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Demystifying High-Deductible Plans

February 10, 2010
Related Topics: Benefit Design and Communication, Health and Wellness, Featured Article, Compensation
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Leaders at Silicon Valley-based Intel had already been educating employees about their high-deductible plans, among other insurance options, but a few years ago they significantly ramped up those efforts.

They developed a side-by-side chart, comparing the five primary insurance approaches, which included a high-deductible plan paired with either a health savings account or a health reimbursement account. They spent additional time at Intel work sites meeting with employees and provided a phone number for additional questions.

Also, beginning in 2007, they launched an internal health benefits forum so that employees could exchange information during enrollment. The overall strategy: to convince employees to look at facets other than just the high deductible involved, including the lower premiums and the accrual of a health account.

“We wanted to make sure that employees understand the total value of what’s there,” says Corrie Zenzola, Intel’s global health and risk benefits design manager.

U.S. employees have been slow to embrace consumer-directed health plans, which pair a high-deductible policy with a health savings or health reimbursement account. In 2009, 9 percent of all insured employees were covered by high-deductible plans, compared with 5 percent in 2007, according to Mercer’s annual health plan survey data, released in November 2009.

But at least half of large employers offer a high-deductible plan. The figure in 2009 was 54 percent, according to the Health Care Cost Survey by Towers Perrin (now Towers Watson). The survey focused on Fortune 1,000 companies.

When companies introduce high-deductible plans, their complexities can trigger confusion and misunderstandings that extend beyond the enrollment period. Companies like Intel are striving to avert these issues. Among the numerous variables, according to benefits experts, are questions such as these:

• How much does the employer contribute to the health savings account or health reimbursement account?
• How does the attached debit card work?
• How should employees budget for these accounts or, more broadly, a higher-deductible plan in general?

“You peel back each onion layer and there is just more and more to explain,” says Dean Hatfield, national health practice leader at Sibson Consulting. “It’s one of those programs that really needs some very carefully thought out communication to help employees understand it and not scare them away.”

Zenzola credits Intel’s coordinated and ongoing education, rather than any single component, with the company’s success in persuading more employees to select a plan linked to a health savings or health reimbursement account. By 2010, 49 percent of about 43,000 U.S.-based Intel employees were enrolled in one of the two plans, compared with 14 percent in 2007.

What’s in a name?

“Consumer-driven”? “Consumer-directed”? “High-deductible”? The plans, which typically provide a high-deductible policy with the option of a health savings or health reimbursement account, have worn a variety of monikers through the years.

 

Now a new term is creeping into the lexicon: “account-based health plans.”

Towers Perrin—now Towers Watson—used the term in its 2009 health care cost survey. “Consumer-driven” or “consumer-directed” has “frankly a bit of a commercial orientation” says Jay Savan, a Towers Watson health consultant. “It just sounded like something that somebody was trying to sell you.”

“Account-based,” he says, highlights the plans’ link to health accounts, a concept that consumers are already familiar with through 401(k)s and other account-based financial vehicles.
 

Beyond the sticker shock
Still, some employees don’t necessarily understand all the details, according to a recent survey from the Employee Benefit Research Institute. A recurring misunderstanding, and one picked up by prior EBRI surveys, involves the coverage of preventive care, says Paul Fronstin, an EBRI senior research associate.

Preventive care and screenings, such as mammograms, are typically covered at 100 percent, he says. But in the recent survey, 57 percent of those already enrolled in consumer-directed plans thought the deductible applied to all medical care. “The risk is that people may not be getting preventive services when they need them, because they think they need to be paid for out of pocket,” Fronstin says.

Online calculators, albeit useful in projecting out-of-pocket costs for employees with chronic health conditions, can’t capture the unexpected, Fronstin says. “I can’t predict when I’m going to throw out my back or cut my finger cutting a bagel,” he says.

One alternative is to create fictitious medical scenarios, and show how they would be covered in a variety of health plans, allowing employees to put their own situation into context, benefits experts say. Intel created a CD-ROM delineating different scenarios and mailed it to employees prior to the 2009 enrollment year, Zenzola says.

Intel’s side-by-side comparison chart also includes a bottom line, specifying how much employees would spend out of pocket in each plan if they were hit by the proverbial bus, she says. Interestingly, today’s online-savvy employees—even at Intel—gravitate to paper handouts as they weigh their options, she says. “I think there is something about having in your hands information that you can flip through as you do your thought process.”

The longer view
Employers shouldn’t limit education to the enrollment period and, to support workers even further, should combine it with wellness programs and other prevention-related efforts, says Jay Savan, a Towers Watson health consultant. Ideally, employees will shift their mind-set toward improving their health, and their health accounts, over the long haul.
“You have to elevate people’s perspective,” he says.

Companies that take those extra steps stand to gain financially, according to an Aetna analysis released in 2009. The study, which looked at data from 2.6 million members in both consumer-directed and other Aetna plans, found that employers that offered the option of a plan linked to a health savings account or health reimbursement account saved $7 million per 10,000 members over a five-year period.

But employers that also adopted related strategies—ongoing education, wellness programs and full coverage of preventive care, among others—saved even more: $23 million per 10,000 members over the same time period.

Even so, becoming a price-sensitive health consumer can be challenging for employees and physicians alike. Doctors are noticing more middle-income patients asking about cost, because they are worried about their high deductible, says Mark Hall, director of the Center for Bioethics, Health & Society at Wake Forest University in Winston-Salem, North Carolina.

“It’s a new thing for them,” says Hall, who recently interviewed some primary care physicians for a 2009 article in the Journal of Family Practice.

Not only are such conversations time-consuming, but they are also potentially uncomfortable and difficult for patients to sort through, Hall says. Take, for example, when a doctor recommends a particular treatment. “The doctor talking to the patient about his own bill is a little bit like the auto mechanic who says, `You really need this repair,’ ’’ he says.

While some physicians may find it awkward to discuss price, others might prefer to know more about their patient’s insurance when recommending treatment alternatives, Zenzola says. To assist employees, they are given various resources, such as online sites that compare treatment prices that they can share with physicians, she says.

In recent months, Intel officials have also decided to keep the employee health benefits conversation going by establishing a forum that’s open all year, not just at open enrollment. “What we found is that our employees educate each other in the process,” Zenzola says. “It’s a valuable way for employees to share their experience and they can learn from each other.”

Workforce Management Online, February 2010 -- Register Now!

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