Dear Employer--High Deductible Health Plans Are Making People Sick

What has become a standard practice for employers to control their healthcare spending could backfire…big time

What has become a standard practice for employers to control their healthcare spending could backfire…big time

We get it. Healthcare is expensive and costs are going up every year.  Medication costs are skyrocketing. For some chronic conditions, a year of treatment with a specialty drug can exceed $100,000. American companies are shouldering the burden of a healthcare system where ½ of what we spend in healthcare is considered “wasteful”.  Healthcare is now the 2nd highest business expense for most companies, second only to salaries. And because most employers pay their health claims at dollar 1, regardless of what their business does, by default all companies end up in the business of healthcare. And something’s gotta give.

Why do employers bear the burden of the inefficiency of the US healthcare system? In US healthcare we spend twice as much per capita with health outcomes that rank among the worst in the world. So the growing trend for employers to deal with crippling health care costs is to find others to share in this cost. Why not hold employees more accountable? After all, employees’ personal health choices and behavior make up37% of health costs. Employers tell their employees “let’s solve this together. We will support you.”

So very well-meaning companies offer “high deductible health plans” to employees. On the surface, it’s a win-win. The thought behind these plans is that if employees have to contribute more to their healthcare costs, they will take more responsibility for their health. In theory, employees will take better care of themselves so they can stay healthy. They will avoid unnecessary medical procedures, since they are responsible for paying for costs under their deductible. Employees will start to compare costs of medications and procedures to make sure they’re keeping their health expenses as low as possible. And so with average out-of-pocket costs for individual employees at $5,248, the rationale is that overall health costs for both the employer and the employee will go down since employees start to understand the value of their health, and they become smarter consumers of health care.

From an employer perspective, this sounds like a brilliant plan to control costs. But does this idea to transform Americans into savvy health consumers actually happen once a company starts expecting employees to pay a higher share of health costs?


As we track the results, there is evidence that raising employees’ out-of-pocket costs for healthcare does NOT increase consumerism, and it also has led to people not taking necessary medications and delaying care for chronic conditions, which leads to more serious health events (and costs) later on down the road.

Employers save money in the short term…but at what cost?

Researchers from UC Berkeley and Harvard studied the results of a large employer’s choice to offer a high deductible plan over 2 years. But instead of finding evidence to support the theory that high-deductible plans make people take more charge of their health spending, they found some surprising trends. Yes, employees spent 12% less on their healthcare, so in the short term these plans achieved their goal of lowering health costs. But these “savings” were from avoiding care of EVERY type. There was no evidence to show that employees were comparing costs or cutting unnecessary services once they had a high healthcare deductible. They went to the same doctors. And they cut low-value health services at the same rate as they were cutting important medical services, causing the employer to question whether members were making the right choices for their long term health.

Yes, But What if Preventative Services are Free?

The common response from employers with high deductible plans is to make sure necessary and preventative health services come at little to no cost to employees. But a recent study from California found that despite these efforts, 1 in 5 people still avoided preventative care citing cost as the reason. In fact, most high deductible health plan members surveyed did not know that their preventative screenings and important care was available with little or no out-of-pocket payments.  Additional studies show that high deductible health plans have the most adverse impact on those with chronic conditions, people with mental health disorders, and low-income individuals and families.  The danger of high deductible health plans is that their members with the highest health risks have shown that they avoid necessary care and medications. And this trend is one of many symptoms of the crippling cost of healthcare in America. 

Employers: we know you did not ask for the job of footing $640 billion of our healthcare bill in the U.S. It’s ridiculous, we know. But we just want to make sure you know high deductible health plans are a band-aid—not a solution. 

Signed, Hardworking Americans

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If you're an employer who feels there's got to be a better way to control health care costs, you're on to something. And we can help. BetaXAnalytics partners with employers to use the power of their health data "for good” to improve the cost and quality of their health care. By combining PhD-level expertise with the latest technology, they help employers to become savvy health consumers, to save health dollars and to better target health interventions to keep employees well. For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow Follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.

If you want to read more about how data can solve healthcare’s challenges, you may also like:

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5 Questions with HR Leader Bob Selle on Why Decisions and Data Go Hand-in-Hand

Photo: Getty Images

Photo: Getty Images

Wellbeing goes far beyond what many think of when they hear the word “wellness.”  And employers realize that employee wellbeing is a key building block to creating an engaged and productive workforce. 

Bob Selle, Chief Human Resource Officer of Ocean State Job Lot (OSJL) talks with our team at BetaXAnalytics (BXA) about the challenges employers face with respect to maintaining a “well” workplace, and how data allows them to achieve this. 

BXA: What challenges make it difficult to have a healthy workplace?

Selle: Keeping a heathy workplace is hard, and retail poses some unique challenges. Associates are so spread out geographically and being able to communicate and get the right message can be difficult. Helping the associates understand the "why" to living a healthy lifestyle is also a challenge. We strive to translate what it means to their quality of life when they make healthy lifestyle changes.  Lastly and most importantly, we need to tie pieces together so they understand all the individual links that fit in a wellbeing chain.  Wellbeing goes beyond physical activity and nutrition; mental health, sleep, finance, and stress are all individual parts that tie the chain together.

BXA: How does Ocean State Job Lot support a healthy workplace?

Selle: OSJL supports a healthy workplace through a number of activities.  First, we have best in class benefits offerings at a very low premium to our associates. We are all one family and we believe in sharing our profits and low cost, and offering quality healthcare is one way to do this. We also listen to our associates.  For example, our associates want to be active and also give back to their communities. So we will pay for their entry fee in local walks/runs. We work with partners who share our values and find ways to have fun challenges between the locations we serve. Eating right is a big deal so we partner with Chop Chop, a non-profit who helped us create recipe cards and menus we share on our communications portal. Understanding that caring for associates and their families means caring for their pets, we now offer pet insurance.  In addition to this, we provide life insurance for every associate who works 20 hours or more.  Supporting a healthy workplace means so much more to us than the obvious.  We want to prioritize providing the education and resources that can ensure our associates have the tools they need to be healthy.

BXA: Why is data-driven decision making important at Ocean State Job Lot?

Selle: Data is valuable because it takes the emotion out of the equation. I like to ask my team, “What is the story?”  Data can provide this in many ways. The story can be told in pictures or graphs, but the bottom line is that it's factual and actionable.  The traditional barriers to using data to drive decisions are access (people do not know how to obtain the data they need) and understanding (people do not understand how using data can help them to form better decisions.) Every company has limited resources, so it is important to be targeted in your approach to wellbeing in order for your efforts to succeed.  At OSJL, we want to be smart stewards of our finances to be able to provide the best benefits possible for our associates, while providing low prices for our customers; making data-driven decisions helps that to happen.

BXA: How does OSJL use data to support their spending decisions?

Selle: We use the data to ensure that we work with the right providers for our associates. For example, if we did not know that not having life insurance coverage was a stress for our people, we would never have invested in this. Data showed that our associates are more at ease if their pets had insurance, so we made a business case to offer this benefit. Lastly, we have learned from our data that those who work part time for a number of businesses may not have the resources if an emergency came up.  So OSJL provides a full service employee assistance program to ease the burden.

BXA: What does the future of wellbeing look like at Ocean State Job Lot?

Selle: The future of wellbeing for OSJL is two-fold. First, we are becoming “surgical” in our approach to using data.  We want to make sure the resources we are providing to keep employees healthy are aligned with our true cost drivers and needs.  Second, wellbeing is at OSJL will continue to be fun and rewarding. Seeing and hearing the stories of associates who have transformed themselves using the tools we provide is priceless. This is why I do what I do.

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Founded in 1977, Ocean State Job Lot is the Northeast's largest, privately held, closeout retail chain with 126 stores in New England, New York, and New Jersey; approximately 4,800 employees; and annual sales exceeding $650 million. Our company mission is to provide exceptional value to our customers through opportunistic buying and selling of quality brand name merchandise, and to share the resulting profits with stockholders, associates, and the communities in which we live and work. The Ocean State Job Lot Charitable Foundation has a long history of philanthropic leadership, placing emphasis on local food banks in communities where we operate stores. Ocean State Job Lot is headquartered in North Kingstown, RI.

BetaXAnalytics partners with employers like Ocean State Job Lot to use “data for good” to improve the cost and quality of health care.  By combining PhD-level expertise with the latest technology, they help employers to become savvy health consumers, saving health dollars and better targeting health interventions to keep employees well.  For more insights on using data to drive healthcare, pharmacy and wellbeing decisions, follow Follow BetaXAnalytics on Twitter @betaxanalytics, Facebook @bxanalytics and LinkedIn at BetaXAnalytics.