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The Truth about High-Deductible Health Insurance

The Truth about High-Deductible Health Insurance

As employers and health insurance companies move to cut costs, high-deductible health insurance plans have become a more frequent fixture among consumer health care options. However, this consumer-driven option can actually be not so consumer-friendly.

What is a High-Deductible Health Plan

A high-deductible health plan, or HDHP, is a plan through which the consumer pays an annual premium that is lower than most traditional policies. In exchange, the policy holder has a significantly higher deductible that will need to be met. In fact, HDHP are sometimes called catastrophic coverage because of the high deductible that would need to be met before the insurance kicks in. Proponents of these types of plans contend that they help to reduce the number of uninsured and to bring costs down. Essentially, the theory is if consumers have a greater financial stake in their care (i.e., they pay more out-of-pocket), then they will be more fiscally prudent when it comes to their health care choices.

While on the service this might sound like a reasonable assertion, HDHPs still have not become mainstream – according to the National Center for Health Statistics, a division of the Centers for Disease Control and Prevention, only 17.3 percent of U.S. adults under the age of 65 years with private insurance in 2005 were enrolled in an HDHP.

So, why have HDHPs not gained more ground over the years? One reason could be the numerous drawbacks associated with such plans.

Few Can Afford the High Deductible

Research has shown that few policy holders with an HDHP can actually afford the higher deductible. A study published in a 2008 issue of Health Affairs showed that only one-third of those with an HDHP had $2,000 in assets available to cover the amounts owed if necessary. And affording such deductibles becomes even more problematic when considering lower-income Americans. The April 2005 Commonwealth Fund Biennial Survey of Health Insurance predicted that 33 percent of people with annual incomes below $35,000 and a HDHP deductible of $500 or more would experience cost-related health-care access problems versus only 21 percent of higher-income, insured adults with deductibles below $500.

Total Costs of an HDHP are Unclear

Those considering signing up for an HDHP should make sure to read the fine print. Many policy holders with HDHPs find that these plans often do not cover the same care as a traditional plan might. With the need to reach such a high deductible, it’s important to find out exactly what medical expenses will count toward that deductible. Some drug therapies might not be included. Prenatal maternity care often is not included. And many HDHPs will not cover care for preexisting conditions. It is not rare to find an HDHP policy holder with a $7,500 deductible who ends up spending in excess of $10,000 in care costs as a result of what is and what is not counted toward the deductible.

HDHP Policy Holders Less Likely to Seek Necessary Medical Care

In reality, most insured individuals do not go to the doctor needlessly. They go to get routine check-ups or when they feel like something is wrong. HDHPs, which are intended to cause people to act more prudently when seeking treatment, actually cause people to put off needed care in order to avoiding the costs. The April 2005 Commonwealth Fund survey showed that 38 percent of adults with deductibles of $1,000 or more reported at least one of four cost-related access problems: not filling a prescription, not getting needed specialist care, skipping a recommended test or follow-up, or having a medical problem but not visiting a doctor or clinic. In contrast, only 21 percent of adults with no deductible reported one of these four access problems.

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