Americans Shift Toward High-Deductible Health Plans

Traditionally, enrollment in high-deductible health plans (HDHPs) by individuals under 65 has been higher when purchased directly than when provided through an employer. However, a recent National Health Statistics Report, which examined HDHP enrollment rates between 2021 and 2023, found that HDHP enrollment did not differ significantly between directly purchased and employment-based coverage. Other studies show that by 2018, the gap between participation in HDHPs because of direct purchase and employment-based coverage had closed significantly.

Overall, white non-Hispanic individuals were most likely to be enrolled in HDHPs during this timeframe. Black and Hispanic individuals were the least likely to be enrolled in HDHPs. Generally, participation in HDHPs increases when household incomes and education levels increase. Nonetheless, the Employee Benefit Research Institute has produced studies showing that overall enrollment in HDHPs has decreased since 2020.

The Medicare Prescription Drug, Improvement and Modernization Act of 2003 established HDHPs. Under these plans, participants pay lower monthly premiums and pay more out-of-pocket healthcare expenses until their deductible is met. Individuals may or may not use health savings accounts (HSAs) with HDHPs. When HDHPs have associated HSAs or health reimbursement agreements (HRAs), they are also known as consumer-directed or driven health plans (CDHPs). In the case of employment-based HDHPs, costs shift from the employer to the employee seeking medical care.

An increasing number of individuals enrolled in HDHPs also are enrolled in CDHPs; this percentage of individuals increased from 30% in 2010 to almost 45% in 2018. The Consumer Engagement and Healthcare Survey noted similar increases in CDHP enrollment. Participation in CDHPs helps individuals offset the high initial costs of HDHPs by allowing them to use HSA or HRA funds to pay those costs until their deductible is met.

Like HDHPs, enrollment in CDHPs rises as family income and education levels increase. HDHP participants may also be more sensitive to healthcare costs due to their heightened financial responsibilities under these plans. This factor can lead to a reduction in unnecessary healthcare expenses. Overall, HDHP participants have fewer doctor and emergency room visits, lower use of preventive services, and less out-of-pocket spending.

HBL has experience in all areas of benefits and employment law, offering a comprehensive solution to all your business benefits and HR/employment needs. We help ensure you are in compliance with the complex requirements of ERISA and the IRS code, as well as those laws that impact you and your employees. Together, we reduce your exposure to potential legal or financial penalties. Learn more by calling 470-571-1007.

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Hall Benefits Law, LLC

HBL offers employers comprehensive legal guidance on benefits in mergers and acquisitions, Employee Stock Ownership Plans (ESOPs), executive compensation, health and welfare benefits, healthcare reform, and retirement plans. We counsel a wide spectrum of clients including small, mid-sized, and large companies, 401(k) investment advisors, health insurance brokers, accountants, attorneys, and HR consultants, just to name a few. HBL is passionate about advising clients, and we are dedicated to our mission: to provide comprehensive, personalized, and practical ERISA and benefits legal solutions that exceed client expectations.

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