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To Hold Down Costs, Companies Are Offering High-Deductible Health- Care Plans

Posted on: Friday, 11 November 2005, 21:00 CST

By Ken Schachter

In a fresh attempt to hold down spiraling health care costs, companies on Long Island and elsewhere are enlisting their workers' aid by offering high-deductible, or consumer-driven, health-care plans.

A 2005 survey by the Kaiser Family Foundation and Health Research and Educational Trust found that 20 percent of employers who provide health insurance offer the option of a high-deductible plan. Louis Basso, chief executive of the Farmingdale-based human resources consultancy the Alcott Group, said those numbers are just the opening ripple of a much larger wave.

That will probably double next year and double again the next, he said.

Unlike traditional health benefits, high-deductible health plans carry an annual 2006 deductible of at least $1,050 for single coverage and $2,100 for family coverage. That means more out-of- pocket expense for the workers and, companies hope, a more judicious use of health-care resources.

Employees who enroll in the plan are charged significantly lower monthly premiums.

The psychological underpinning of the plans is that, by having a little skin in the game, workers and their families will think twice about heading to the doctor's office, said Kevin Arnstein, managing director at Cook Hall & Hyde, an insurance advisory service. They're going to be a little more wise in accessing health care.

Scott Keyes, with benefits consultancy Watson Wyatt in Stamford, Conn., said that when their money is at stake, patients are more likely to ask the cost of a drug or medical procedure.

The trajectory we were on, no one cared what anything cost, he said.

High-deductible plans also may prompt employees to find lower- cost alternatives to a traditional visit to the doctor, Keyes said, citing Minute Clinics in some Target and CVS/Pharmacy stores.

Why pay Nordstrom prices for Wal-Mart service? he asked.

Employers, meanwhile, can realize savings of about 10 percent-15 percent if they replace all other health benefit options with a high deductible plan, Keyes said.

Some high-deductible plans are paired with federally sanctioned health savings accounts, noted Fred Barba of the Long Island Association Health Alliance.

With an HSA, employee contributions are tax deductible; interest earned on the account is tax free; unused funds and interest are carried over from year to year; and HSA funds remain with the employee even when it he changes jobs or retires.

Those deductibles will be tax free, Barba said. They'll be the employee's money. It's basically a 401(k) plan.

That savings effect, including possible employer contributions to health savings accounts, forces a different perspective on health care consumers.

Maybe I'll wait a day or two and tax and aspirin before going to the doctor, Basso said. It's not $15 anymore. It's $150. At the end of the year, because I didn't go to the doctor as much, I may have spent only $1,000 in stead of $2,000, then I have $1,000 in my account for the next year. You can carry it over for the next year and continue to carry it over. At age 65, you have a very large pot of money that can be used on your senior years that is already pre- taxed.

When it comes to seek medical help, however, the economic incentive lies with going the conservative route.

You put people in the doctor business, Barba said. [Let's say] I hurt my knee on Sunday playing softball. Under the old plan, I paid $15 [co-pay] to go to the doctor. Now it's $250 and maybe I'll put on a heating pad.

Source: Long Island Business News

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