What Holds Back Consumer-Driven Health Plans?

health-insuranceA previous entry discussed new evidence that so-called consumer-driven health plans (CDHPs) reduce health spending one eighth among employer-sponsored group plans run by national health plans.

CHDPs are defined as High-Deductible Health Plans coupled with Health Savings Accounts or Health Reimbursement Arrangements). These plans became available in 2005. However, they only appear to cover a little over one quarter of employed people or their dependents who are enrolled in their benefits.

The case for CDHPs is that consumers (patients) will spend their health dollars more prudently than insurers or employers will. So: How can such a small proportion of people be enrolled in CDHPs after over a decade of evidence supporting the case that they cut the rate of growth of health spending?

According to the Kaiser Family Foundation’s 2016 Employer Benefits Survey, the average premium for a family High-Deductible Health Plan was $16,737, versus $19,003 (almost 15 percent higher) for a traditional Preferred Provider Organization (PPO). Why do employers appear to be leaving money on the table?

One reason is an agency problem. If government policy forced you to buy housing benefits, or automobile benefits, from your employer, the market would obviously work a lot less effectively than the current one, where you buy your home or car wherever you want.

This agency problem is compounded by a type of money illusion: People believe their employers pay most of their health benefits. Employers believe the same thing, even though economists understand workers pay one hundred percent of their health costs, either directly or through suppressed wages.

This illusion is reflected in how cash flows for premiums are divided. According to the Kaiser Family Foundation’s survey, an average $5,569 of premium for a PPO plan is deducted from a worker’s pay, while $13,433 is contributed directly by the employer. For a High-Deductible Health Plan, the shares are $4,289 versus $12,488.

So, if an employer switches from a PPO to a HDHP, the worker saves $1,280, or 23 percent of the premium deducted from his pay. However the employer’s share of premium drops $945, just seven percent.

If the labor market had no friction, this would not matter. However, there is a lot of friction. The largest source of friction is seven decades of cultivating workers’ sense of dependency on employer-based benefits, so they are not confident in demanding changes that would benefit them.

Further, as long as the government mandates workers get health benefits from their employers, rather than on their own, it gives power to employers. There is no reason for them to switch to consumer-driven health plans if almost all the benefits are captured by workers.

The solution is to reform the tax code so that workers get the same relief from taxation of health benefits whether they acquire them individually or through their employers.

Comments (54)

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  1. Ron Greiner says:

    Good post John!

    “…same relief from taxation of health benefits whether they acquire them individually or through their employers.”

    President Trump will establish high-risk pools for those that don’t qualify for the security of medically under-written portable and personable individual health insurance. So healthy people will switch to cheap, cheap, cheap, individual insurance and the employer-based plans will be left with who? THE SICK!

    Any reform will kill employer-based health insurance but giving Americans the FREEDOM of low-cost medically under-written health insurance will immediately wipe out employer-based health insurance reminiscent of the dinosaurs after a big asteroid hits.

    When President Trump lifts the heavy burden of over-priced health insurance off the backs’ of America’s employers the economy will sour like never before.

    Vote Trump and make America great again.

    • Do I recall back in 2014 you were urging us to vote for someone you insisted was the next governor of Florida or something like that? I cannot remember the name of the person.

      I guess we won’t forget the name of the person you’re endorsing now, whichever way the election goes.

      Because the entirety of your comments now and (I anticipate) November 8 will be to urge us to vote for your candidate, I thought I’d just point out that NCPA does not endorse candidates.

      • Ron Greiner says:

        “And one thing we have to do — repeal and replace the disaster known as Obamacare,” Trump said during the debate. “It’s destroying our country. It’s destroying our businesses — our small businesses and our big businesses.”

        He further asserts, “You take a look at the kind of numbers that that will cost us in the year ’17 — it is a disaster. If we don’t repeal and replace — now, it’s probably going to die of its own weight — but Obamacare has to go. The premiums are going up 60, 70, 80 percent. Next year they’re going to go up over 100 percent. And I’m really glad that the premiums have started — at least the people see what’s happening — because she wants to keep Obamacare, and she wants to make it even worse. And it can’t get any worse. Bad health care at the most expensive price. We have to repeal and replace Obamacare.”

        Trump will sign whatever Republicans pass. If he had a clue he would promote REFORM because it fits perfectly into making America great again.

        Example 2017 prices from one Obamacare company for a 50-year-old with a $7,000 deductible

        $450 month HMO Skinny Network 1
        $550 month HMO Larger Network 2
        $650 month HMO Largest Network 3

        These HMO plans pay $0 if the consumer goes out-of-network

        IN CONTRAST – medically under-written STM PPO $5,000 deductible that still pays out-of-network

        $173.01 month PPO — 850,000 doctors nationwide

        Obamacare $650/month HMO VS $173 PPO

        With a $3,000 refundable tax credit the consumer would have $1,000 left over deposited into their tax-free HSA – if they are healthy

        The employer pays NOTHING and can fill up the HSA

        I know that the NCPA doesn’t have FREEDOM of speech in the land of the free, darn IRS.

        • Barry Carol says:

          So what percentage of 50 year old people can pass underwriting to qualify for your STM plan and what are the people who can’t pass it supposed to do without the ACA? Who do you think is going to cover the tax increases necessary to cover the huge cost of high risk pools? The people in the risk pools might be a comparatively small percentage of the population but they will be a huge percentage of healthcare costs. Somebody has to pay for that. It would probably take a good size payroll tax to fund the high risk pools.

          • Ron Greiner says:

            Barry, President Obama came to the SunShine State today to peddle Obamacare. Obama says the problem is the name and we should fix that by switching it to ReaganCare – hahaha

            “They can even change the name of the law to Reagancare or Paul Ryan-care,” Obama said. “I don’t care. I just want it to work.”

            Obama admitted that the law needed some fixes to keep premiums down and help people afford plans. He suggested three fixes:

            Fix 1. “Expand Medicaid in the 19 states where it has not been expanded. Obama said that since the funding to expand the program comes from the federal government states are laving free money on the table by not expanding it,” Obama said.

            Obama said 700,000 Floridians should get Medicaid — that won’t cost anything will it Barry?

            Obama went on, Fix 2. “Use savings from Obamacare to fund more tax credits for those that fall above the current threshold to qualify for subsidies, which is 400% of the poverty line.”

            Barry, where is Obamacare savings?

            Fix 3. Stop foolish Democrats – Vote Trump

            • Barry Carol says:

              You didn’t answer my question. What percentage of 50 year old and older people wouldn’t be able to pass underwriting and what would it cost for high risk pools to cover those people in the absence of the ACA? Maybe Bob Hertz could give us an estimate if you don’t want to.

              • Ron Greiner says:

                I have already answered you Barry about the under-writing on Individual Medical (IM) at 20%.

                I also say that under-writing is easier with Short-Term-Medical (STM) so those that would not qualify is more like 10%. There are only 5 questions with STM. 1 question is — R U PG?

                You have come to the right place, the NCPA Blog, to get these important questions answered. But, Barry, don’t keep asking the same question once I answer YOU and YOU have to answer questions too, which a Socialist like YOU can’t.

                So, 90% of the American people, who pay for Obamacare without tax credits, are paying way too much and when Obama, Hillary and the Democrats said, “The AVERAGE family will save $2,500 a year” — U LIED & people suffer.

                Stop Socialists / Vote Trump!

  2. John Fembup says:

    “economists understand workers pay one hundred percent of their health costs, either directly or through suppressed wages.”

    My son corrected me on that very point the year he first started his first job, at Booz-Allen. I was helping him analyze his insurance choices and mentioned that his employers contribution was generous compared with others. He immedicpately said, No I pay the whole thing – it’s all compensation, and the company contribution just reduces my wage.

    He’s an engineer not an economist. I was impressed.

    • Barry Carol says:

      I wish the unionized people, especially in the public sector, understood the facts of the matter as well as your son does.

  3. Bob Hertz says:

    John G, you left out part of the picture in your assertion that employees save money when their employer goes to an HDP.

    You said:

    “an average $5,569 of premium for a PPO plan is deducted from a worker’s pay, while $13,433 is contributed directly by the employer. For a High-Deductible Health Plan, the shares are $4,289 versus $12,488.

    So, if an employer switches from a PPO to a HDHP, the worker saves $1,280, or 23 percent of the premium deducted from his pay.”

    What you left out is what happens if the employee has a major illness in the first year? The company plan went (let’s say) from a $1000 deductible to a $5000 deductible. The sick employee could be out $4,000.

    I have presented HDP’s to employee groups. The biggest opposition is always from older workers who are not well off. They are very familiar with the scenario I just posed.

    • Ron Greiner says:

      Bob, Obamacare is not affordable says MN Gov. Premiums are going up more than 50% – ouch! But its is now raising MN property taxes because the State Exchange won’t work and MN counties have to hire local people:

      The Minnesota Association of Counties estimates taxpayers spend an additional $27 million annually to work around the flawed online METS technology. This year alone some 249 extra eligibility workers were added to county government payrolls statewide.

      Has there ever been a comprehensive failure to match Obamacare? It has driven up the cost of health care, made it illegal for people to buy cheaper coverage with fewer mandates, eaten up many billions of federal tax dollars, wasted uncounted billions in state income and sales taxes. And now it is driving up property taxes because the program’s failures have to be dealt with by counties.

      In a normal election cycle, the disaster that is the Affordable Care Act would have been a campaign issue.

      Make America Great Again and TERMINATE Obamacare – vote Trump

    • Allan says:

      Bob, that is true, but if the employer saves a bit of money from ever rising premiums in the future some of that money could be used for a year or two to supplement a worker who is going to reach that $5,000 deductible. Most will not need that supplementation and that leaves profit for the employees and employer.

      The alternative for the employer who wishes costs never to rise again is to increase the cost of insurance to all employees where all lose.

      Using your own numbers run them over a period of ten years using a normal distribution of the workforce.

      • Barry Carol says:

        Any switch from low to high deductible health insurance plans whether paired with a health savings account or not will create winners and losers. The likely losers generally know who they are and they won’t like the switch. It’s human nature. You can’t save money for employers in a way that doesn’t adversely affect some employees even if the majority employees are net winners.

        • John Fembup says:

          I like high-deductible insurance coupled with a savings account. My employer offered them, but only to active employees. Medicare rules. But I think arguing over this or that insurance design is not going to result in real savings to anyone.

          Neither employers nor employees will save money if the cost-driving factors in the medical delivery system are continually subsidized by higher insurance reimbursements (whether private or public subsidies doesn’t matter, because it all comes from the incomes of productive workers anyway).

          One need not be an economist to know that when there is no incentive to economize, costs rise. And of course, saving money is only a part of the issue, the arguably more important part is value. Is US medical care as presently delivered worth its cost? How are people to figure that out, when virtually no one knows what the cost is in the first place?

          I think this means any insurance solution (private or public, still doesn’t matter) cannot fix our cost problem. Obamacare has become Exhibit #1. Arguing over Obamacare or Medicare Advantage or high-deductible insurance misses the basic point. The point is whether there is anything that can be done to reduce the cost of delivering modern medical care while still providing adequate treatment?

          And that’s only the supply side. What about the demand side? How much cost is driven by unhealthy behaviors? What if anything can be done about those behaviors? Would most people even accept the insurer or i government trying to do something about them?

          The American health policy debate over the past 60 years has not focused on cost, but on insurance. Mistake. It’s as though we lost our watch over there, in the dark part of the parking lot. But we’re looking for it over here, under the street light, because the light is better over here. Good plan? Hasn’t worked. Isn’t working. Won’t work either.

          • Barry Carol says:

            John — Regarding the cost of healthcare as opposed to health insurance, people will respond to incentives including incentives that are actually penalties. For example, much higher cigarette taxes drove U.S. smoking rates down to where we are now 2nd lowest in the world after Canada. I think a tax on sugary soft drinks could eventually move the needle on obesity as well. Charging smokers a significant premium for health insurance is another strategy. We could try something similar for people with a BMI above, say 30.

            Then there are my long term favorite strategies including tort reform, a more sensible approach to end of life care, better analytics to combat healthcare fraud and, of course, price and quality transparency tools.

            • John Fembup says:

              Barry, yes, excess utilization drives a meaningful amount of overall cost. And insurance definitely affects utilization. But an optimal theoretical level of utilization, if it could be achieved, will not reduce the cost to deliver the remaining medical services. I think delivery cost still lies at the heart of the matter.

              ACA sharply reduced insurance benefits and resulted in insurance restrictions to physician and hospital access – yet overall costs are still rising by 6% a year. ACA is functioning like the insurance scheme it is – – a band-aid of cost shifting and rationing of benefits, rather than a cure for the continuing growth of the underlying delivery costs in the first place.

              It may be that if all things are considered, the public will actually prefer modern medicine and its cost. After all, we could in theory go back to 1966 medical cost – if we were willing to go back to 1966 medicine. I doubt the public would accept that. I’m sure the malpractice plaintiffs bar would not accept it.

              But in our policy debate, all things are not considered. Instead, we’ve watched a 50-year cat-fight among opposing camps of so-called experts, each advocating their own insurance nostrum and devoting enormous energy to debunking their rivals’ ideas. The public is confused which – as Jonathan Gruber has helpfully pointed out – is the bureaucrat’s ideal environment.

              I still say (1) a strategy to use some insurance scheme to bend the medical cost curve is the wrong strategy, (2) failure of Obamacare is only the most recent evidence and (3) the correct strategy is to delve into the factors that drive the underlying delivery costs. The longer this is put off, the higher the costs.

              Sorry to be so wordy.

              • Barry Carol says:

                John – I hear you on the medical delivery issue.

                Interestingly, over on The Healthcare Blog, a Philadelphia based cardiologist tells us that in his specialty, utilization per patient has declined a lot over the least ten years – fewer stents, fewer stress tests, even fewer people admitted to the hospital. I asked him privately what accounts for this. I asked whether doctors concluded they were doing too much before, or better drugs are keeping patients healthier or are patients more compliant in taking their drugs or are patients taking better care of themselves in the areas of smoking, drinking, diet, exercise, drinking, etc. His answer was that doctors concluded that they were doing too much before. Aside from maybe becoming more aware of the cost of providing all this care, I don’t have any insight into what the catalyst was that caused cardiologists to change their practice patterns the way they did. At any rate, we need more of that.

                It’s also encouraging to note that per capita Medicare spending grew only 1.5% per year between 2008 and 2014 which I assume was totally unrelated to the ACA. Beneficiaries didn’t lose coverage because of job loss and deductibles didn’t rise more than general inflation. More people are in Medicare Advantage plans than ever despite CMS squeezing down payments to insurers relative to standard FFS Medicare.

                It’s conceivable that physician practice patterns are changing in a more conservative direction, at least for the Medicare population. Moreover, that probably includes less marginally useful and futile care at the end of life as far more seniors are executing living wills and advance directives. It looks like there may be some reason for optimism here though increasing regulation and lots of consolidation in the hospital sector could contribute to somewhat higher healthcare cost growth in the short term.

                • There is anecdotal evidence, and maybe more, than many doctors are becoming more “conservative” in the way you describe.

                • Allan says:

                  NBER 2012 Collision and Kaestner
                  Guessing is not a substitute for research. John G. is right.

                  “There is a general consensus among policymakers that raising tobacco taxes reduces cigarette consumption.”

                  That is where, Barry, I think your ideas come from regarding healthcare and smoking. Policy makers in the healthcare field seem to only produce evidence that promotes their desires whether the evidence is good or bad.

                  “However, evidence that tobacco taxes reduce adult smoking is relatively sparse. In this paper, we extend the literature in two ways: using data from the Current Population Survey Tobacco Use Supplements we focus on recent, large tax changes, which provide the best opportunity to empirically observe a response in cigarette consumption, and employ a novel paired difference-in-differences technique to estimate the association between tax increases and cigarette consumption. Estimates indicate that, for adults, the association between cigarette taxes and either smoking participation or smoking intensity is negative, small and not usually statistically significant. Our evidence suggests that increases in cigarette taxes are associated with small decreases in cigarette consumption and that it will take sizable tax increases, on the order of 100%, to decrease adult smoking by as much as 5%.”

                  • Barry Carol says:

                    If you look at each state’s rank from low to high in the percentage of their population that smokes and their cigarette tax rank from high to low, you will find a pretty strong correlation between high taxes and low smoking rates. There are also other factors at work including poverty and, in the case of Utah, religion — Mormons are generally non-smokers regardless to the tax amount.

                    Only 15.1% of the U.S. population smokes now ranging from a high of 26.7% in WV to a low of 9.7% in UT. U.S. per capita cigarette consumption declined from a high of 4,259 in 1965 to 1.232 in 2011, a 71% decline. Higher taxes were likely a significant part of that story.

                    • Allan says:

                      Correlation is not causation. A better idea might be John G.’s. ” It is more likely that the reduction in smoking gave politicians cover to raise taxes on smokers.” which strikes me as a much better answer. Socio-economic situations have a lot to do with smoking. Higher socio-economic status persons have reduced smoking while those having a lower socio-economic status continue to smoke more heavily.

                      NYC especially the island of Manhattan has huge cigarette taxes and those that live there high economic status, but I rarely see people smoking except in the housing projects and those that come in from other areas. That should tell you something.

                  • Barry Carol says:

                    There is an article on Bloomberg this morning that says economists believe a 10% increase in the total price of cigarettes, not just the tax, will lower consumption over time by 3%-5%. As it happens, I did a detailed report on Phillip Morris back in the late 1960’s and their view at the time estimated the elasticity of cigarette demand at 0.4 which means a 10% price increase results in a 10% reduction in demand or right in the middle of the range of the number cited in the Bloomberg article this morning.

                    It’s the total price per pack that’s key, not just the tax. If the tax doubles from a low base but only raises the price per pack by a percent or two, it won’t have much impact on demand.

                    • Barry Carol says:

                      Correction, a 10% increase in price results in a 4% reduction in demand.

                    • Allan says:

                      No one is saying it doesn’t have any effect. The question is how much of an effect it has. I think the other two rationals mentioned are much stronger. Then again I always wonder about statements such as the one you mention and wonder if there is data behind the comment, data that is not selection driven.

                    • Allan says:

                      Let me add that when one starts to increase taxes more and more on cigarettes one sees more violations of the law and bootlegging occurs. (Bad for how society views laws.)

                      Therefore, when doing a study we have to add in the bootlegged numbers or out of state cigarettes so there is a strong chance that those pushing certain policies are only looking at tax revenue to determine the amount of smoking that occurs.

                  • I would add that when “everybody” smoked, most smokers were not addicts and millions found it relatively easy to quit after the news about its health effects got out.

                    Now, the people who are life-long smokers are those who find it very difficult to quite. Therefore, taxing them is even more profitable for government (otherwise stated: Demand is inelastic).

                • Allan says:

                  “His answer was that doctors concluded that they were doing too much before. “

                  I wonder if that was his chosen context. That indicates intentional overuse at the time those things were done. I’ll bet what he said was more like, recently we have found from experience that we can be less aggressive and therefore reduce the use of certain modalities.

                  • Barry Carol says:

                    He may have been partly referring to the results of the COURAGE study that showed stenting was no better than drug therapy for patients with stable angina. He may also have been referring to the fact that doctors became more aware of the cost of the various tests they ordered in recent years and may have concluded that some either weren’t worth the money in some cases or didn’t have to be ordered as frequently. I don’t know for sure though.

                    • Allan says:

                      He probably was referring at least in part to the COURAGE study and that doctors may be more aware of costs nowadays especially with the sudden rise and attention costs have today.

                      That was not my problem with what you said. The context of your response could give one the idea that your answer was to blame physicians first and then consider alternative ideas.

                      In your world are physicians guilty until they prove themselves innocent?

                    • Barry Carol says:

                      I’m getting tired of your constantly making the most negative possible interpretation of anything I say as it relates to doctors.

                      Regarding the issue here, I was perfectly willing to assume that the cardiologists were doing the best they could for the patient in front of them ten years ago and they’re doing the same today. To the extent that costs and utilization have declined without sacrificing quality of care, that’s something to be celebrated. However, it was achieved, I congratulate them.

                    • Allan says:

                      “I’m getting tired of your constantly making the most negative possible interpretation of anything I say as it relates to doctors.”

                      Then don’t use the blame the doctor factor as your lead. That can be a factor, but you always seem to lead with the doctor is guilty type of rhetoric. That is easily remedied.

                      I do the same to the Dartmouth Atlas group that also seem to blame the doctor before important variables are taken into account.

                      We have to take into account a lot more variables than the doctor is at fault rhetoric.

            • I disagree the taxes drove down smoking. It is more likely that the reduction in smoking gave politicians cover to raise taxes on smokers.

            • Allan says:

              “I think a tax on sugary soft drinks could eventually move the needle on obesity as well. Charging smokers a significant premium for health insurance is another strategy. We could try something similar for people with a BMI above, say 30.”

              I don’t disagree with permitting insurers to set premiums based upon risk. That is how classical insurance works and is definitely not something the ACA permits unless you are talking about the government placing a tax on obesity. You seem to be calling for a sugar tax (soft drinks), one that was tried in NYC. Apparently, you like dictating to people what they can or cannot do with their lives even if that has no significant impact on others. It sounds like you prefer a very authoritarian approach by government.

              • Barry Carol says:

                NYC never passed a soda tax but Philadelphia recently did. We’ll see how it works out.

                Soda and cigarette taxes aren’t about dictating to people. They’re about trying to get the price of the product to more closely match the full social cost of producing and consuming it. The same concept applies to carbon taxes. I call it using a market approach to more efficiently allocate resources when traditional market prices don’t capture the negative externalities caused by producing and consuming certain products.

                • Allan says:

                  I should have said NYC tried to pass, but I don’t think it was looked upon favorably by the people. that is who our legislators are supposed to represent, right? But there are those that wish to tell us how to live our personal lives. You aren’t one of them, are you?

                  Regarding cigarettes Barry, first you have to ask yourself whether cigarette taxes are needed to match social costs. Sometimes I think we should thank the smokers because they die early and save us a lot of costs over a lot of years including social security and Medicare costs.

                  Perhaps like cigarettes you ought to rethink your ideas on carbon taxes. The science is not yet proven and nor is the carbon tax, Dr. Gore.

                  • Barry Carol says:

                    I’m a little skeptical about the smokers die early and save us money argument. People who have low socioeconomic status, are obese, abuse drugs or drink too much also die, on average, well before people with higher incomes and healthier lifestyles. If those low income people also happened to smoke, is it fair to attribute the cause of their early death solely to smoking? I don’t think so. Correlation isn’t causation.

                    • Allan says:

                      Yes, people with lower socioeconomic status die earlier, but they also smoke a lot more and smoking is a major factor in their lifespan.

                      I suggest you look up the data. One year of extra life under Medicare is on average about $10,000 and social security is even more. Lung cancer dies quickly and relatively inexpensively compared to congestive heart failure. Those that live longer take a lot of money from society’s pockets. Imagine the person dying at age 85 with 20 years more in benefits.

                      Death is expensive, but everyone has to die one time. The earlier people die after finishing their working lives the more society saves.

                • That is the argument. However, the tax revenues would have to be fully dedicated to medical care for smokers, which they are not. Indeed, only 3 percent of tobacco-tax revenues are even used for smoking prevention programs.

                  There is little constraint on how politicians spend the revenue because it is extracted from an unpopular minority.

        • Allan says:

          Yes, winners and losers are created. The problem is we all are losers and have been for some time as premiums rise and actual healthcare delivered falls. Do nothing and everyone loses.

          For most organizations almost everyone will win. Those that lose may need help for a year or two, but in general those requiring help every year are few and of those few, few will remain working long with or without the change.

          Your way is to wait until those that would be losers lose anyway because the employer has to eventually increase the cost to his employees. Isn’t that the same logic you use when speaking about the ACA? You wish to wait to do anything.

          • John Fembup says:

            Allan, in a prior comment you say “One year of extra life under Medicare is on average about $10,000 ”

            Are you sure it’s not more?

            Annual Medicare premiums are around $10,000 – for all participants, not just those in the last 12 months of their lives. If the average cost of an extra year of life is only $10,000 that’s break-even.

            • Allan says:

              I just read somewhere that ~$10,000 was the calculated per capita rate, but didn’t pay too much attention so don’t quote me on it. It should be in that area, but remember if you are comparing it to private insurance that Medicare doesn’t cover drugs without additional coverage. Also Medicare has certain caps.

              If you think it should be a lot higher then maybe it’s because the smokers die early something we should be thankful for not tax. 🙂

              • “Don’t quote me on it”? You are writing in a public forum!

                • Allan says:

                  John, I realize this is a public forum, but the statement was meant in an alternate way. I didn’t want him to take that number as a solid figure since I might have been wrong. It was a recollection and not something I just looked up. I realize John Fembup probably doesn’t take numbers without legitimate citations so the point is probably mute.

    • Yes, I agree with that issue. However, is there not a difference between the chronically ill and those that have one-time illnesses?

      If your deductible has gone up from $1,000 to $4,000 then you have a delta of $3,000. If you have not saved money in hour HSA (which you should have from your wage increase) you will struggle.

      So, it takes more self-restraint and planning.

  4. Bob Hertz says:

    test — my posts are not going through as per usual

  5. Bob Hertz says:

    Well, let’s try again.

    I disagree with Ron that Minnesota is out of line in hiring extra assisters or navigators.

    Down in the 150-200% of poverty range, you have a lot of people with no computer, or poor computer skills, or indecipherable foreign accents.

    Social Security has a lot of employees to help seniors.
    Yes, human beings cost more but the ACA budgeting should have recognized this.

  6. Jack Towarnicky says:

    Obviously, not one corporate benefits weenie in the whole group.

    You state: “… According to the Kaiser Family Foundation’s survey, an average $5,569 of premium for a PPO plan is deducted from a worker’s pay, while $13,433 is contributed directly by the employer. For a High-Deductible Health Plan, the shares are $4,289 versus $12,488. So, if an employer switches from a PPO to a HDHP, the worker saves $1,280, or 23 percent of the premium deducted from his pay. However the employer’s share of premium drops $945, just seven percent….”

    No, no, no… that is not the outcome/result of such a change.

    Those are average premium or premium equivalents among the employers surveyed. So, in the survey you have some employers who only have PPO’s, some who only have HSA-qualifying HDHP’s, some that offer a choice between those coverage options – where the employer financial support might be the same regardless of the option the individual chose or different. Some HDHP options have $5,000/$10,000 deductibles, some $1,300/$2,600. Some PPO options have no deductible, and others have $5,000/$10,000 deductibles. In the KFF survey you have employers of 1,000,000+ employees, and employers of < 500 employees. In some plans, the employer contributes towards the cost of dependent coverage, and in other plans, the employer makes the same contribution regardless of the tier of coverage selected. In the survey you have employers with employees in all 50 states, where the coverage chosen by a 64 year old living in Miami Florida might be averaged in with the 25 year old living in Duluth Minnesota.

    Simply, averages are deceiving. My old health actuary, Ed, once brought me up short when I was presenting something that had a lot of averages. He said: Jack, back in actuary school they taught us that averages can be deceiving. You take a guy, put his head in the oven and his feet in the freezer, his average temperature may still be 98.6, but he is dead!"

    The KFF data might be OK if you are trying to show trends, year over year changes, but, I believe you are misleading individuals when you use them in the example above.

    Here are a couple of examples of how it really works in corporate benefits weenie world:

    Say my company offers a choice between a PPO and a HSA-qualifying HDHP. Chances are, the employer contribution will be the same dollar amount, by coverage tier, for both options – where the participant pays 100% of the difference to ramp up the coverage to reflect the lower deductible (maybe even with a surcharge or load for selection). Lotsa times this is a "Fram Oil Fliter" choice – pay me now (contributions, point of enrollment cost sharing) or pay me later (deductibles/copayments, point of service cost sharing).

    Or, say my company does not offer a HDHP today. And, let's say I go to full replacement with a HSA-qualifying HDHP. More often than not, I will decide in the year of transition to avoid reducing my spend on health coverage – if only because of employee relations/engagement. So, I might freeze 2016 employer financial support levels and continue them indefinitely into 2017 and future years. That allows me to assert that we did not reduce employer financial support for health coverage and let inflation work its "magic". This is particularly important if I want to encourage those with anticipated significant medical expense/needs to consider other available options (spouse's employer's plan, Medicare, former employer's plan, parent's plan, etc.)

    Each situation would be different. Making assumptions based on survey data from a broad sample, such as that collected in the KFF survey, is probably more misleading than it is informative.

    • John Fembup says:

      “Simply, averages are deceiving.”

      Yes, because even if technically “true” – as the quotient of one number divided by another – averages so often fail to tell the whole truth about a distribution of variables.

      Consider that on average, Americans have one testicle and one ovary.

    • Thank you. This is good detail and educational for the readers.

      However, I believe readers understand that I am a policy analyst not a broker or consultant and so my illustration will not apply to any specific situation.

      I hope readers understand that my “average” employer does not exist and those figures are not applicable to any single employer’s situation, but illustrative of what is motivating changes.

      Indeed, your description of how you deal with clients corroborate my assertion of a kind of money illusion among interested parties.

      • Jack Towarnicky says:

        “I hope readers understand that my “average” employer does not exist and those figures are not applicable to any single employer’s situation, but illustrative of what is motivating changes.”

        Well, that was my point. What you show, what you are arguing (the spread in costs suggested by different average costs of surveyed employers) is NOT what is motivating change (now why most employers resist change) in health coverage.

        According to Gallup, almost 2/3rds of Americans still confirm in surveys that PPACA, soon to be in its sixth/seventh year, has not had any noticeable impact on their own health coverage.

        • Or, if we were to state the 2/3 ratio as an average: “The average American worker is two thirds convinced the PPACA has not had an impact on his health coverage and one third convinced it has.”

          • Jack Towarnicky says:

            Again, the point is that you can split employers pretty much into two groups in terms of their response to PPACA:
            Those who took advantage of PPACA and made some changes (as Rahm Emmanuel would say, “You never let a serious crisis go to waste. And what I mean by that it’s an opportunity to do things you think you could not do before”), and
            Those who approached every one of the iterative PPACA changes with the attitude of “… what do we have to do … NOW… ”

            Again, employer decisions to maintain existing coverage or to adopt HSA-qualifying HDHP options, soon to be in their 12th year, is a complicated decision process – that varies substantially from employer to employer.