Expanded pre-deductible coverage in HSAs has little impact on premiums

Three-fourth of large employers and health plans offering HSA-eligible plans have expanded pre-deductible coverage for medications and services that prevent the exacerbation of chronic conditions. This expansion, however, has had minimal impact on premiums, according to a new report from the Employee Benefit Research Institute.

“Our prior EBRI research demonstrated that a majority of employers would expand the list of services covered on a pre-deductible basis if allowed by the IRS,” says Dr. A. Mark Fendrick, coauthor of the report and director of the University of Michigan Center for Value-Based Insurance Design. “Reflecting this interest, bipartisan, bicameral legislation has been introduced in the U.S. Congress that would provide additional flexibility to extend pre-deductible coverage to services that manage chronic conditions.”

Among the key findings of the report:

• The premium impact was driven by the amount of increased uptake of drugs because of enhanced coverage; elimination of all consumer cost-sharing or inclusion of coinsurance in lieu of the deductible; and whether increased drug use led to offsets in spending on non-drug medical expenditures, such as preventable hospitalizations.
• Premiums increased the least (1.3%) when employers imposed coinsurance instead of a deductible; when increased use of prescription drugs led to reduced use of other medical services by 20%; and when utilization increased 12%.
• The most expensive scenario, an increase of 4.7%, occurred when increased prescription drug utilization led to no decrease in the use of other medical services; utilization increased 12%; and employers did not impose any coinsurance.

Overall health spending averaged $4,947 per person in 2018. Prescription drugs accounted for $983, or 20% of total spending. The 116 drug classes examined in this study accounted for $798, which was 81% of the drug spend and 16% of the total spend per person.

Read more: Cost of premiums, deductibles are an increasing burden on working Americans

Only $108 of the $798 in drug spending on the 116 drug classes, or 2% of total spending, was attributable to the deductible. The remainder was covered by insurance or some other form of cost sharing. Without utilization increases as a result of covering these 116 drug classes in full, premiums would increase 2%. However, medical cost offsets and other forms of cost sharing will reduce the impact of expanding pre-deductible coverage on premiums.

“It is our hope that the main finding — that expanding pre-deductible coverage to over a hundred drug classes has a very small impact on premiums — will inform ongoing policy deliberations on how more-generous coverage for essential chronic disease services can enhance equity and improve patient outcomes,” Fendrick says.