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High Deductibles are Here to Stay. Here's Why That's OK.

Analysis  |  By Gregory A. Freeman  
   August 24, 2016

Putting a financial burden on enrollees helps them understand the true cost of care, says an executive at a healthcare financial management platform.

There aren't a lot of people defending high deductibles for health insurance, but count Jeff Bakke, chief strategy officer of WEX Health, as one of them.

High deductibles are generally a good thing because they force buyers to be more cost-conscious, says Bakke, whose company provides cloud-based financial management services for healthcare providers.

He says today's high deductibles are the inevitable result of years of overspending on healthcare.

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"We've needed to go on a healthcare spending diet for a long time, and high-deductible plans are the way to get patients and consumers super engaged in what things cost," Bakke says.

"It's one of the few things where people don't think about the cost. They just act, and sometimes not in their own best interest or the interest of the third party that is paying for those things."

The trend to higher deductibles has been led mostly by employers, not health plans, Bakke notes. "They see it as a way to stop their employees from acting like everything is free," he says.

High deductibles are here to stay, Bakke says, because employers cannot meet the coverage mandates of the Affordable Care Act without significantly cutting back on their employees' healthcare costs.

If everyone has to be covered, then everyone will receive fewer benefits. But that is not necessarily a bad thing, he says.

Setting the Stage for Better Choices

"For employers who had different populations with different benefit levels, high deductibles are a way to normalize that," Bakke says. "For a lot of companies, it is not the attractive option—it's the only option. And it is a way for employers to help younger employees start to save for these future expenses."

It is not unusual for employers to save as much as 20% on healthcare coverage by using high deductibles, but these savings don't result from employees having to pay more  to cover their deductible. The savings are the result of getting the consumer to appreciate how much healthcare costs and to make better choices, he says.

Health plans certainly benefit. High deductibles can help insurers fend off overutilization, which can pull any health plan into the red—although they couldn't save Aetna and other large companies, which cited higher than expected utilization costs as the reason they pulled out of Obamacare exchanges, online marketplaces for health insurance.

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Without the high deductibles, those Obamacare exchange plans would have crashed much sooner, Bakke says, but even extremely high deductibles can't compensate for procedures that cost hundreds of thousands of dollars.

"People who haven't been insured before are very high cost," he says. "I heard that one of the plans had more transplants in 2014 than they had had in the entire 35-year history of the company."

Gregory A. Freeman is a contributing writer for HealthLeaders.

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