Employees Start to Feel the Squeeze of High-Deductible Health Plans

And even list prices themselves are typically starting points for negotiations when a provider is dealing with a large payor whereas an unwell individual (y'know, one who is about to spend a lot of money on healthcare) is not in a great position to bargain with her caregivers, and so is forced to negotiate after the fact, from an artificially inflated starting point, under the guise of bill reduction, or worse, debt relief.

Our absolutely-perfect no-deductible no-coinsurance plan was retired, and every year, for five years, the cost of our reasonable-deductible no-coinsurance plan kept going up.

Eventually, our broker convinced us that HDCP was the only way.

But I absolutely hated it.

We have quite a few employees with chronic, expensive conditions. Moving a HDCP (in our case 2K/6K family), effectively meant we were cutting their salaries. They were absolutely going to be paying that deductible.

We also employ a LOT of younger people, who just don't go to the doctor more than once a year, maybe. The HDCP wasn't that big a deal for them.

We looked into HSAs – the thing our broker recommended. These are garbage. In theory, we'd put in some amount of money each month, and eventually, over time, the entire premium would be sitting in an account for the employee. For the young and healthy, this was free money. The move to HCDP+HSA was basically a raise for them.

For the chronically-ill, the rate we'd contribute to their HSA was never going to be fast enough to keep pace with their expenses. And for most people, with most savings levels (near $0), a $1500 bill you'll "eventually get back" is just as unaffordable as one they'd never get bet.

I hate HSAs.

"Look, we know most of our folks are NEVER going to hit their deductible. We know a few folks will. Can't we just give everyone a credit card with a 2K limit that they can use to pay for stuff?"

Meet HRAs.

HRAs are like HSAs, but they're not incrementally funded. Instead, it's basically a credit card whose balance I, the employer, pay. It has an annual limit, which matches each employees annual deductible.

These things are amazing.

1. The employee never has to worry about out of pocket cost. They go to the doctor, the doctor charges their HRA.

2. The company has MUCH lower premiums, because we're on an HCDP. I think we saved like 30% or something moving to it.

3. We have a maximum annual additional cost each employee can ring up in medical costs. Worst case scenario (every employee hitting their deductible) isn't fantastic, but we can plan for it.

4. The normal-case scenario is a that a handful of employees hit their deductible very quickly at the beginning of the year, and the rest barely use their HRA at all.

I do not understand why more companies don't do HRAs given the above.

year | growth rate

2005 | 6.7% (Bankruptcy act passed making it harder to discharge medical debt)

2006 | 6.5%

2007 | 6.5%

2008 | 4.5% (Great Recession)

2009 | 4.0%

2010 | 4.1% (ACA Signed)

2011 | 3.5%

2012 | 4.0%

2013 | 2.9% (ACA Taxes)

2014 | 5.1% (Exchanges Open)

2015 | 5.8%

2016 | 4.3%

2017 | 3.9%

There are also a couple of timing advantages that people give credit to the ACA that would have happened otherwise.

There were a lot more prescription drugs created after the Orphan Drug Act and the Hatch-Waxman bills of the early 80's. So the timeline for that is 83-84 laws passed => research => 1990-1999 prescription drug explosion => 2010 - 2019 patents expire. This lead to a dramatic increase in costs over this period, but this is good since people now have access to drugs that wouldn't otherwise exist. The patents expire and the costs decrease, and they won't likely increase further due to the nature of those bills.

You could also make the point that from 2001-2006 you should see higher healthcare costs due to war.

A lot of the calculated savings are based on government projections of future spending. We can go off on a tangent on how good the CBO is at its job, but I think we could agree that predicting the future is hard and people are frequently wrong about their predictions.

Furthermore, lower costs aren't necessarily a positive thing. To put it simply if you are buying a BMW and I am buying a Kia, they are both cars but you aren't unhappy to pay the higher price.

Percentage increases also get harder to maintain as time goes on.