“Problems of high prices and complexity of health care cannot be solved by shifting responsibility to people”
I read this piece at Health Affairs. Liked it, thought I could shrink it down with a bit of a rewrite, failed on the latter. It is a 10 minute easy read on health care, deductibles, and why the ACA is in trouble . . . think deductibles. They do not solve the use of healthcare nor help to provide healthcare.
Abandon—Don’t Expand—High-Deductible Plans Linked To Spending Accounts, Health Affairs
Another BS attempt to force cost on patients. “The White House and Congress have joined forces around a health reform concept to promote high-deductible health plans linked with subsidized spending accounts to pay for out-of-pocket costs. A central argument is that shifting costs from insurance companies to consumers will encourage them to shop for services, lowering health care utilization, prices, and thus costs. This proposition is neither new nor untested.” It is an attempt for the gov to get out of the healthcare business and let commercial interests handle it. In other words citizens will be at the mercy of business.
Health Insurance Deductibles: The History
The debate over deductibles has been present throughout the relatively short history of US health insurance. Deductibles were absent from private hospital insurance that emerged during the Great Depression and expanded during and after World War II. Original Blue Cross and Blue Shield plans covered hospital services with no deductible and capped annual payments.
During the 1950s, insurance shifted toward “major medical,” which included a higher catastrophic cost cap as well as expanded coverage for outpatient services It added a deductible which is common in other types of insurance. By 1970, 80 percent of non-elderly people had private coverage. It only covered 40 percent of their expenditures due to deductibles and other coverage limits. In the 1980s, managed care plans proliferated by offering low deductibles in exchange for a limited network of providers and other utilization control mechanisms.
High-deductible plans linked to health spending accounts emerged in the 1990s and early 2000s. Generally, such accounts (e.g., medical savings accounts, health savings accounts, flexible savings accounts, health reimbursement arrangements) are funded by employees and/or employers, are not subject to taxation. They have annual contribution caps and are to be used for health services. Enrollment in them remained low.
The Affordable Care Act
The 2010 ACA included major consumer protections while allowing insurers to offer both high-deductible health plans and first-dollar managed care plans like health maintenance organizations (HMOs). An ACA provision to cap deductibles for small group plans at $2,000 was subsequently repealed. The law indirectly regulated deductibles by requiring individual and small group market plans to cover specified actuarial values (average percent of total medical costs covered for a standard population). Cost coverage for bronze plans (60 percent), silver (70 percent), gold (80 percent), and platinum (90 percent). Premium tax credits for people without access to affordable alternatives are linked to a benchmark silver plan sold through the health insurance marketplaces. Tax-credit eligible individuals with income below 250 percent of the poverty level can receive subsidized cost sharing reductions, including low deductibles.
In 2025, the average deductible for employer-sponsored individual insurance was $1,886. For individual marketplace coverage, it was $2,759. Congress enhanced premium tax credits (that is, increased their value and eligibility thresholds) from 2021 to 2025, leading more enrollees to choose lower deductible health plans.
Over time, both average deductibles and the share of workers facing a deductible (now 88 percent) have risen. In 2025, one-third of covered workers were enrolled in a high-deductible plan with some type of tax-preferred health savings account or health reimbursement arrangement, an increase from 2014 but not significantly higher than 2019.
The Impending Expansion Of High-Deductible Plans
In 2026 and beyond, people will be driven to high-deductible health plans by trends and policy. Industry groups project employer-sponsored insurance premiums would rise by 9 percent in 2026. It is the largest increase in 15 years. That is if employers took no actions raising deductibles to lower the premium increase. As it is employers expect a 6.5 percent increase even with such cost reduction strategies. KFF estimates that out-of-pocket premiums for individual marketplace coverage will more than double (increasing 114 percent) due to similar cost drivers such as prescription drugs as well as the expiration of the enhanced premium tax credits.
Preliminary reports from state-based marketplaces show people switching to higher deductible plans to lower the amount of their premium increase. Congress in Trump’s One Big Beautiful Bill Act deemed certain high-deductible ACA plans as qualifying for tax-preferred health savings accounts. Further and through executive action, the Trump Administration expanded access to catastrophic plans (included in the ACA as a plan of last resort). These plans have the highest allowable deductible. The Administration doubled down on this in its proposed Marketplace rule for 2027 through eligibility expansion and favorable policy for catastrophic plans. Plans with deductibles as high as $31,000 for a family. Even before the recent proposal, the White House projected that these changes would make 10 million more people eligible for health savings accounts, with 3 million people newly choosing catastrophic plans.
Rationale For High Deductibles
An early argument for high deductibles in health insurance was they limit “moral hazard,” in which health care costs are induced because people and providers are insulated from meaningful financial consequences. Current proponents typically cite basic economics:
“The higher the price, the lower the use.”
Research has proven the increasing of a person’s out-of-pocket payment for health care decreases their use. This occurs regardless of need or the service’s value.
An equally strong claim is that high deductibles lower monthly premiums for the cost of coverage. For example, the 2025 annual employer-sponsored insurance premium for a single worker was $8,620 in a high-deductible health plan compared to $9,229 in an HMO in which nearly half of enrollees faced no deductible. This correlation is even more pronounced in marketplace plans. However, a dollar increase in a deductible does not yield a dollar decrease in premiums, since health spending is unevenly distributed. Half of Americans account for less than three percent of health spending, and among this small group, most spending is above the deductible. The majority of people have little or no health care spending in any given year so would not qualify for coverage above a high deductible.
Advocates also suggest that high deductibles encourage shopping and price competition. The term “shoppable services” generally describes non-emergency services that can be scheduled in advance. Because there is wide variation in pricing and competition for certain services in some markets, some analysts believe there could significant savings if consumers were encouraged to shop for health care.
Limitations Of High Deductibles
Deductibles work as envisioned if the first several thousand dollars of health care spending in a year were discretionary and shoppable while health care spending after the deductible merited insurance coverage. Research shows cost sharing, including deductibles, deter all types of care: high-value and necessary care as well as extraneous or low-value care. Also, people with chronic illness or significant health conditions are more likely than people with sporadic health needs to pay the full deductible, making deductibles effectively a surcharge for people with pre-existing conditions within the plan. Low- and middle-income people may also struggle to pay high deductibles. Thirty-seven percent (37%) of U.S. adults would have to borrow to pay for an emergency expense above $400.
Shopping for low-cost services, according to several studies, is no greater among enrollees in high-deductible plans than those in traditional plans (and is low in both). Employers also believe that the use of shopping tools is relatively low. AB: The issue here is where do you shop? Also the doctor has to read your history in order to tell you cost.
Spending accounts, meant to address affordability concerns about high deductibles have balances and contributions below the deductible, leaving a gap. Accounts are disproportionately used by, and benefit, wealthy people; They are subsidized through tax code—tax deductions are worth more to people with higher marginal tax rates. Overall health spending among people with tax-preferred accounts, compared to those without them, was not lower overall, and was actually higher for people with year-end “use it or lose it” flexible savings accounts, according to one study.
High-deductible plans also contribute to complexity, confusion, and dissatisfaction. Enrollees have to track spending toward the deductible and must guess when coverage will kick in. If they have an account, they also have to monitor it since they will have to pay full cost once it is exhausted. Such an experience is similar to dealing with the much-criticized coverage “donut hole” in the original Medicare Part D drug design. One survey found that less than half of high-deductible health plan enrollees were very or extremely satisfied with their plans compared to 62 percent of enrollees in traditional coverage; 42 percent were not or not at all satisfied with the cost they pay out of pocket for most health services compared to 22 percent of traditional plan enrollees.
Lastly, the high-deductible plan/tax-favored account model may increase system costs. Accounts charge various types of bank fees. Hospitals have to collect from a patient 100 percent of the below-deductible costs. This raises their administrative and uncompensated-care costs. High deductibles may also have contributed to growth in direct primary care as physicians and other outpatient providers forgo bill chasing for a fixed-fee model. This balkanizes the system, making access to primary care even more challenging for people without the means to pay for it.
How To Eliminate Deductibles In Health Insurance
While it would be no small task, federal and state policy makers could limit or altogether eliminate high deductibles connected to spending accounts in health coverage. Starting with the ACA marketplace, this could be done at the federal or state level, holding actuarial value constant for gold and platinum plans by replacing deductibles with co-pays and coinsurance. State-based marketplaces, such as California, already offer zero-deductible gold plans as does the second largest public purchaser of health care after the federal government, the California Public Employees’ Retirement System (CalPERS). Cost sharing can be set based on the value of the service, which evidence suggests can address overutilization concerns without harming access to necessary care and may lower costs.
A more meaningful proposal offered by experts, think tanks, and some members of Congress would raise the average share of covered health expenditures by linking the ACA premium tax credits to gold plans. Such legislation could direct that all gold plans lack deductibles. Congress could fund the tax credit increase by reallocating less targeted federal health subsidies toward this purpose. For example, by replacing premium tax credits add-ons to fund cost sharing reductions through “silver loading” with an appropriation. Congress could also streamline or eliminate tax preferences for spending accounts or decrease insurance company overhead through medical loss ratio policy changes.
Alternatively and preferably, Congress could fund ACA no-deductible gold benchmark plans by requiring marketplace plans to limit their provider and drug payment rates to a percent of Medicare rates. The Urban Institute has conducted modeling in various reports suggesting significant savings from capping rates within private insurance plans. This approach has been used for a subset of plans (also called public options) in Colorado and Washington State; it would tackle the problem that is at the heart of the debate over the ACA: the high cost of health care.
Policy makers could go further. Congress could raise required the minimum value for employer-sponsored insurance from 60 percent of total allowed costs and, similarly, limit or eliminate deductibles. Applying caps on the rates that private insurers pay in employer-sponsored plans could offset the premium increase from the more generous coverage. Congress could also extend this approach to traditional Medicare, which has set deductibles. Private plans in Medicare Advantage are already less likely to rely on deductibles as a cost-sharing mechanism and reducing over payments to Medicare Advantage plans could finance this change for all beneficiaries.
In closing, the problems of high prices and complexity of health care cannot be solved by shifting responsibility to people through high-deductible plans linked to spending accounts. Evidence suggests going in the opposite direction to solve these problems: replacing deductibles with value-based cost sharing and having the government take on greater responsibility for lowering prices.