High-deductible health plans (HDHPs)-- plans with deductibles of more than $1,000 for individuals and more than $2,000 for families-- have been around since the mid-2000s and have grown in popularity since. From the employer's perspective, HDHPs solve two problems: They shift costs from the employer onto the plan member without raising premiums, and they attempt to solve the "principal-agent" problem wherein doctors who provide care and patients who receive care are both immune from the costs of services rendered.

Employers hoped that HDHPs would give their health plan members skin in the game, creating incentives to consume healthcare services more judiciously by compelling them to pay out of their own pockets until they meet their deductibles.  

While HDHPs succeeded at reducing the use of healthcare services and shifting costs from the employer to the employee, they backfired with detrimental outcomes. Why?

To start, HDHPs cause people to refrain from seeking care, even care they need. Reducing the use of healthcare services is good if those services are unnecessary or from an unnecessarily expensive healthcare provider. But significant portions of Americans have chronic conditions that require regular care. Thanks to the Affordable Care Act, basic preventive services are fully covered and outside of deductible requirements. But most services that help manage chronic conditions require patients to pay out-of-pocket until they meet the deductible.

This means that employees with diabetes, for example, pay the full cost for the pricey test strips they need to monitor their blood sugar. Survey research found that 38 percent of adults enrolled in HDHPs either did not fill a prescription; skipped recommended medical test, treatment, or follow-up; or, did not see a specialist when needed. Considering that the average cost per day for a hospital admission ranges from $2,500 to $3,000, avoiding care can have dire health and financial consequences for individuals and employers.  

Plus, there isn't good information to support patients as consumers. For decades, employers thought, if only individuals had information about the cost and quality of healthcare, the dream of the empowered healthcare consumer would become reality.  Unfortunately, even after two decades of trying to make the quality and price dimensions of healthcare easier to find, we are far short of "Yelp" for healthcare.  And researchers find that even when patients have information, they rarely consult it or act on it, unless it is paired with incentives, like waving their cost-sharing.

Finally, your workers may not have enough money to cover their deductibles. If your company employs low-wage workers, they might be among the 46 percent of Americans without sufficient savings to cover their annual health plan deductible.  Except for preventive services covered by law before the deductible, those employees are essentially uninsured.

So, given that HDHPs will make the workforce sicker and won't help employees become empowered healthcare consumers, where does that leave employers who need to curb healthcare costs? There are options:

Be choosy about healthcare providers.

In healthcare, high prices do not correlate to higher quality. Eliminating access to the most expensive providers can bring down premium costs. In a tight labor market, some employers fear that restricting their employees' choice of providers will generate backlash-- though evidence suggests that only about 1 percent of employees leave their jobs because of benefits.   

Set up the right incentives.

Strategies like value-based insurance design vary the amount employees pay out of pocket to encourage them to use high-value, preventive care and discourage them from seeking low-value services, like those identified by The Task Force on Low-Value Care. Similarly, some employers use strategies like reference-based benefits to encourage plan members to seek care from more affordable providers and/or in less expensive sites of care (e.g. an outpatient clinic rather than an emergency room).

Design benefits for health equity.

The Northeast Business Group on Health published a "How To" guide for employers about benefit designs that support access to diabetes and obesity care with messaging that engages BIPOC employees. Obesity and diabetes disproportionately impact people of color. This targeted approach acknowledges racial disparities and addresses some of the underlying social barriers to health.

These approaches are only a few of the many strategies employers can pursue with the dual aim of improving employees' health while reducing costs. The commonality among them is their specificity. Rather than throwing high cost-sharing at employees with a vague hope that savvy consumerism will take hold, targeted benefit design enables employers to construct their health plan offerings around the needs of their employee populations.