Hitch Keeps Many HDHPs From Covering Chronic Care Up Front

As the number of people covered by high-deductible health plans soars, some insurers and employers are easing the strain on consumers' wallets by covering certain benefits like doctor visits or generic drugs before people have reached their plan's deductible. But there's a hitch: Under Internal Revenue Service rules, high-deductible plans that are set up to link to health savings accounts can only cover preventive services like vaccines and mammograms until patients buy enough services on their own to pay down their deductible.

A bipartisan bill was introduced in Congress in July that would allow high-deductible plans that can link to health savings accounts (HSA) to cover care for chronic conditions like diabetes and heart disease before plan members have met their deductibles.

Health savings accounts were introduced in 2004, reflecting the popular belief that if consumers had more financial "skin in the game" they would make smarter, more cost-effective decisions. Individuals and their employers can deposit money into the accounts tax free, where it grows tax free and can be withdrawn tax free to use for medical expenses. The accounts must be linked to health plans that meet certain federal standards, including minimum deductibles of $1,300 for individuals and $2,600 for families in 2016. The plans are required to cover preventive services without cost sharing, but consumers must pay for all other services until they meet their deductible.

Many high-deductible plans don't meet those standards. The HSA-plan deductible coverage restrictions can be a sticking point when employers and insurers consider what plans to offer.

"I've worked with numerous clients that chose not to pursue an HSA strategy because they wanted their employees to be able to get coverage not subject to the deductible," said Jay Savan, a partner at Mercer Health and Benefits, a consulting firm.

This legislation would lift those restrictions to some degree, but its passage is far from assured, say experts.

It could make a big difference to Cheri Amos-Prater. Diagnosed with rheumatoid arthritis and psoriasis 10 years ago, the 54-year-old drug sales representative had been paying approximately $50 in monthly copayments to her health plan for Humira, a drug sold by her company, AbbVie. This year, she switched to a high-deductible plan with a health savings account, not realizing that she would be responsible for paying the first $3,000 of her medical care to satisfy her deductible before her plan's coverage kicked in. Her Humira alone would have cost $2,100 in January. Unable to afford it, she stopped taking the drug.

"I didn't realize that in the fine print of the policy it said that if I made this choice I couldn't get the drug at a discount" until meeting the deductible, said Amos-Prater of Birmingham, Alabama. She plans to go back to a regular PPO plan next year.

The legislation has been endorsed by consumer groups and policymakers who are proponents of "value-based insurance design," which encourages health-plan features that nudge consumers to get clinically effective care by reducing or eliminating out-of-pocket costs for such services.

"We need to spend money differently," said Dr. A. Mark Fendrick, director of the University of Michigan Center for Value-Based Insurance Design. "We should put a very high deductible on those things we don't need and incentivize consumers to get the care they need."

For example, he pointed to people with diabetes who need to have annual eye exams to prevent adult-onset blindness, "yet the fastest growing type of health plan, HSA high-deductible plans, covers those exams not at all," he said.

Twenty-nine percent of workers with employer-sponsored coverage are enrolled in a high-deductible plan with a savings account of some sort, according to the Kaiser Family Foundation's annual survey of employer-sponsored benefits, up from 17 percent in 2011. (Kaiser Health News is an editorially independent program of the foundation.)

These enrollees also generally pay more out of pocket for care than people in traditional plans. People in high-deductible plans were responsible for 24 percent of their medical costs between 2010 and 2014, on average, compared to 14 percent for people in traditional plans, according to a recent study by the Health Care Cost Institute that examined claims data from three major insurers for 40 million Americans. Annual per capita spending out of pocket was $1,030 on average for those in high-deductible plans compared with $687 for people in traditional plans.

Both employer-sponsored and marketplace plans often cover services before the deductible in plans. Two-thirds of plans on the federal marketplace exclude primary care visits from the deductible, according to Avalere Health. Similarly, the deductible doesn't apply to a majority of workers in employer-sponsored plans when they visit their primary care doctor.

Insurers that want to attract people, especially healthy people, realize that offering a plan with hardly any coverage before a huge deductible may not do the trick, said Caroline Pearson, senior vice president at Avalere Health, a research and consulting firm.

Still, it's unclear that insurers would jump at the chance to offer plans that are particularly attractive to people with chronic illnesses, said Linda Blumberg, a senior fellow at the Urban Institute's Health Policy Institute.

America's Health Insurance Plans, a trade group, has endorsed the proposed legislation, because it would give insurers more flexibility to design plans that ensure that consumers get the right treatment at the right time, said AHIP spokesperson Clare Krusing.

Even if there is the political muscle to pass the bill, it could be difficult to design plans that provide pre-deductible coverage for chronic conditions without pushing premiums up, said Pearson.

Advocates of value-based design "would say that if you're covering the right services, it shouldn't increase costs," she said. But how do you discourage coverage of the ineffective physician visits while encouraging coverage of the effective ones? "We are not yet particularly skilled about designing services that are nuanced," Pearson said.