HDHP enrollment sees 2% drop, study finds employees have more choices

A new report has found a decline in membership of high deductible health plans (HDHPs) in 2022, the first time since 2013 that that model had seen a decline in enrollment.

The report by ValuePenguin, part of LendingTree, an online lending marketplace, found that HDHP enrollment declined 2% in the U.S. between 2021 and 2022. In addition, HDHP enrollment fell in 32 states, with 13 states reporting HDHP enrollment numbers below 50% between the 2021 and 2022 plan year. Overall, the study said 54% of private sector workers in the U.S. were enrolled in HDHPs in 2022.

“HDHP enrollment soared over the past 10 years, but enrollment fell in 2022 for the first time since 2013,” the report said. The analysis said that the change is a natural consequence of employers offering a wider array of health plans, giving employees more options in the health plan model they choose.

“With more options, it isn’t surprising to see pandemic-weary Americans opting for plans that provide more coverage,” said Divya Sangameshwar, a ValuePenguin insurance expert. The report included data showing that in 2018, 22% of employers with 20,000 employees or more offered only high-deductible health care plans. By 2022, that number dropped sharply, to 9% of large employers.

According to the report, the state with the highest rate of private-sector employees choosing HDHPs in 2022 was South Dakota. That state had 72.2% of private-sectors employees enrolled in HDHPs. South Dakota was the only state in the nation with an HDHP enrollment of more than 70%. Maine had the second-highest rate of HDHP enrollment, at 67.8%. For 2022, the two states with the lowest rate of HDHP enrollment were Hawaii (21.8%) and the District of Columbia (36.4%).

Lower premiums, but higher deductibles

The report noted there is a balancing act with health plan options—HDHPs, for example, have lower premiums but higher deductibles, and in the years following the pandemic, people saw health care providers more, so high-deductible costs were more apparent.

However, with the pandemic fading and worries about inflation and rising prices of day-to-day consumer goods, it’s possible consumers may reconsider the trade-off.

“With rising costs for essentials like groceries hitting consumers hard these days, there may be little money left over in the budget for health care spending,” the report said. “The lower premiums associated with HDHPs pose risks if you need to file a claim, but they could help you lighten your monthly financial load otherwise.”

HSAs can be a plus

The report included a breakdown of pros and cons with HDHPs. In addition to the lower premium/higher deductible tradeoff, there are several other HDHP issues the ValuePenguin report discussed.

For one, not all HDHPs are created equal, Sangameshwar noted. “It’s important to take a moment to read through what yours would offer and how it’ll work for your medical needs,” she said. HDHP plans that have only slightly higher deductibles than other option may be a good choice if it allows a worker to contribute to an HSA or if the employer offers a cash incentive. But deductibles and costs like prescription drugs should be affordable, the report said.

“HDHPs do come with downsides, like $8,050 for an individual or $16,100 for a family in out-of-pocket expenses in 2024,” Sangameshwar said. “This can be a huge expense for the 64% of Americans living paycheck to paycheck, and the 49% admitting they can’t afford a $1,000 emergency expense.”

Related: 20 Years of HSAs: Exploring the evolution to mainstream status

On the other hand, the ValuePenguin report concluded that for some employees, the lower premium will be a better deal, depending on the individual. Employees who have fewer expenses or no chronic conditions can take advantage of the premium savings offered by HDHPs, the report added. “Since checkups and screenings are counted as preventive care, HDHPs typically cover them, making overall medical expenses low,” Sangameshwar said. “An HDHP can be especially appealing if it comes with an HSA that employers contribute toward. This will offer employees a cushion in case of any emergency medical expenses.”