Waiving HDHP Deductibles Has Little Effect on Premiums, Study Says

Employers who offer health savings account-eligible high-deductible health plans (HDHPs) to employees can significantly expand pre-deductible coverage for certain drugs used to manage chronic conditions — with only a tiny effect on premiums. That’s the finding of a new study from the Employee Benefit Research Institute (EBRI). The reason: According to research from Johns Hopkins University, poorly managed chronic medical conditions cost employers an estimated $198 billion every year. These costs show up in several ways:

• Direct usage of medical services such as preventable ER visits and hospitalization
• Absenteeism
• Illness-related presenteeism
• Cost of temporary workers
• Overtime costs

Johns Hopkins also estimates employers lose another $178 billion per year in workers’ compensation costs, Family Medical Leave Act costs, and wages and benefits paid during workers’ absence.

The growing cost burden of HDHPs

By 2030, unmanaged chronic diseases such as diabetes, high blood pressure, heart disease, asthma and depression are projected to cost an estimated $2 trillion in direct medical costs, as well as an additional $794 billion in indirect costs like lost employee productivity. While the combination of health savings accounts (HSAs) and HDHPs was supposed to help reduce costs by encouraging consumers to take more ownership of their own health care, deductibles on important preventative drug therapies cause plan members to skip needed medications. This has been shown to lead to much more expensive conditions later, including blindness, amputation, heart attacks and strokes. Conversely, workers and covered family members are significantly more likely to be medication-compliant when these drugs are exempt from their health plan’s deductible — and therefore less likely to be hospitalized, become disabled or need more expensive medical treatment. Among HDHP plans that expanded pre-deductible coverage to 116 drug classes used to manage expensive long-term, chronic medical conditions, the cost of these drugs was almost entirely offset by reduced health care utilization. Among the study’s highlights:

• When plan sponsors allowed plan beneficiaries to access these medications with zero out-of-pocket cost-sharing (e.g., no deductible and no coinsurance), the net impact on premiums was an increase of 4.7%.
• When employer HDHP plans allowed plan members to access these medications with a coinsurance charge, but no deductible, the direct net effect on premiums was an increase of only 1.3%.

Improved disease management

The EBRI study only measured the direct impact on premiums of expanding pre-deductible coverage to these medications, largely through reduced health care utilization costs, which show up later in the form of higher premiums. EBRI’s research suggests that employers can realize significant improvements in workforce health and wellness by expanding “first dollar” coverage of certain medications. Helping workers manage their chronic diseases has other powerful positive indirect effects on employers’ bottom lines. Under current law, HDHP plan sponsors have limited flexibility to cover more than a limited list of 14 medications and services before deductibles are met. But there are several innovative strategies employers can use to close the coverage gap and encourage employees to get the care they need to prevent them from getting sicker, including HSAs and health reimbursement arrangements.