The Rise of High Deductible Health Plans

Posted on February 10, 2012 by Craig Bauer in Benefits, Human Capital Management

As Benjamin Franklin once said, there are two guarantees in life: death and taxes.  If he were around today, he might add a third guarantee: your health insurance premiums will increase every year. With these rising at a tremendous rate across the nation year over year, different plan designs have come into the marketplace. One design in particular, the High Deductible Health Plan, has come to the forefront and is gaining momentum every year. A recent study indicates that between 2010 and 2011, HDHPs added an additional 1.1 million participants, a 10% increase. Here at TriNet, I’m fielding a lot more questions than I used to as they make gains in popularity. I even had one client fund its employees’ HSA accounts as an incentive to move from a traditional plan to an HDHP.  And, as our CEO, Burton Goldfield, shared in a recent blog post on Forbes, as a company, TriNet added options for our clients’ current plan year and after analyzing open enrollment, our numbers show that by adding new plans, we met a demand.  As background, only about 7 percent of our benefits-eligible population selected an HDHP, but 51 percent of last year’s participants stayed in their current plan, and another 32 percent chose from our newer HDHP options.

Just uttering the term ‘high deductible’ during an annual open enrollment meeting can send fear down the spines of employees, as no one ever wants to hear the words ‘deductible’ and ‘high’ uttered together! But further explanation of how the plans work can set minds at ease, which is why the plan’s adoption rates are growing quickly. HDHPs present a different way of looking at health care. If you paid the premium on a HDHP and fully funded a Health Savings Account (HSA), you could very well pay the same amount as you would for the richest PPO offering available. The difference is that if you don’t utilize services often, you get to keep your funds that were put into the HSA instead of the insurance carrier keeping the funds on the richest plans.

While there are many positives to participating in an HDHP, education is a must. Employers need to be comfortable with how their plan operates, and related that understand to their employee bases. Most HDHP programs offer free annual physicals, well child visits and so on. Studies have shown that even though these services are free under the plan, many fail to realize this fact and do not go for routine exams. This could have huge ramifications as routine well visits are essential to maintaining a healthy population and keeping overall health care costs down.

We encourage our small business clients to make sure they’re up to speed  on the benefits of an HDHP program, from its impact on their bottom line to its impact on their most important asset: their employees.