The biggest trend in health care this past year is not the introduction of health savings account (HSA) plans, it is the movement toward high-deductible plans.
As health care costs continue to climb at double-digit rates, employers are looking at the only thing left with teeth. Deductibles are increasing and, in some cases, being added even to HMOs. Although not new to the market, more and more employers are pulling the trigger on deductible changes.
Although deductible plans still have co-pays, the sting of these plans is starting to be felt by employees. The deductible comes into play primarily outside of the office visit or prescription drug purchase. Lab work or X-rays that are provided or billed outside of doctor visits are typically employees’ first exposure. With the most common deductible of $500, the employee usually pays the entire cost the first time these services are rendered.
The concern with HSA plans has been that employees will not seek recommended services due to an inability to pay. It is important to remember this when questioning your employees’ ability to pay more.
But although health care costs are at record highs, several independent sources show that employees still put more disposable income toward entertainment than toward health care, something to consider when looking at how much your employees can tolerate in health care expenses.
This trend toward deductible plans is simply a return to what Americans had prior to 1970. Until the introduction of co-pays by PPOs in the late ’70s, everyone had a major medical plan, insurance for a major medical problem.
In the 1970s, the most common deductible was $200. To put that into perspective, the average cost of a new automobile was $2,700. With the average cost of automobiles today around $30,000, that could justify a deductible of $2,222 for a plan with no co-pays.
The next step will be the elimination of co-pays for office visits. Then, and only then, will prescription plans fall to the power of the deductible.
Economists predict that trends for increases in the cost of medical premiums will continue to be in the low double digits for the rest of the decade. With the diminishing return of deductible changes, co-pays will be the next logical choice in offsetting increases.
Whenever that inevitable time comes, HSA plans will be the most common financial tool to prepare employees. The power of the HSA plan is not the high deductible; it is the tax advantage of saving for the day employees have to pay their high deductible.
HSA plans will need to be presented to employees like 401(k) plans are today — get in while you’re young, because someday you will need it. And it can be hard to convince employees to save for retirement when it seems so far away, even to a 30-year old.
With great tax advantages and a target of $5,000 in savings, it will not take a lifetime to save for completely funding the deductible. Once the deductible is funded, employees will have 100 percent coverage with no concern for withholding recommended services.
Both political parties secretly admit the prospect of additional government solutions is dead. Americans have made it clear that they want no interference in their access to health care, be it by the government or managed care companies.
Some day, our kids will be sitting around the fireplace telling their grandchildren about how their parents paid just $10 for a knee replacement, and those kids will look at him in wonderment.
Bruce Bishop ([email protected]) is director of marketing and managing partner of KYBA Benefits. KYBA Benefits provides consulting and administrative services to more than 400 corporate accounts, ranging in size from 20 employees to more than 7,000. Reach Bishop at (770) 425-6700 or (800) 874-2244, ext. 205.
