less health care use and that increased drug use reduces medical spending.

Another population impacted by high deductibles and out-of-pocket costs is low-income individuals and families, as they may not have sufficient assets to meet large deductibles. Individuals enrolled in high deductible plans that live in areas with high rates of poverty and low education rates reduced their "high-severity" (that is, the times you need to go to the emergency room) visitation rates by 25-30 percent over two years. Individuals with higher socioeconomic status only reduced lower severity visits (the less necessary visits).

Research found that enrollees in consumer-driven health plans were likely to reduce preventive care use, even though those services are often covered without cost sharing, and were largely unaware of the fact that preventive care was free or low cost. At least some of the research so far seems to indicate that high deductibles and out-of-pocket costs reduce use of necessary as well as unnecessary care. We look forward to more analysis of the impact of the recent ACA provisions on these trends.

With the confluence of high prescription drug costs, increased prevalence of chronic disease, and higher out-of-pocket burdens across insurance types, it's certain that this issue isn't going away any time soon. We'll be watching closely.

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