No one likes deductibles. For most people, the word “deductible” probably ranks down there with “root canal” and “traffic tickets.” But as we adjust to life in the times of the coronavirus, “deductibles” are more relevant than ever.
The current administration has touted high-deductible health plans (HDHPs) coupled with tax-advantaged Health Savings Accounts (HSAs). Employers have also jumped on the HDHP bandwagon. The share of workers enrolled in a tax-advantaged HDHP increased from four percent in 2006 to 30 percent in 2018. Why are they so attractive? Two words: lower premiums. But as the coronavirus pandemic effectively reveals, those low premiums are fool’s gold.
Here’s the rub – choosing an HDHP means you’re on your own for the full cost of almost all health services until you’ve met a large deductible. The minimum deductible for an HSA-qualified HDHP must be at least $1,400 for individuals or $2,800 for families. But the average deductible is much higher, nearly $2,500 for individuals and $5,000 for families.
So if you have a child or a spouse, you don’t have health coverage until you’ve shelled out nearly $5,000. Considering that four out of ten adults cannot cover a $400 emergency expense, this puts the average consumer between a rock and a hard place.
And even if they could afford it, families in lower tax brackets also get a lower tax break on their HSA contributions. Employers sometimes contribute to HSAs for their workers, but the average contribution falls far short of the average HDHP deductible. In short, HDHPs offer plenty of risk without much benefit unless you’re quite wealthy. You might stay healthy, but if you don’t (for example, by unexpectedly contracting coronavirus), the HDHP option could easily cost you thousands.
It’s not hard to imagine that people with high deductibles might skimp on basic preventive care because they have to pay for it themselves. Skipping this month’s high-blood pressure medication or postponing that colonoscopy can save needed cash. Years of research shows that people facing high deductibles tend to cut down equally on all care, even “high value” services that might prevent worse outcomes later. Recognizing the dilemma, Congress included a “safe harbor” to allow HSA-eligible HDHPs to cover preventive services before the deductible is met.
That’s good, but it’s still restrictive. For example, medications for chronic conditions like high blood pressure or asthma are not included, even though they may prevent high-cost complications or emergency room visits. Other important preventive services, like male contraception, simply aren’t included. The IRS has declined to recognize male condoms or vasectomies as preventive services under the safe harbor, despite our compelling comments co-signed by 35 partner organizations.
Poor outreach and awareness also present barriers to care in HDHPs. The safe harbor only works if enrollees know those services are fully covered with no deductible. Studies show that HDHP enrollees often don’t know, and they frequently delay or avoid deductible-fee preventive care because they think they’ll be charged for it.
Fast forward to the emergence of COVID-19.
It took the IRS less than 24 hours to allow large employers to waive cost-sharing for coronavirus testing and treatment without violating the safe harbor. The IRS agreed that providing those services pre-deductible would not disqualify employees or employers from contributing to HSAs.
Now, in the third Coronavirus legislative package, self-insured employers negotiated an additional expansion. The Senate-passed bill expands the safe harbor to allow telehealth and other remote care to be covered in HDHPs for any visits, not just those related to coronavirus, although it only applies to plan years beginning on or before December 31, 2021.
From a public health perspective, preventive care, telehealth, and infectious disease treatment are all high-value services that should be accessible to all people in all health plans. But the fact that Congress needs to address these problems on a piecemeal basis during an emergency spotlights the real issue with HDHPs. Rather than empowering consumers to spend their health care dollars efficiently, HDHPs drive people to self-ration care, including high-value care, due to cost. In short, just when you most need your coverage, you find out you’ve been fooled because it’s not really there.