High deductible health plans (HDHPs) are health insurance plans that try to strike a balance between affordability and usability. With an HDHP, you keep your premiums down by accepting a higher annual deductible, defined as $1,500 or greater for individual coverage and $3,000 or more for a family. However, a recent study by the Kaiser Family Foundation (KFF) implies that those with HDHPs are less satisfied than other health care consumers are and are questioning the value of an HDHP.
The discrepancy relates to the overall rating as well as the value. When asked how they would rate their overall health insurance coverage, 66% of HDHP holders rated their care as either "good" (53%) or "excellent" (13%), compared to "not so good" (17%) or "poor" (12%). In contrast, 85% of those with lower-deductible plans rated their coverage “good” or “excellent.” When asked whether their plan provides value for the money, the good or excellent responses drop to 37% for HDHP holders and 68% for those with lower deductibles.
That should be a significant concern for insurers, since according to the KFF survey, 40% of the non-group insurance enrollees have high deductibles. (In a disturbing side note, another 17% were unsure of their deductible, so it's possible that HDHP numbers are even higher.)
Those with HDHPs tend to have higher incomes, and in general are eligible for fewer subsidies through the exchanges. 37% of KFF survey respondents with HDHPs had incomes below 250% of the Federal Poverty Line (FPL) of $11,770 for an individual and $15,930 for a two-person household in 2015. However, 64% of respondents with lower deductible plans fell into that lower-income category. KFF concluded that only 36% of HDHP holders were likely to receive a tax credit, as compared to 56% of lower-deductible plan holders.
A higher income should be able to withstand higher deductible costs — so what's the problem? It appears that too many people either do not have the money in their account to cover the higher deductible or simply refuse to use it and consider their insurance as only being for catastrophic conditions beyond their deductible. This explains why survey respondents with HDHPs report feeling more vulnerable to high medical bills by a 55%-22% margin over those with lower deductible plans.
When asked about a hypothetical medical bill of $500 or $1500 and how they would pay for the bill, a surprising number of HDHP respondents said they could not pay the bill at all, even though it's within their deductible. 15% could not pay a $1500 bill, and 8% could not even pay $500. An even larger group would borrow to pay the bill, mostly via credit cards, with 43% borrowing to pay a $1500 bill and 28% borrowing to pay $500.
The KFF survey did not explore one interesting aspect — the presence or absence of Health Savings Accounts (HSAs). HDHP plans are required in order to have an HSA, and it would be interesting to know if the benefits of a HSA make a HDHP more desirable, or if there is an income split associated with HSAs.
In the end, income does not seem to matter since both higher and lower income individuals give lower ratings to HDHPs. It is more about the premiums. People seem to be choosing a plan not because it finds the best balance between premiums and protection from high medical bills, but because it offers the most affordable premium option available to them, wherever they are on the income scale.
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