Companies switching to high-deductible health plans

As health care costs continue to escalate, employers are offering financial incentives to encourage workers to embrace high-deductible insurance plans -- a move companies hope will bring significant savings by lowering premiums.

At Atlanta Medical Center, 51 percent of workers are now in a high-deductible health savings plan, versus 15 percent in 2010. The hospital was trying to transition its 1,100 employees who elect benefits into a high-deductible plan, so it boosted its contributions to employee health savings accounts by hundreds of extra dollars per account.

Instead of paying an insurance company for care they may or may not use, employees can sock away tax-free money in a health savings account to pay for future medical expenses, said Troy Bond, the hospital’s chief human resources officer. “We’re just giving thousands of dollars away to insurance companies.”

While many consumers save money under the plans, however, meeting high deductibles -- which often vary from $1,000 to $5,000 -- can create sticker shock for some people, especially low-income families, benefits experts say.

For Andrea Sweeten, a contract administrator at Atlanta Medical Center, switching to a high-deductible plan was a no-brainer.

Sweeten, 45, said she paid a $260 premium every two weeks for herself and 18-year-old daughter under her old plan but rarely went to the doctor. “To me, it was money I was wasting,” she said.

Sweeten, who has a $2,400 deductible, now pays $62 with the health savings plan and is putting the extra money in her health savings account to use toward laser eye surgery.

Though the push toward a high-deductible plan could mean significant savings for Atlanta Medical Center — part of Tenet Healthcare Corp. — and its employees, changes in health care legislation could affect the hospital’s future benefits strategies, hospital officials say.

Atlanta employers are facing a 6.3 percent hike in health care costs this year in part because of changes spurred by that law, including ending lifetime benefit caps and allowing parents to add adult children up to age 26 to their plans, according to a survey by global consulting firm Mercer. And companies are increasingly shifting those costs to workers by raising deductibles, co-pays or out-of-pocket maximums.

“Cost is going to continue to be a huge problem,” and consumer-driven, high-deductible health plans will only become more prevalent, said Tony Holmes, a partner in Mercer’s Atlanta office.

High-deductible plans are quickly catching on, with 22 million people now enrolled nationwide, said Paul Fronstin, head of health research at the Employee Benefit Research Institute.

Some 11 percent of employees are enrolled in a consumer-driven plan, up from 1 percent in 2004; meanwhile, HMO enrollment fell from 27 percent to 19 percent during the same period, Mercer data shows.

Garry Hill, manager of the group benefits practice at insurance brokerage firm Sterling Risk Advisors, said a growing number of his clients are offering high-deductible plans with health savings accounts. Most of his clients are in metro Atlanta.

Unlike some health care savings products, the money in HSAs rolls over from year to year and moves with the employee if he leaves the company, similar to a 401(k). Federal guidelines allow individuals to contribute a maximum of $3,050 to their HSA this year, while families can put in $6,150.

Some of the companies Hill works with entice workers to switch over from a traditional HMO or PPO plan by putting $1,000 into employees’ HSAs; others provide a matching contribution similar to a 401(k). His own company contributes $45 a month for those who opt for an HSA.

While many people tend to save money under the plans, for low-income families or individuals with chronic illnesses, it can be a big hit to their wallets, experts say.

For a family with an income of $25,000, the out-of-pocket expenses of a high-deductible plan could consume an estimated 15 percent of their yearly budget, according to a Kaiser Family Foundation study. Those who have trouble meeting the deductible also may be less likely to see a doctor, which can lead to poorer health overall, the report shows.

Someone who has a lot of prescription costs, such as a diabetic, will have to pay for expensive medications out of pocket until hitting the deductible, said Al NeSmith, managing partner at Atlanta-based Benefits Advisory Group.

Patients typically don’t know the true costs of their medications because they’ve had co-pays, so paying out of pocket can be a shock, NeSmith said. Some ask their doctors for generics; others just leave the medication at the pharmacy counter when they find out the price tag, he said.

The number of patients abandoning brand-name prescriptions at pharmacies has climbed from 5 percent in 2006 to nearly 10 percent last year, according to market data firm Wolters Kluwer Pharma Solutions.

NeSmith added that some people may not have enough money in their HSA at the beginning of the year to cover the high deductible if they had a medical emergency.

Still, high-deductible plans are attractive for many companies and employees, experts say.

It's unclear how the new health care law may ultimately impact health savings accounts, which are big tax advantages, Hill with Sterling Risk Advisors said. “The uncertainty around it is very real.”

In the meantime, for high-deductible plans to work well, there needs to be more transparency so consumers can compare the price of doctor’s visits, hospital procedures and other costs, he said.

Instead of a small co-pay, a patient may pay upward of $100 for a prescription, he said. “If nobody’s really explained that to you beforehand, you’re going to be pretty upset.”

At Atlanta Medical Center, the hospital has been holding information classes for workers to help with the transition.

Emily Page, an assistant trauma coordinator at the hospital, said she was leery of the high-deductible plan in the beginning but has come to view her HSA as a nest egg like her 401(k). The 44-year-old mother of two and her husband have saved nearly $8,000 since joining the plan three years ago.