HDHP/HSA: An Overview
Since its inception in 2004, the adoption rate of the High-Deductible Health Plan (HDHP) has been growing. Today, approximately 30% of covered workers in the United States participate in an HDHP. Originally offered as an alternative to PPOs and HMOs, the HDHP was intended to incentivize consumer behavior in healthcare. Its plan design, which allows it to be paired with a tax-advantaged Health Savings Account (HSA), was distinct from existing medical plan options and the name alone made it easy for HDHPs to stand apart.
The Challenge of Naming a Plan
As acceptance has grown, so have the options. Employers are increasingly adding not just one HDHP, but multiple HDHPs. In these cases, quickly distinguishing one HDHP option from another through use of a descriptive plan name can be challenging.
This is due, in part, to low understanding among employees of key medical plan features:
- Premium: the amount the employee pays for the coverage each month
- Deductible: the amount the employee pays for covered services before their insurance starts to pay
- Copayment: a fixed dollar amount the employee pays for certain healthcare services
- Coinsurance: the employee’s share of the costs of a healthcare service once coverage kicks in
- Out-of-Pocket Maximum: the most the employee pays during the plan year before the plan starts to pay 100% of the allowed amount
Generally, higher deductibles and out-of-pocket maximums result in lower premiums and multiple HDHPs are distinguished from each other by these amounts (rather than by features such as access to out-of-network providers).
Comparing these multiple plans can be challenging for employees because there are many variables must be compared against one another.
- How much will this cost me each month?
- How much health care will my family use?
- How much risk am I taking over the course of the year?
- How much will my medications cost?
- How much can I save in HSA over time?
These are not trivial one-to-one cost analysis. They are highly individualized and impactful for most employees’ health care budgets. Therefore, finding simple, easily understood names for the plans is also difficult and complicated.
Common Approaches to Naming HDHPs
Metallic Plans (Platinum, Gold, Silver, Bronze)
This is likely the most familiar option, as it is employed by healthcare.gov. Similar to how they are used in the Olympics (or by jewelers), these metals distinguish plans by actuarial value with Platinum being the highest followed by Gold, Silver and Bronze.
Metallic names seem to offer an immediate recognition of value. (Would you rather have an ounce of bronze or an ounce of Gold?) However, metallic names are problematic, because it’s not necessarily clear to the employee what that value means.
It could easily be inferred that Platinum plans are most expensive, but that’s only true with regard to premiums. Yet, high premiums may be a waste of money for people who don’t use very much health care. It could also be inferred that Bronze plans are worth less, but they could be a better deal for the employee based on their use of health care, and a greater ability to save money in an HSA.
Including the deductible amount in a plan’s name immediately conveys useful information about the underlying plan. However, as mentioned above, employees might not necessarily understand this concept. For example, some employees might be willing to pay higher premiums in exchange for a lower deductible because they may assume a lower deductible means “more” or “better” coverage.
Some employers use only the individual deductible in the name (which can cause confusion for those who choose family coverage), and some use both the individual and family deductible, (which can result in long or clunky names).
- Single Deductible Approach: HSA $1,500 and HSA $3,000
- Both Deductible Approach: HSA $1,500/$3,000 and HSA $3,000/$6,000
Another approach is to use descriptive terms that attempt to convey how the plans are different. However, these approaches have similar pros and cons as the metallic names; they have inherent meanings but might mislead employees.
- HSA Premium and HSA Standard
- HSA Plus and HSA
- HSA High and HSA Low
- HSA and HSA Core
- HSA and HSA Basic
- HSA and HSA Value
- HSA High Use and HSA Low Use
Another approach would be to use descriptors that merely indicate the two options are different without implying any comparison. These labels have no inherent meaning. Employees would have to learn what each means over time.
- HSA Blue and HSA White
- HSA 1 and HSA 2
- HSA A and HSA B
There is no right or wrong approach to naming HDHPs. The metallic names, though simple and easy to understand, are imperfect. Other comparative and descriptive methods also fall short. Simplicity cannot be the ultimate concern.
Employees need to understand the features of their health plans through effective communication and tools that help them model and compare the offered plans against their individual circumstances. Any name will work, if it is properly supported with information employees can usefully access and apply.More Ideas