This fall, Americans will enter the largest health insurance open enrollment in history, with many enrolling in plans through private and public insurance exchanges. Many individuals may gravitate toward high-deductible health plans due to the initial low cost of premiums. However, a lack of understanding of, and experience with, these plans could lead many participants to make poor health decisions.

A medical director for NBC Universal saw firsthand how employees chose to lessen or drop prescription medications and avoided necessary medical appointments because of high out-of-pocket expenses when the company only offered a HDHP. Dr. Matthew Liss, East Coast medical director of NBC Universal health services, worries that individuals electing HDHP plans through the exchange will make similar poor decisions without sufficient education.



'People don't make rational choices'

"Back when NBC was under GE, we went to an exclusive high-deductible health plan in 2010, which no longer had an option for a traditional health plan. So everything was out-of-pocket," Liss explains. "The experience I saw was pretty remarkable, in that people started making decisions based on cost, but not necessarily [making health decisions] in their best interest."

For example, many employees were prescribed the drug Lipitor by their doctors to control high cholesterol. However under the HDHP, the drug cost escalated from a $20 copay to $185 out of pocket. Employees either cut down or stopped taking Lipitor altogether. Liss noticed a similar effect with other brand name medications.

Contrary to the intention of HDHPs that people would start having conversations with their doctors about generic medications, "they started making their own decisions," he reports.

"There was a real resistance," Dr. Liss adds. "There was a [prevailing] mood not to spend so much money because they were accustomed to a small deductible or small copay. They were making decisions to avoid short-term cost that could cause long-term problems."

When one patient came into one of NBC's onsite clinics complaining of chest pains, they found changes on his EKG indicating he could be having a heart attack.

"Our judgment was that he needed an ambulance to go to an emergency room, [but] he didn't want to go because he hadn't met his deductible and didn't want to pay [a high out-of-pocket cost]," says Liss.

In 2012, after Comcast bought NBC, the company returned to traditional health plans, a move that was applauded by employees. Liss notes that even if the result is the same cost in a traditional plan versus paying out of pocket with pretax dollars from a health savings account in a HDHP, people prefer the anticipated out-of-pocket costs and copays. The bottom line: People don't like paying upfront.

"When it comes to health care, people don't make rational choices. They don't want to pay for services. I have wealthy patients that are reluctant to go out of network and were some of the most resistant to paying higher costs for drugs [under the HDHP]," he says.



Exchanges may exacerbate the problem

Once public and private health insurance exchanges are open next year, experts predict that enrollees may find HDHPs more attractive whether or not the overall value of the plan is conducive to their particular health needs.

"I think what will happen is that people who just use the Internet to buy a plan are absolutely going to elect the cheapest plan regardless of their health condition, and that can oftentimes be a mistake," explains Bryce Williams, managing director for exchange solutions at Towers Watson, who has developed Medicare exchanges for more than 15 years with Extend Health.

Especially if enrollees are buying insurance for the first time, "the tendency is to look for the lowest premium cost," seconds Julie Stich, research director at the International Foundation of Employee Benefit Plans.

Williams estimates that through an exchange or aggregator websites, 70% to 80% of people will select HDHPs without looking at how it impacts their out-of-pocket costs. However, if people discuss their options with an expert, he estimates that only 20% to 30% will select the highest-deductible plan and may walk up the value curve to a silver- or gold-valued plan.

In today's market, the current average stay on an individual plan is only 20 months if they buy it through the Internet. This can be "because people select a super-high-deductible health plan without assessing what's going on with their health and the health conditions that they're managing. As they start to use the plan, they find that it's extremely deficient in terms of overall value," says Williams. He adds that "you need a human component or an expert who can help you pick the right plan based upon your health conditions, where you live, what doctors you see, what networks you want to be in and so forth." For those that buy a plan through an agent in today's market, the average stay is over three years.



Exchange is 'not a website'

For this reason, the 2014 exchanges aim to have navigators who can offer unbiased advice to individuals and help them pick the right plan choices.

"Our mantra is an exchange is not a website," advocates Williams. "An exchange is a combination of a marketplace where you have competing plans and where you're receiving expert advice from an adviser who helps you navigate that choice."



Employer-based education still important

Employers and HR departments may find it in their best interest to educate employees in small groups or part-time workers entering the exchange about the various plans.

"I think employers take it upon themselves to provide materials to educate people simply because they've been offering these benefits voluntarily for the better part of the last 70 years, and they did so for business reasons," says Paul Fronstin, director of the health research and education program at the Employee Benefit Research Institute. "They wanted to recruit and retain the right workers, and they're also concerned about the health status of their population - none of that has changed. Employers will want to educate employees about their health coverage choices because they are concerned that if employees make the wrong choice it will affect their health status and their productivity."

Based on conversations Williams has had with large employer clients in the Fortune 500 market, he agrees.

"Even for their part-time workers that don't have access to their group plan, they still feel very paternalistic, and they want to turn on an advice engine to those people," he explains.

He believes large employers will use both offline (sending employees marketing communications that coach workers on how to look at their overall health picture) and online tools to educate workers. Online tools, like Extend Health's "Plans like Mine" function that compares and contrasts total out-of-pocket costs in addition to plan costs, can help enrollees make the right decisions.



Slow migration

While Williams believes there will be a "slow migration" of larger employers moving active employees into exchanges, employers will still want to give part-time, along with full-time, workers basic information on plans and insurance concepts.

IFEBP's Stich recommends offering face-to-face meetings for the entire staff and providing written information as well as floating education through social media or other avenues like videos and podcasts.

"Sometimes educating that basic level of health literacy is helpful before you move on," Stich says, citing information on different types of plans available and definitions of deductibles, copays and out-of-pocket expenses. "I think it's a good idea for employers to educate employees about plans in the exchange because there are definitely ramifications for the employer," she adds.

Specifically, some enrollees may not know that preventive care is free and exempt from the deductible in an HDHP and other plans. Without full education, employees could be absent from work, suffer serious disabilities or be distracted while at work because of financial worries.



Back to basics

Even though it's difficult for employers to provide specific education on state and federal exchanges since there are so many unknowns, they could take a day to educate about health insurance basics or provide information through wellness initiatives.

"I think it's always a struggle to educate people and get them to make the best choices. I think the best thing is to apply the lessons learned in self-directed retirement accounts [and] carry them forward to health care," Liss says, adding that employers could offer risk assessment calculators and financial planners, and possibly tie health care contribution choices into retirement, disability and life insurance planning algorithms.

Fronstin agrees that straightforward tools that allow participants to make apples-to-apples comparisons between plans can "give them a way to narrow decisions and stay engaged in the process."


Health care, retirement confidence linked

As defined contribution health care expands right along defined contribution retirement, employees are factoring in both types of benefits into their long-term plans.

* 54% of Americans say that access to health insurance in their retirement decision was extremely important.

* 53% plan to work longer than they would like in order to continue receiving health insurance through work.

* 27% in 2012 say they would retire earlier than planned if they were guaranteed access to health insurance, up from 15% in 2003.

Source: EBRI 2012 Health Confidence Survey

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