High-Deductible Health Plans Fall From Grace In Employer-Based Coverage

Yves here. The decline in use of high-deductible health insurance policies is important not just for employees who get insurance at work, but for the public generally. The retreat by employers will make it harder to treat high-deductible plans as a preferred option for expanded government-provided care.

Note that employers health care costs, as you might expect, continue to rise. And even though employers aren’t so keen about high deductible plans, average deductions are rising. From the Wall Street Journal:

The average cost of employer health coverage offered to workers rose to nearly $20,000 for a family plan this year, according to a new survey, capping years of increases that experts said are chiefly tied to rising prices paid for health services.

Annual premiums rose 5% to $19,616 for an employer-provided family plan in 2018, according to the yearly poll of employers by the nonprofit Kaiser Family Foundation. Employers, seeking to blunt the cost of premiums, also continued to boost the deductibles that workers must pay out of their pockets before insurance kicks in…..

Nationwide, workers paid $5,547 a year on average in premiums for a family plan in 2018, according to the Kaiser employer survey. That represented 29% of the total premium cost.

In 2017, workers’ average premium contribution for a family plan was $5,714, or 31% of the total cost, slightly higher than this year’s figure but not statistically different, according to Kaiser.

For an individual employer plan, the average total premium cost was $6,896 in the 2018 survey, or 3% higher than last year, with workers paying 18% of the total.

The average 2018 general deductible for individual-worker coverage was $1,573, according to the survey, up from $1,505 last year and $1,135 five years ago. Those averages don’t include plans that lacked such deductibles.




By Jay Hancock, a Senior Correspondent for Kaiser Health News, who previously worked for The Baltimore Sun, The Virginian-Pilot of Norfolk, and the Daily Press of Newport News. Originally published at Kaiser Health News

With workers harder to find and Obamacare’s tax on generous coverage postponed, employers are hitting pause on a feature of job-based medical insurance much hated by employees: the high-deductible health plan.

Companies have slowed enrollment in such coverage and, in some cases, reinstated more traditional plans as a strong job market gives workers bargaining power over pay and benefits, according to research from three organizations.

This year, 39 percent of large, corporate employers surveyed by the National Business Group on Health (NBGH) offer high-deductible plans, also called “consumer-directed” coverage, as workers’ only choice. For next year, that figure is set to drop to 30 percent.

“That was a surprise, that we saw that big of a retraction,” said Brian Marcotte, the group’s CEO. “We had a lot of companies add choice back in.”

Few if any employers will return to the much more generous coverage of a decade or more ago, benefits experts said. But they’re reassessing how much pain workers can take and whether high-deductible plans control costs as advertised.

“It got to the point where employers were worried about the affordability of health care for their employees, especially their lower-paid people,” said Beth Umland, director of research for health and benefits at Mercer, a benefits consultancy that also conducted a survey.

The portion of workers in high-deductible, job-based plans peaked at 29 percent two years ago and was unchanged this year, according to new datafrom the Kaiser Family Foundation. (Kaiser Health News is an editorially independent program of the foundation.)

Deductibles — what consumers pay for health care before insurance kicks in — have increased far faster than wages, even as paycheck deductions for premiums have also soared.

One in 4 covered employees now have a single-person deductible of $2,000 or more, KFF found.

Employers and consultants once claimed patients would become smarter medical consumers if they bore greater expense at the point of care. Those arguments aren’t heard much anymore.

Because lots of medical treatment is unplanned, hospitals and doctors proved to be much less “shoppable” than experts predicted. Workers found price-comparison tools hard to use.

High-deductible plans “didn’t really do what employers hoped they would do, which is create more sophisticated consumers of health care,” Marcotte said. “The health care system is just way too complex.”

At the same time, companies have less incentive to pare coverage as Congress has repeatedly postponed the Affordable Care Act’s “Cadillac tax” on higher-value plans.

Although deductibles are treading water, total spending on job-based health plans continues to rise much faster than the overall cost of living. That eats into workers’ pay in other ways by boosting what they contribute in premiums.

Employer-sponsored group health plans, which insure 150 million Americans — nearly half the country — tend to get less attention than politically charged coverage created by the ACA.

For these employer plans, the cost of family coverage went up 5 percent this year and is expected to rise by a similar amount next year, the research shows.

Insuring one family in a job-based plan now costs on average $19,616 in total premiums, the KFF data show. The American worker pays $5,547 of that in a country where the median household income is more than $61,000.

The KFF survey was published Tuesday; the NBGH data, in August. Mercer has released preliminary results showing similar trends.

The recent cost upticks, driven by specialty drug costs and expensive treatment for diseases such as cancer and kidney failure, are an improvement over the early 2000s, when family-coverage costs were rising by an average 7 percent a year. But they’re still nearly double recent rates of inflation and increases in worker pay.

Such growth “is unsustainable for the companies I have been working with,” said Brian Ford, a benefits consultant with Lockton Companies, echoing comments made over the decades by experts as health spending has vacuumed up more and more economic resources.

For now at least, many large employers can well afford rising health costs. Earnings for corporations in the S&P 500 have increased by double-digit percentages, driven by federal tax cuts and economic growth. Profit margins are near all-time highs.

But for workers and many smaller businesses, health costs are a heavier burden.

Premiums for family plans have gone up 55 percent in the past decade, twice as fast as worker pay, according to KFF.

Employers’ latest cost-control efforts include managing expenses for the most expensive diseases; getting workers to use nurse video-chat services and other types of “telemedicine”; and paying for primary care clinics at work or nearby.

At the “top of the list” for many companies are attempts to manage the most expensive medical claims — cases of hemophilia, terrible accidents, prematurely born infants and other diseases — that increasingly cost as much as $1 million each, Umland said.

Employers point such patients to the highest-quality doctors and hospitals and furnish guides to steer them through the system. Such steps promise to improve results, reduce complications and save money, she said.

On-site clinics cut absenteeism by eliminating the need for employees to drive across town and sit in a waiting room for two hours to get a rash or a sniffle checked or get a vaccine, consultants say.

Almost all large employers offer telemedicine, but hardly any workers use it. Thirty-nine percent of the larger companies covering telemedicine now make it comparatively less expensive for workers to consult doctors and nurses virtually, the KFF survey shows.

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  1. jefemt

    Might be part of the no-wage-growth reality for most? Management/HR rationalizing no bump in pay: it’s coming in the form of continued ‘insurance coverage’.

    Fear, motivating behavior, in the immoral scheme of insuring the health of a mortal being who will inevitably suffer health issues during their lives. Tie it to work– this ain’t property/casualty actuarial risk betting, folks.

    Neofeudalism. I wonder how much creative energy would be loosed, how much new economic activity would occur, if health costs weren’t tied to being employed / ‘benefits’ versus paying as part of say, federal income tax. Get the insurors out, get some market-place competition in there, stop the aggregation/monopoly-building consolidation that has taken place in the last decade.

  2. TimH

    The issue with high deductible plans is that the deductible isn’t met for healthy people. So they become ‘catastrophic care’ plans. My Blue Shield quote under ACA last year for late-50s male in CA was over $10k/yr, with $6k deductible before any payout. Maybe fine for catastrophic event insurance, but not exactly a health plan in the conventional meaning.

    The UK system, though grossly underfunded, at least allows patients to jump the queue and go private for the main costs of elective stuff (surgeon/anaesthetist for new hip etc), using (but not paying extra for) the underlying health service such as hospital bed etc.

  3. curlydan

    A key point though is that the trend downward is based on a survey of what employers will do next year: “This year, 39 percent of large, corporate employers surveyed by the National Business Group on Health (NBGH) offer high-deductible plans, also called ‘consumer-directed’ coverage, as workers’ only choice. For next year, that figure is set to drop to 30 percent.”

    I’m hopeful of a drop, but I’m wary that what the employer says may differ from what the employer will do when the rubber meets the road. And a deductible decrease can be offset by relentless premium increases.

  4. cojo

    It seems that health care costs is just a big shell game. Hidden costs get shuffled around between employers, governments, and individuals. High deductible plans just shift the costs to the consumer rather than the employer. The consumer, being uninformed, is still not able to make the most judicious choices that will both improve her health and bring down costs. What most often happens will be reducing utilization for unaddressed symptoms until the emergency happens, at which point costs go up. There is some mention of growing drug costs, especially the new biologics, but no mention of administrative bloat.

    The article makes a feeble attempt at the end to introduce some promising cost control measures in the end, but these are just window dressings. Companies will continue to pay for the increases in rates and the employees who are disconnected from these costs discussions will continue to see stagnation of their wages due to rising health care costs.

  5. Pat

    I do realize that there are some tax deductions for employer healthcare I don’t entire understand, but I have spent years trying to figure out why most major employers have not jumped on the Medicare for All bandwagon, especially now that employer provided insurance is a requirement.
    I have come up with two reasons:
    1.) Ideology (Must always support markets even when they are neither rational or remotely make business sense.)
    2.) Personal greed of the top management and major stockholders (they also have investments in the for profit medical/insurance industry) which trumps good of the business.

    If anyone else can give me a good reason, I’d love to hear it. But having healthy employees, a relatively stable cost regarding their healthcare (the employer based contributions towards single payer), and the lack of administrative nightmare all would make me think is a win win for Business (outside of the Insurance and For Profit Medicial Drug Industry)

    1. Go Braves

      Honestly, I used to think your reasons 1 and 2 were the only reasons. Then I realized that another component is protection from competition and worker desertion. By being the “only game in town” so to speak, for healthcare coverage, the employer protects itself from highly skilled workers leaving to start new companies and from the market becoming crowded with numerous, smaller, more agile competitors. Large corporations are, by their inherent nature, slow-moving and cost-laden. They also fear upstarts. With health insurance operating as “golden handcuffs” for so many employees, they buy a significant measure of protection from competition. It’s a smart cost of business if you look at it that way.

      1. curlydan

        exactly. Anytime someone says that “we’re the land of entrepreneurship”, tell them we’re the land of inefficient corporations. To aspiring entrepreneurs we implicitly say: Want to start a business when you have a family? Prepare to spend an additional $15K to do that above what you’re currently paying with your employer. I’m sure your spouse will love that plan.

        1. KLG

          The late, great Michael Harrington talked about “job lock” due to employer-provided health insurance at several meetings I attended in 1977-1978. This is nothing new, except that way back then the insurance was actually affordable, usable, and sufficient for most needs. You want to be a writer or artist, start that new business but have a child with a chronic illness? Knock yourself out!

    2. curlydan

      I generally agree you’ve got the 2 big reasons for not jumping on the Medicare for All bandwagon. I might add one more offshoot of those 2 reasons:
      CEOs don’t want to [family blog] with the profit stream of other CEOs’ businesses. Moving to Medicare for All would severely crimp some companies’ profits. And we’ve been conditioned in this country not to get in front of the profit train as if those profits are inviolable.

      One other interesting component of a move to Medicare for All would be: would the companies that are giving large subsidies to their employers give that money back to the employees in salary in a transition to Medicare for All? Or would most be greedy b-tards and keep it? I could see this transition being used as a “fear component” to motivate employees to oppose a shift to Medicare for All.

      1. Harrold

        I’m sure companies would behave exactly how they did earlier this year when given those huge corporate tax cuts. A few high profile bonuses paid out and 98% of the companies would just keep the money.

  6. Knifecatcher

    I’ve been on a HDHP for several years now and it’s awful. Not only do we pay $4k before we see the first nickel in benefits but once we do hit the deductible – and even worse, when we hit the $8k out of pocket max – we have to fight tooth and nail to get Cigna to approve a claim. My wife has been having shoulder problems that haven’t improved with months of therapy. Cigna denied the MRI recommended by her doctor.

    The worst example was for my son’s Autism therapy. Immediately after we hit the deductible we were told that Cigna would no longer cover the therapy because his diagnosis was out of date.(?) Never mind that autism is a lifelong condition and that my son’s case is quite obvious on even a casual interaction, we had to pay out of pocket for a new diagnosis before they would cover any more therapy. And since diagnosing autism involves forcing someone into situations that trigger autistic behaviors this was basically two days of torture for my boy, for no good reason.

    F(amily blog) the whole putrid system.

    1. jackiebass

      Insurance companies don’t pay a claim because they have made the appeal process so difficult that if the claim is relatively small people just don’t appeal. To a person this amount is small but for the company the money saved is huge. The company sends you a rejection that for the average person it’s almost impossible to understand. Health care has become nothing more than a big business with every part of the industry trying to get a bigger share of the money spent. Too many doctors seem to be more interested in selling you tests and shots for diseases than actually discussing you health. This has not only happened with me but also with my wife. The old time doctor that actually spent time talking to you no longer exists. These doctors knew their patients.Todays doctors don’t.

  7. Go Braves

    “Because lots of medical treatment is unplanned, hospitals and doctors proved to be much less “shoppable” than experts predicted. Workers found price-comparison tools hard to use.

    High-deductible plans “didn’t really do what employers hoped they would do, which is create more sophisticated consumers of health care,” Marcotte said. “The health care system is just way too complex.”

    This is an astoundingly “no sh-t” conclusion. It really makes you wonder who the “experts” were? The same experts that predicted that deregulating power would lead to new entrants to the production game?

    Healthcare is a classic case of an item with a nearly 100% inelastic demand curve. I understand that economists are largely high-functioning idiots with a good grasp of mathematics (so long as “all things are equal”), but how is it that they selectively ignore their own dogma in cases like this? Not only is demand inelastic, providers in many cases have nearly unlimited freedom and incentive to act in a predatory manner and zero incentive to be transparent in pricing. Add to that nasty situation the massive rise in healthcare consolidation and the insertion of a professional management class (aka parasites) over the providers of healthcare and you have a recipe for a perfect storm of patient (consumer) f-ckery.

    Of course, the above rant proceeds from the position that all of that is a bug and not a feature.

  8. Pat

    Off topic, but considering all of this is a scam to keep ‘markets’ where healthcare and insurance are concerned maybe not, one of the things that chaps my keister regarding this “making the insured a shopper” bs meant to lessen access to health care is the question about how the hell the insured is supposed to be an informed consumer when prices are not posted anywhere AND when the amount charged often changes depending on who is paying.
    Can I be sure I’m paying the same rate as my insurance company would while I meet my deductible?
    Can I be sure that my insurance company is getting the best rate even if I am paying their rate?
    Will I still get the insurance company rate if they refuse coverage on something and I have to pay out of pocket or do I immediately jump into the ‘you have no bargaining power so suck this’ category of pricing?
    How are people who are expected to pay well over a third or a half of their income before taxes on premiums and deductibles every year supposed to keep that up for a serious illness? And how long will it take for the employer to find a way to erase their employment even if a family member manages to keep working under those circumstances considering that this illness would put their coverage into a costlier “pool”?

    There is no winning – except for the private medical industry, no matter how good a shopper you are…

  9. zagonostra

    “The average cost of employer health coverage offered to workers rose to nearly $20,000 for a family plan this year..”

    So remind me again why corporations are not lining up behind M4All? Can companies effectively compete on a global scale with this kind of cost structure?

    Maybe we can get Bezo to lobby Congress for not just an increase into the obscenely low Min Wage but also for Single Payer…hell, lets just make Bezo king.

  10. mbc92028

    An unfortunate dilemma we find our selves in. When I was a young guy in the 90’s I had a conversation with a guy I worked with. He had moved here from England 10 years prior. He explained,you make a little more money in England but the cost of living is much higher and health care was free but awful. Now 20 years later we are earning 18% more then in the 90s, but the cost of housing, insurances and higher education are all at least 100% higher. Too “soften the blow” of HC the costs have gone hidden in to line items in our checks. And post Citizens United we have industry spending billions to keep the trend moving in this direction. With pennies being spent on the opposing side. Year after year, up up up the costs go. Where does all the $ go? How long until this country is a hollow shell of what it once was? This cannot be sustained with out dire consequences. Its time we should make the insurance companies disappear. Have all the $ put into a national fund, create real consequences for robbing the fund we use to keep people healthy. Make all medical non-profit, take it out of the capitalist market, its failing.

  11. JerryDenim

    I see nothing in this article that makes me believe corporate America is feeling more generous towards their employees. There’s no analysis of what kind of new plans with new hidden gotchas the employers are planning on switching their employees over to.

    This year, 39 percent of large, corporate employers surveyed by the National Business Group on Health (NBGH) offer high-deductible plans, also called “consumer-directed” coverage, as workers’ only choice. For next year, that figure is set to drop to 30 percent.

    “That was a surprise, that we saw that big of a retraction,” said Brian Marcotte, the group’s CEO. “We had a lot of companies add choice back in.”

    Few if any employers will return to the much more generous coverage of a decade or more ago, benefits experts said. But they’re reassessing how much pain workers can take and whether high-deductible plans control costs as advertised.

    The cynic in me thinks this change is probably being driven by the profit motives of the health insurance industry itself. My guess is the the health insurance industry realized plans with very high deductibles are very effective at discouraging people from seeking care, so effective they they skip checkups, exams and visits except for extreme cases and emergency care. If people can’t afford to set foot in a doctor’s office they can’t be gouged and and slapped with a million little hidden fees and overcharges, I’m sure the industry recognizes this and is perhaps looking to lure more victims into its clutches.

    A deductible that is a few hundred dollars lower is nothing to celebrate if you get stuck with a co-pay that is thirty or forty percent. My plan has a $1300 deductible ( not a “high” deductible by definition, hooray!) and has a 20% copay. Even with a 20% copay I’ve found tests and procedures where paying 20% of the insurance rate puff price results in the insured paying more than the full cash price for the procedure. I would suspect that is the case more often than not with 30% and 40% copay plans, so really those plans are worse than worthless. The supposedly “insured” is needlessly setting fire to the money they use for their premiums in exchange for the privilege to pay more for medical care than a person without health insurance.

    It’s an outrage that we live in a country where any of this is legal.

    Compared to many people I have it made, still though I find it strange my unhealthy, senior citizen dog who is past his sell-by-date,10-year lifespan, has superior health insurance that only cost a tiny fraction of my health care. After my employer contribution my premiums are over $500 a month, my dog’s premium, 100% paid by me of course is $50 monthly. He has a 10% co-pay, I have a 20%. His deductible is $500 my is $1300. This is after they (pet insurance) coughed up over $18,000 for the removal of a cancerous spleen and a lot of ongoing and expensive heart medications and procedures.

    I belong to a union and work at a large company that is consistently awarded “Best Places to Work” by either Fortune or Forbes.

    Hellvua country the USA.

    1. ChiGal in Carolina

      “The cynic in me thinks this change is probably being driven by the profit motives of the health insurance industry itself… if people can’t afford to set foot in a doctor’s office they can’t be gouged and and slapped with a million little hidden fees and overcharges, I’m sure the industry recognizes this and is perhaps looking to lure more victims into its clutches.”

      This benefits the corporate medical providers like hospital chains and the like; the insurance companies get paid through the premiums regardless of whether you get care, and that would be fine with them.

      While it is true that sometimes the price negotiated by the provider and insurance company is more than the cost of the procedure, usually it is the uninsured who are charged the highest price. Cuz they can least afford it, doncha know.

      1. Pft

        The doctors and hospitals must charged an insured patient the price negotiated with the insurance company. The insurance company gets a negotiated discount (70%) while the insured patient does not.

        If a patient seeks treatment and does not provide insurance details, they may negotiate a price 70% less than the list price provided they pay the full amount on site (no billing or having to chase payment is their incentive to do so)

  12. Antony Baxter

    My employer gave us the choice between a HDHP and a more ‘usual’ plan. I spent several hours reading the fine print and pulling together some spreadsheets before making a choice, and it came down to how much you’re likely to bill in a year. The HDHP was overall (i.e. out of my own pocket) cheaper if you billed less than $5k or more than $16k per year. Depending what you billed between those limits, the HDHP was never more than $992 more expensive, per annum. Note that this was with figures from 2017. I haven’t re-run it this year.

    Now, for a family of four, it’s not difficult to spend more than $16k in a year – breaking just one out of our sixteen limbs would suffice!

  13. Bridget

    I have had a high deductible plan coupled with an HSA in years past. I actually liked it, but it can be complicated and requires good recordkeeping.
    On the plus side, I could pay for whatever healthcare services I wanted out of my HSA account, with no insurance company deciding what I could and could not have. I generally did not meet my deductible, but one year I did due to a minor surgical procedure. Everything over the deductible was covered 100%.
    I no longer have this type of plan as an option, but if I did, I would definitely choose it again. For my particular needs it worked very well.

    1. Stephen Gardner

      I used to have a no deductible plan with low copays. I liked it but the MBA parasites in the insurance, hospital and pharma companies weren’t paying off their 3rd vacation home fast enough so that went the way of all flesh. I have fantasized about hunting them like in the Hunger Games except you have to call the games the Well Fed and Groomed Games. :-)

    2. d

      We had one of these the deductible was so high that the HSA even at it max was never even covering .25 of the annual deductible. Which just lead us to not going to the doctor for any reason at all, as we couldn’t afford it. and i make over 100k. The entire scheme only works if your are young, and have 0 health conditions. And never


  14. DavidLA

    Before I went on Medicare (which is its own subject) I bought my family high-deductible health care policies because the coverage was the same whether you had high-deductible or low-deductible policies. And, more to the point, the average costs of a high-deductible policy and the low-deductible policy, when you add up all the monthly premiums and the annual deductibles, are about the same, after which the insurance company pays 100%. The inadvertent point that your discussion makes is that for employers, it makes sense to provide employees with high-deductible policies because it shifts the financial burden to the employee, because the employer pockets the cost difference between the two types of policies. For the independent consultant or self-employed, it makes sense to have the high-deductible policy because there is a smaller annual minimum out-of-pocket cost, and it may be highly likely that your total cost may never reach even the annual minimum out-of-pocket cost of the low-deductible policy, depending on your health condition. I have thought that unions should explore the option for their members to be given the choice of a low-deductible plan or high-deductible plan, with the proviso that high-deductible plan members be given the difference in annual premiums as a contribution to the accompanying HSA account. This could open the HSA accounts to possible abuse, but there could be restrictions as to how or when the HSA money could be spent, other than on health care directly.

  15. Gregory Etchason

    As the “rate” of profit falls MONOPOLY is the only play for “capital”.
    The rate of profit determines the portion of productivity that goes to capital.
    It is late for the “health care insurance market”. It has failed to deliver affordable accessible coverage for individuals. It is currently failing to provide sufficient return
    on capital.

  16. rd

    I recently spent some time in Canada visiting relatives and some friends. The age range was mid 50s to 80s.

    One of the elderly people had 3 hip replacements that went well and cost very little in out-of-pocket expenses. He knows somebody in the US who got a hip replacement around age 60 and had to sell their house to pay for it. Lots of shaking of heads around the table on that one.

    Ontario is using more tele-medicine in urban settings, not just remote communities. A Nurse Practitioner does the history and basic physical measurements etc. at a clinic and then gets the doctor on a video screen, at which time they sort out if and what needs to be done to move forward. Ontario is also structuring their primary care more along a “concierge” model where the GP gets paid for each patient on an annual basis but doesn’t get paid specifically for things like office visits. So much more gets done over the phone. 30 years of complete electronic medical records where everybody in the health care system can see a thorough medical history on you helps that.

    BC is doing a lot more to clump things together. This was initially driven by the need for people in remote areas to travel in to hospitals and clinics and need to deal with everything in one visit. Now more people go in and get everything done in one visit – physical, blood work, scans etc. to avoid multiple trips over days or weeks.

    BC also blocks out time during the day for a doctor to take same-day or next day requests for high need patients. So those people get immediate response and more time in the doctor’s office with the objective of keeping them out of the emergency rooms and hospital stays. Apparently, the visits to emergency rooms have reduced overall by using more clinics and these types of high need attention.

    The one gap in coverage I heard some detailed stories about appears to be newer expensive drug and treatment regimes (stem cell, immunotherapy, etc.) especially for cancer. The high cost ones (say $10k+/month) have haphazard payment coverage from multiple sources, so one person can get the treatment for free while another person doesn’t. This is the one area that seems to have a “lottery” aspect to it where it can be as random as which town you live in regarding whether or not it is covered.

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