The big boys are embracing health plans with big deductibles.
Slightly more than half of large employers analyzed in a new report now offer their workers at least one high-deductible health insurance plan, underscoring a broad trend nationally toward such coverage.
And slightly more than 40 percent of workers at large firms that give them the option are choosing the high-deductible option over a traditional health plan, according to the report issued Tuesday byBenefitfocus, a provider of benefits-management software.
Benefitfocus also found that younger workers were much more apt to choose the high-deductible option when given the choice. These plans tend to have lower monthly premium payments for their enrollees than traditional health plans.
But they also require enrollees to pay more in out-of-pocket charges when they obtain health services than what they are required to pay under traditional plans. The minimum deductible for a high-deductible plan is $1,300 for self-only coverage, and $2,600 for family coverage.
Benefitfocus’ report was based on an analysis of actual 2015 enrollment data from about 500 employers with more than 1,000 workers apiece. In all, the report reflects enrollment choices of more than 700,000 workers.
High-deductible plans have become increasingly common in recent years as companies and insurers look for ways to control health spending. The plans are seen as encouraging more careful shopping for and consumption of health services, such as by opting for a generic drug as opposed to a brand-name prescription.
Jeff Oldham, vice president of Benefitfocus’s Benefitstore, compared traditional plans to “all-you-can-eat” pizza buffet for a college student, who has no financial incentive to moderate his consumption of slices.
Workers who don’t use a lot of health services can realize significant savings by enrolling in a high-deductible plan — while also running the risk of paying a lot more if they end up needing health care.
Oldham told CNBC that the embrace of high-deductible plans by employers reflects the fact that “they’d pretty much run out” of options to control health-care costs and utilization of health benefits by tweaking the design of traditional plans.
Oldham also said that the trend toward high-deductible coverage is a reaction by employers who want to avoid Obamacare’s coming “Cadillac Tax,” which starting in 2020 will impose a surcharge on health plans whose premiums exceed a certain maximum threshold.
Asked if both factors will lead to more companies offering high-deductible plans in the future, Oldham said, “Absolutely.”
The plans’ offer of paying-less-now/possibly-pay-more-later is most attractive to millennials, those workers who were born between 1980 and 1998, and decreasingly attractive as workers get older, according to the Benefitsfocus report.
The report found that 44 percent of millennials working at the large firms analyzed opted for a high-deductible health plan when given the choice.
That compares to just 22 percent of workers who were born in 1948 or before, a group defined as “Traditionalists” by the report.
“This could simply be the result of familiarity (HDHP’s are less of a novelty for millennials, while Traditionalists might be more reluctant to change), or that of income (millennials presumably earn less than older generations and therefore choose to spend less on premiums),” the report said.
Although millennials were the biggest fans of high-deductible plans, they also were the least avid participants in health-savings accounts, which the plans are paired with.
HSAs are tax-advantaged tools designed to help participants save and invest money that they may need later for out-of-pocket costs. HSAs allow participants to contribute pretaxed pay to the account; allow them to invest that money without the capital gains being taxed; and also allow them to withdraw money from the account without paying taxes as long as they use the funds for qualified medical expenses.
Benefitsfocus’ report found that between individual and family accounts, participants in high-deductible plans analyzed contributed only just about 42 percent of the maximum amounts allowed for HSAs in 2016. The maximums are $3,350 for a self-only high-deductible plan, and $6,750 for a family plan, with workers 55 and older allowed to kick in an extra $1,000 against both limits.
The average single, 25-year-old worker analyzed by the report contributed just 22 percent of his maximum allowed HSA contribution.
Millennials think themselves “to be indestructible,” which could lead them to put less in HSA’s than their older colleagues, Oldham said.
He also noted that many millennials enter the workforce with significant amounts of student loan debt, which can limit their ability or inclination to contribute to HSAs.