A new suggestion to ease the burden of high deductibles: Split them in two
Having deductibles reset after six months could serve to “smooth out” the burden by making them smaller, researchers suggest.
A new study from the University of Wisconsin finds that resetting deductibles to cover six-month periods, rather an annual rate, might save some health plan members an amount that equals from 6%-to-10% of premium costs.
The study was conducted by Long Hong, a researcher at the UW Department of Economics, and Corina Mommaerts, PhD., also with the UW Department of Economics. It was released by the National Bureau of Economic Research.
High deductibles have increasingly become a topic of debate in the U.S., since so many Americans have moved to high deductible health plans (HDHPs). In their study, the researchers noted that having to meet the deductible for a health plan has added economic stress to many Americans.
“In 2010, only 10% of individuals with single employer-based health insurance had a plan with a deductible over $2,000, while in 2020, 26% of these individuals had such a plan and 24% were offered only high-deductible plans,” the study said. “In the individual market, roughly 90% of enrollees had high deductible plans in 2015. These deductibles are large and can pose a significant financial burden on those exposed to health costs: for instance, the average medical deductible in the 2017 federal marketplace was $3,276 for silver plans and [a 2017 study showed] that only 47% of single households have enough liquid assets to pay this deductible.”
A new approach
The study explores a different kind of deductible; instead of one that resets annually, the researchers asked what if deductibles were to reset over shorter time periods, such as every six months, rather than yearly. This could serve to “smooth out” the burden of meeting deductibles by making them smaller, although more frequent. This approach could create less out-of-pocket cost burden on enrollees over the early months of the year.
Using claims data from the Truven Marketscan database, the researchers found that the usefulness of resetting deductibles had different impacts on different kinds of consumers. Enrollees who have more financial resources preferred the yearly deductible, but those with less financial security prefer the reset; especially those with no ability to save or borrow funds to cover out-of-pocket health care costs. Those enrollees, the researchers found, “are willing to pay an extra $270 annually, or 6.3% of their total premiums, for the resetting deductible policy instead of the standard deductible policy.”
Implications for the future of HDHPs
At the same time, the researchers find that “moral hazard”—the concept that people might take more risks, assuming that their insurance coverage will shield them from consequences, does not factor in much to the deductible-reset concept. The report said that on the whole, moral hazard does not seem greater under the reset option.
The report concludes by saying its findings raise additional questions about the concept of resetting deductibles, and that more research is needed. However, it noted that the findings do have implications for HDHP policies and added that this may be especially true for plans under the Affordable Care Act, where high deductibles are common, and where many enrollees have lower incomes.
“Given that deductibles are trending into the thousands of dollars, however, these issues extend far beyond low-income populations: [the 2017 study showed] that less than half of single-person households have enough liquid assets to pay a $2,000 deductible,” the study said. “Meanwhile, policymakers continue to encourage the use of HDHPs on the individual market.
“Designing and introducing alternative deductible structures, such as resetting deductibles, could maintain the use of high deductible policies while alleviating some of the liquidity issues that concern their critics,” the researchers conclude.
Read more: