Study Warns of High-Deductible Insurance Plans

High-deductible health insurance (search) plans heavily touted by President George W. Bush could wind up damaging access to medical care and increasing the likelihood of high medical bills for lower-income policy holders, according to data released by the Commonwealth Fund (search) Thursday.

Meanwhile, one expert warns that wider use of the plans, spurred by tax breaks favored by the White House, may cause more Americans to lose their traditional employer-sponsored health coverage.

The plans work by charging much lower monthly premiums than traditional insurance, but in exchange require families to spend at least $2,000 of their own money before insurance coverage kicks in. The Medicare reform bill (search) signed in December 2003 lets individuals and families save money in tax-free accounts to cover those up-front costs.

The president hosted two events this week where he promoted the arrangement as ideal for lowering health costs by shifting more responsibility for health spending from third-party insurers to consumers. Consumers generally pay far less in monthly premiums than they do with traditional employer-sponsored coverage, and also get to keep more of their own money if they keep costs low by staying healthy and avoiding the doctor.

“[It] really puts somebody in charge of the decision making, and that in itself is part of how you control costs. If you're out there shopping for a better deal, it helps bring cost efficiencies into a system that needs cost efficiencies,” Bush noted at a health care event in Cleveland Thursday.

Bush has made the accounts a key part of his health care policy and even gave them a boost by announcing Wednesday that he had signed up for one himself through the federal employees’ health insurance program.

Americans Signing Up

Approximately 440,000 Americans signed up for health savings accounts (search) between December 2003 and September 2005, according to America’s Health Insurance Plans, an insurance industry group. Researchers say they have little direct evidence of how consumers have fared under the fledgling program.

But a study released by the Commonwealth Fund concludes that people who used high-deductible insurance plans were more likely than those with traditional medical coverage to have difficulty paying their medical bills. Forty-nine percent of consumers with deductibles above $500 per year wound up with outstanding medical debt, vs. 32 percent with regular coverage.

At the same time, those using the plans were in some cases twice as likely to forgo a needed medical test or doctor visit because of high costs, concludes the study, based on data from 2003.

“The major concern is that cost sharing will lead to underuse of appropriate care,” Karen Davis, the Commonwealth Fund’s president, said at a conference of the National Academy of Social Insurance in Washington.

According to Davis, the plans “make sense” for healthier, higher-income people who are unlikely to get sick or have trouble paying out-of-pocket costs if they do. But those with chronic health conditions can wind up responsible for high costs, which may overwhelm them if they earn lower incomes, she warned.

“If you’re sick, you’re definitely better off with the more comprehensive coverage,” she said.

Insurance Market Effects

“What it’s really doing is shifting risk [from insurance companies] toward individuals,” says Jean Lambrew, PhD, an associate professor of health policy at George Washington University. She cautions that the HSA’s appeal to healthier workers could undermine the U.S. insurance market by leaving behind sick patients whose higher costs could make traditional coverage more expensive.

“We’ve then created a potentially more difficult uninsured problem to solve” than the 45 million who already lack coverage, she says.

Analysts expect the tax-free account paired with high-deductible insurance to appeal mostly to workers in small businesses, who often already face high deductibles with insurance sponsored by their employer.

“The market is developing and developing quickly,” says Roy Rathmun, a health official at the U.S. Treasury Department.

By Todd Zwillich, reviewed by Brunilda Nazario, MD

SOURCES: Commonwealth Fund, Jan. 27, 2005. President George W. Bush. Karen Davis, president, Commonwealth Fund. Jean Lambrew, PhD, associate professor of health policy, George Washington, University. Roy Rathmun, senior advisor for health initiatives, Department of the Treasury.