Home > Employee Benefits > Going back to the future with high deductible plans

Going back to the future with high deductible plans

highdeductibles1Although high deductible health plans (CDHP) have been around for a number of years, these plans are still in the minority of offerings provided by employers. With the roll out of National Health Reform (PPACA), these plans are expected to gain more interest from employers in the next three to five years. This will be either in the form of a total replacement or as a health benefit option.

Having worked in the employee benefits industry for a number of years, I have seen many changes to the design of health insurance plans. Over time, we have gone full circle with our plan designs. In the early 1980’s,  the prevalent plan design for health insurance were major medical plans that included an annual deductible of $100 with members required to pay 20% coinsurance on charges until they had spent $500 out of pocket. From the 1990’s and for nearly two decades after, the most prevalent plan designs were HMO/PPO arrangements. These plans began with $5 office visit co-pays, and over the years have increased to $20 or $25 as the most common office visit co-pays. The copay increases were designed to lower renewal increases.  Basically, they were ‘tweaks’ to the plan design in office visit, emergency room, in /out patient hospital and prescription drug copays, all in order to reduce renewals.

The introduction of HMO/PPO plans in the 1980’s was a major change to the way people and providers were familiar with receiving health coverage. Many people and providers were skeptical of this new approach that encouraged visits to your primary care provider. The  logic behind these plans was that by receiving annual physicals and  routine services would keep individuals healthier and help them avoid serious illnesses.  Regular check-ups might mean early detection of diabetes or high blood pressure. At the same time, and providers would be more up-to-date on what was happening on these plans.

Today, we are seeing an increase in plans with deductibles. High deductible plans with a $1,000/$2,000 or $1,500/$3,000 deductible are gaining momentum. Plans that include a $500 deductible are an introduction to the deductible environment. They provide employers with some savings to the co-pay plans. These plans also introduce the employees to what the providers are charging. They become familiar with the explanation of benefits, which outlines the charge for services and the actual payment negotiated by the provider. The future of health plan designs will be interesting. Exchanges, both public and private will gain popularity as will self-funding for smaller groups and captive insurance arrangements. One thing for certain is that high deductible plans will be a big part of these new arrangements.

About the Author


Michael Moran is a Senior Vice President at WGA in the Employee Benefits Group, specializing in health and welfare insurance programs for WGA clients.

617.646.0360 | MMoran@wgains.com | Connect with Michael on LinkedIn

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