POLICY STATEMENT

High-Deductible Health Plans

abstractHigh-deductible health plans (HDHPs) are insurance policies withhigher deductibles than conventional plans. The Medicare PrescriptionDrug Improvement and Modernization Act of 2003 linked many HDHPswith tax-advantaged spending accounts. The 2010 Patient Protectionand Affordable Care Act continues to provide for HDHPs in its lower-level plans on the health insurance marketplace and provides for themin employer-offered plans. HDHPs decrease the premium cost of insur-ance policies for purchasers and shift the risk of further payments tothe individual subscriber. HDHPs reduce utilization and total medicalcosts, at least in the short term. Because HDHPs require out-of-pocketpayment in the initial stages of care, primary care and other outpatientservices as well as elective procedures are the services most affected,whereas higher-cost services in the health care system, incurred afterthe deductible is met, are unaffected. HDHPs promote adverse selectionbecause healthier and wealthier patients tend to opt out of conven-tional plans in favor of HDHPs. Because the ill pay more than the healthyunder HDHPs, families with children with special health care needsbear an increased cost burden in this model. HDHPs discourage useof nonpreventive primary care and thus are at odds with most recom-mendations for improving the organization of health care, which focuson strengthening primary care.

This policy statement provides background information on HDHPs, dis-cusses the implications for families and pediatric care providers, andsuggests courses of action. Pediatrics 2014;133:e1461–e1470

INTRODUCTION

High-deductible health plans (HDHPs) have been in existence for manyyears and were formally codified in 2003 by the Medicare PrescriptionDrug Improvement and Modernization Act (Pub L No. 108-173). Theyhave become more prevalent in recent years and continue to growrapidly. The early results of the Patient Protection and Affordable CareAct (ACA) of 2010 (Pub L No. 111-148) indicate that HDHPs will continueto proliferate. Therefore, it is appropriate for the American Academy ofPediatrics (AAP) to revisit HDHPs and their effects on health care forchildren. This policy statement seeks to enhance understanding of thebasic principles of an HDHP, to evaluate how this model comports withthe principles of the AAP in providing health care for children, and tomake recommendations as to how (and whether) an HDHP should beimplemented. Because research data on HDHPs are scarce on manypoints, as others have observed, “until better evidence emerges, policy

COMMITTEE ON CHILD HEALTH FINANCING

KEY WORDShigh-deductible health plan, Patient Protection and AffordableCare Act, health reimbursement arrangement, health savingsaccount, patient-centered medical home

ABBREVIATIONSACA—Patient Protection and Affordable Care ActAAP—American Academy of PediatricsHDHP—high-deductible health planHRA—health reimbursement arrangementHSA—health savings accountPCMH—patient-centered medical home

This document is copyrighted and is property of the AmericanAcademy of Pediatrics and its Board of Directors. All authorshave filed conflict of interest statements with the AmericanAcademy of Pediatrics. Any conflicts have been resolved througha process approved by the Board of Directors. The AmericanAcademy of Pediatrics has neither solicited nor accepted anycommercial involvement in the development of the content ofthis publication.

The guidance in this statement does not indicate an exclusivecourse of treatment or serve as a standard of medical care.Variations, taking into account individual circumstances, may beappropriate.

All policy statements from the American Academy of Pediatricsautomatically expire 5 years after publication unless reaffirmed,revised, or retired at or before that time.

www.pediatrics.org/cgi/doi/10.1542/peds.2014-0555

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Organizational Principles to Guide and Define the ChildHealth Care System and/or Improve the Health of all Children

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makers and employers will have touse the best available information andcommonsense strategies.”1

DESCRIPTION

For an existing HDHP to receive gov-ernmental approval, the plan musthave a minimum deductible for 2013 of$1250 for an individual and $2500 fora family, with total out-of-pocket ex-penses (not including the cost of pre-miums) not to exceed $6250 for anindividual and $12 500 for a family.2

Because pure HDHP policies coulddiscourage use of preventive services,to mitigate this effect, federal lawrequires HDHPs to cover basic pre-ventive services—well-patient visits,immunizations, screening tests, andBright Futures preventive services—with no deductibles and no copays.

An optional modification provided bythe law is the addition of either ahealth reimbursement arrangement(HRA), which can be applied to any typeof health insurance, or a health sav-ings account (HSA), which is applicableonly to an HDHP policy (Table 1).2 BothHRAs and HSAs consist of tax-freefunds that can be used to pay forout-of-pocket costs (except copays) notpaid for by the insurance plan. In 2013,HSA contributions are limited to $3250for self-only coverage and $6450 forfamily coverage. The mechanics of howfunds are withdrawn and how the costsare paid—for instance, by special-purpose debit card or conveniencechecks that draw down the account—vary depending on the plan.

An HRA is both funded and owned bythe employer. If the employee leaves

employment, the funds revert to theemployer, unless the employer opts tomake them portable. At the discretionof the employer, unused funds may becarried over from year to year.

An HSA is funded by the subscriber, theemployer, or both. The HSA account isowned by the subscriber, not the em-ployer, and can move with the sub-scriber in the event of job change orretirement. In addition, HSA funds canbe invested for interest or other gains,and those gains are not taxable. UnusedHSA funds can be rolled over into anindividual retirement account at age 65.

It is important to understand that if theHRA or HSA is funded by the employerat a sufficiently high level (“fully fun-ded”), patients will not actually sufferfinancial harm, compared with con-ventional policies (ie, preferred pro-vider organization, health maintenanceorganization, point of service, and in-demnity plans). Instead, these featureswill simply induce patients to makea market calculation in seeking carebecause the need to tap into the sav-ings account resource will be a muchmore palpable event as compared withthe invisible use of resources with con-ventional policies. It is not known howwell funded HRAs and HSAs have been,but common experience indicates thatfull funding of the accounts is unusual.The average HSA account balance was$1879 at the end of 2012; the averageHSA account balance for accountsopened in 2005 was $4688.3

HDHPs are becoming a more pre-dominant form of health insurance inthe United States as they are in-creasingly offered by employers and

chosen by subscribers. Although pre-ferred provider organization plansremain the most common offeringsby employers and cover more thanone-half of covered employees, a 2013report found that 20% of small com-panies and 40% of large companiesoffered an HDHP plan to its employees,and 20% of all employers offered HDHPplans as the only choice.4 Whereas in2006, only 4% of employees werecovered by HDHP plans, that numberis approximately 20% in 2013. Oneestimate is that 27% of HDHP enroll-ees are younger than 20 years.5 It isestimated that more than 5 millionpeople younger than 20 years are en-rolled in HDHP plans. The health in-surance marketplace, under the ACA,offers HDHP plans in the lower tiers,and the ACA allows HDHPs to continueto be offered by employers, so thenumber of patients covered by HDHPplans is expected to grow further.

Historically, enrollees who have cho-sen HDHP plans have representeda healthier, wealthier, and better-educated segment of the population.In one study, 64% of HDHP householdsdeclared themselves in excellent orvery good health, and 89% earned $50 000or more per year.6 Increasingly, how-ever, HDHPs are being offered bycompanies with a predominance oflow-income workers. In 2012, 44% ofcovered workers at companies withmany low-wage workers faced anannual deductible of $1000 or more,compared with 29% at firms with manyhigh-wage workers. Across all employ-ers, 34% of insured workers faceda deductible of at least $1000, with 14%required to pay a deductible of at least$2000 annually.7 Some plans exceed thefederal limits for copays or deductiblesand are, thus, ineligible for adding theHRA or HSA features; whether theyconform or not, however, all HDHPplans have the effect of shifting liabilityfrom the insurer to the insured.

TABLE 1 Comparison of HRAs and HSAs

Plan Tax Savings Funded by Annual Rollover ofUnused Funds

Portable

HRA Yes Employer At the employer’sdiscretion

At the employer’sdiscretion

HSA Yes (funds may beinvested and earninterest tax free)

Employers and/oremployees

Yes Yes

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HDHPS: FOR AND AGAINST

HDHPs represent a market-based ap-proach to one segment of health care:the initial stages of care. In evaluatingthis approach, it is necessary to look atthe detailed effects of HDHPs in prac-tice as well as theory. Because of thescarcity of research data, it is neces-sary to use inferences and commonexperience of participants in the fieldas well as research findings.

For HDHPs

The rise in health care costs has placedunremitting pressure on employers,who remain the primary purchasersof health insurance products, and onindividual purchasers as well. HDHPsoffer a simple way to reduce the cost ofpremiums.

There have been many ideas for healthcare reform that would reduce totalcosts, but many of these ideas wouldbe complex to enact, would require thecooperation of many who have vestedinterests and might be at financial riskfrom the reforms, and would requirelegislative authorization. By contrast,HDHPs are simple to implement, re-quiring the agreement of only the in-surance company and the purchaserand no other stakeholder. In addition,legislation authorizing tax exemptionfor HSAs and HRAs was enacted in2003. Simplicity of implementation is,no doubt, one of the most attractiveaspects of HDHPs.

Employers, employees, and individualsubscribers welcome the lower pre-mium level of HDHP plans. Patientstend to accept HDHP deductibles andcopays as familiar features, althoughthe levels are higher than in conven-tional plans. Employees tend not tomake the calculation that the financialrisk of illness is being transferred tothem from the insurer and the busi-ness owner. (As HDHP subscribersincreased from 2007 to 2011, “Totalper capita spending on employer-

sponsored insurance grew at an av-erage annual rate of 4.9 percent …[and] out-of-pocket medical spendingincreased at an average annual rateof 8.0%.”8) Both individual subscribersand employees who are confident oftheir ability to make medical choicesand to withstand the financial riskmay find HDHPs a reasonable choice,especially if linked to an HSA or HRA.Even if they are not confident of theircontinued good health or medicalnavigational skill, subscribers of mod-est means can find the HDHP premiumtheir only affordable choice and mayjudge running the financial risk ofHDHPs preferable to being uninsured.

In addition to these practical consid-erations, HDHPs have been justified ona theoretical basis. With conventionalprivate insurance, patients are shiel-ded from the financial effect of theirpurchases when they seek care at theearly stages of illness. As a result, pa-tients may use more of the servicesthan they would if they had to pay theactual cost of the services. By contrast,HDHPs require a family to confront themarket price of health care services atthe point of purchase—a primarycare or specialty visit, a laboratorytest, or a hospitalization. With “skin inthe game,” it is hypothesized thatpatients will have incentive to seekless care for minor reasons, to seekmore high-quality and low-cost ser-vices, or perhaps to adopt a healthierlifestyle (eg, exercise more, lose weight,improve nutrition, abstain from or re-duce smoking and alcohol consump-tion) to avoid medical expenditures.Because of the patient’s direct expo-sure to the financial consequences ofseeking care and his or her expectedresponses to this burden, HDHPs havebeen called consumer-directed healthplans.9

There is evidence that patients withHDHPs do consume less health carethan those in other plans.10–13 Patients

with HDHPs are prescribed genericdrugs more often than other patients,make fewer visits to specialists, areless frequently hospitalized, and havefewer visits to doctors for episodes ofillness and make fewer visits withinthose episodes.12 HDHPs seem to re-duce overall health care costs sig-nificantly.12 How much the employersaves on HDHP policies depends onboth the level of HRA or HSA fundingand the utilization behavior of thepatients. It seems clear, however, thattotal employer costs of HDHP plansare less than with conventional plans.

There is ample anecdotal evidencefrom knowledgeable consumers, es-pecially medical professionals, thatHDHPs have worked well for theirpersonal health care insurance. Theyhave been able to save money in-dividually and for their office staff/personnel as they advise them onhealth care decisions, by canny utili-zation of the system. When they avoidvisits for minor illnesses or avoid teststhat seem to be an overreach of care,money accumulates in their HSA ac-counts. When their families are healthy,they reap the reward. Their above-average wealth allows them to with-stand the risk of unexpected ex-penditures for illness. Although lesssophisticated consumers may not beable to make such decisions, the HDHPmodel works for many in this specificgroup.

Against HDHPs

While acknowledging the success ofHDHPs in reducing expenditures, atleast in the short term, critics of HDHPsfind many flaws with the HDHP strategy.

Appropriateness of PreferentiallyDecreasing Initial and Lower-CostCare

Although most agree that cost re-duction in the American health caresystem is essential, HDHP critics insist

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that constraining “first-dollar” expen-ditures by excluding these costs frominsurance support, while leaving thehigher-cost items covered and thusunconstrained, is a poor choice. Vir-tually all policies today have deduc-tibles, but the expanded level of thedeductible under HDHPs means thata majority of patients will find all theirprimary care costs to be fully out-of-pocket (except for preventive visits),along with costs that flow from pri-mary care encounters, such as tests,imaging services, medications, andspecialty office visits. In addition, be-cause of the higher deductible limit,many procedures will now be encom-passed in the out-of-pocket domain,such as hernia repairs, tympanostomytube placement, and even proceduressuch as pectus excavatum surgery.

The reason the American health caresystem is so expensive, however, is notgenerally considered to be expendi-tures in the low-cost sector, whichrepresent the majority of encounters.Hospitals, procedures, prescriptiondrugs, and imaging are generallyconsidered the major culprits of the

high cost of medical care, rather thanordinary office services. Increasingly,health policy analysts are assigningthe high cost of care to high priceseven more than high utilization.14 TheHDHP focus on the low-cost segmentof care would thus appear to bemisplaced.

Moreover, a significant amount ofcosts are incurred by a small per-centage of high-cost patients. “Nearlytwo-thirds of health care costs areconcentrated in 10% of patients, so tocontrol costs, the focus needs to be onthese patients, not the 50% of thepopulation that is relatively healthyand uses just 3% of the health caredollar”15 (see Fig 1). A way to decreasecosts for these patients would be tosupply more initial and primary care,not less.16

The conclusion, then, would be thatalthough cost reduction is important,a better solution than curtailing costsat the low end would be curtailing costsat the high end and with high-intensityusers, which are exactly the areas inwhich deductibles are ineffective.

Lack of Concurrence Between HDHPsand the National Strategy on HealthCare Organization

Most health policy experts agree thatthe United States suffers from in-sufficient primary care and a surfeit ofspecialty care.17,18 Evidence also in-dicates that primary care should bethe foundation of a highly functionalhealth care system.19 Primary careis widely thought to be an essentialservice that, if well-used, saves moneyfor the system. Prescriptions forwaste reduction in the medical caresystem generally exempt primary careand have never targeted primary carefor children.20 Although studies havenot shown great savings from pre-ventive services, it is reasonable toassume that primary prevention andearly detection of disease decreasemorbidity and associated costs. It isalso widely assumed that having aready source of primary care pre-vents excessive use of emergency de-partments.21,22 Starfield asserted that“Several international studies haveconfirmed the importance of … low

FIGURE 1Cumulative distribution of personal health care spending, 2009. Reproduced with permission from National Institute for Health Care ManagementFoundation analysis of data from the 2009 Medical Expenditure Panel Service.

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or no cost sharing for primary careservices.”23

One policy response to the need forbuttressing primary care has been thepatient-centeredmedical home (PCMH).24

The PCMH is essentially a strengthenedprimary care office with highly per-sonal care, greater nurse outreachand team care, an emphasis on pre-ventive services and patient registries,education about self-care, and guid-ance and coordination through themedical care system. The AAP supportsthe PCMH model and believes that theactivated primary care office will be animportant component of improvedhealth care organization.25

There are many potential negativeeffects, however, that HDHPs couldhave on the strategy of increasing thecapacity of American primary care.HDHPs reduce the resources that couldand should be invested in primarycare; fewer resources expended in asector will inevitably lead to its deg-radation. The PCMH strategy requiresmore resources rather than fewer. Inaddition, it is widely recognized that 2prime deterrents to choosing a careerin primary care are the imbalance ofspecialty/primary incomes and thedifficulty of managing primary careoffices. HDHPs only exacerbate both ofthese influences (see next section).

Specific Effects on Primary Care

Although HDHPs affect more than justprimary care, primary care is perhapsunique in its reliance on relativelysmall payments for a large number ofpatients as well as the absence ofhigher-priced procedures. Expandingthe deductible to HDHP levels makesnearly all primary care visits through-out the year (except for preventivevisits) subject to out-of-pocket pay-ments. HDHPs will, thus, have a uniquelyheavy effect on primary care (as well ascognitive specialty services), making itimportant to define the effects.

As rational consumers, families con-fronted with high deductibles will oftensearch for strategies to minimize theirout-of-pocket expenditures. They mayforgo visits and access information ofquestionable reliability from sourcessuch as the Internet, neighbors, andthe like. They may attempt to substitutetelephone conversations for face-to-face visits. They may postpone neededconsultations in an effort to addressconcerns only at well-child visits thatare exempt from deductibles. They maydecide not to accept physician rec-ommendations for testing or referralsor for follow-up visits to monitor theprogress of a disease process. Theseconsumer tactics will affect both healthoutcomes and processes for patients aswell as the operations of the primarycare office. In addition, postponementof visits can contribute to the physi-cian’s risk of the most common out-patient malpractice complaint—failureto diagnose serious disease early.26

Even though HDHPs offer full coverageof preventive visits without referenceto the deductible, HDHP patients tendto stint on preventive care, includingimmunizations.10 It is reasonable tobelieve that early detection of diseasesuffers, although there have been nostudies on that important subject.Continuity of care and the doctor–patient relationship suffer as primarycare visits are discouraged and ef-forts to fulfill the requirements ofPCMHs are eroded. Even if a visitwould not have revealed serious ill-ness, the calming effect of reassuranceto a worried family is part and parcelof excellent medical care, frequentlynot only allaying anxiety but alsoaverting further use of medical re-sources, and to the extent that thesevisits are discouraged, an essentialfacet of medical care is undermined.

In addition to the effects of HDHPs oncare itself, HDHPs also impede thefunctioning of a pediatric primary care

office. Although the literature mightnot explore these specifics, they arereadily apparent to practicing physi-cians. Substituting telephone calls foroffice visits increases practice over-head and decreases income. Exces-sive discussions of costs increase visittimes and, thus, overhead, a point thatadvocates for spending time discus-sing finances with patients ignore.27

Bundling sick visits into preventivevisits increases the time per visit andmay decrease the quality of either thepreventive service or the illness ser-vice or both, and it is difficult for theoffice to receive payment for this ex-tra service, despite it being warrantedby Current Procedural Terminologycoding rules.

Finally, it is common experience thatbilling costs and bad debts are exac-erbated by HDHPs. It is usually im-possible to know how much a patientwill owe for a visit at the checkoutstation because insurance companyWeb sites are most often problematicin delivering information that includesboth the allowed charge and the de-ductible remaining. The method ofaccessing an HRA or HSA account isoften opaque. Repeated billings areoften necessary, with the attendantoverhead, and patients are not in-frequently unwilling to pay once theyare away from the office and theservice, and they are angry that theirsubstantial premiums do not cover alltheir medical bills. Although some ofthese factors apply to all insurance, withHDHPs, they recur throughout the year.

Effects on Those Not ChoosingHDHPs—Adverse Selection

HDHPs promote adverse selection tohealth insurance pools as healthierpatients gravitate toward the lowerpremium price HDHP plans, leavingconventional private plans with dispro-portionate numbers of sicker, higher-cost patients. As a result, patients in

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conventional plans will pay higher pre-miums because patients opting forHDHP plans will not be contributing fullyto the common pool.

Quality of Care With HDHPs

Although the previous discussion hasincluded observations of quality ofcare, it seems appropriate to reiteratethese effects here. Once again, a lackof studies hampers this effort, butinferences can, nonetheless, be made.Patients frequently make poorly in-formed decisions in the medical caremarketplace. Many of the reductions incare, not only office visits but also testsand consultations, hospitalizations,emergency care, and use of genericdrugs in some cases, may be un-warranted.28 One study has shownthat patients of modest means post-pone visits to emergency departmentsfor serious illnesses.28 This phenome-non is especially pronounced inmales.29 A report on Medicare patientshas shown that increased cost-sharinghas led to decreased physician visitsand prescriptions but also to a higherrate of hospitalization.30 Pediatric sur-geons report informally that manypatients defer elective but importantprocedures because of cost under anHDHP plan (personal communication,Mary Brandt, MD, professor of surgeryand pediatrics, October 12, 2013). Con-tinuity of care and the doctor–patientrelationship suffer as primary carevisits are discouraged under HDHPs,fewer patients receive preventive care,and fewer patients are fully immu-nized.12 The ability of PCMHs to fulfilltheir mission is undermined. It standsto reason that with increased barriersto seeking initial care, some diagnosesand treatments of illnesses will bedelayed. Haviland et al, advocates ofHDHPs (referred to as consumer-directed health plans), concede that“for all populations, enrollment in[consumer-directed health plans] …

leads to reductions in care that is

considered beneficial.”13 In short, thereare many reasons to think that HDHPsdecrease quality of care and few tothink that they increase it.

HDHPs and Market Mechanisms

HDHP critics question whether marketmechanisms are capable of achievingthe outcomes that HDHP advocateswould wish. Many patients agree withthe critics and think that shopping forhealth care is confusing and inap-propriate.31 There appear to be manydiscrepancies between theory andactuality.

A well-functioning market requireswell-informed consumers to makerational choices, but many believe thatthe highly specialized nature of med-ical decision making, coupled with theprofound information asymmetriesand uncertainties that characterizethese interactions, undermine theability of market mechanisms to ef-fectively function as expected.32 Cer-tainly, urgent situations are notcompatible with “careful shopping,”and the emotional distress accompa-nying acute illness often compromisesrational decision making.33

Although in the aggregate, patients inHDHPs consume fewer health care re-sources in response to higher out-of-pocket expenditures, whether thisconsumption pattern is beneficialremains an open question, as the pre-vious discussion of quality of care un-der HDHPs illustrates.

There is some evidence that patientstend to equate higher price with higherquality.34 One study indicated thatwhen confronted with a complicatedbenefit structure, patients often makesuboptimal choices.35 An example ofthis situation is that 80% of patientswith HDHPs are unaware that theirpolicies mandate coverage of pre-ventive services free of the deductibleor copays (supplying at least part ofthe explanation for poor prevention

and immunization statistics underHDHPs).36 Patients with chronic ill-nesses forgo care because of cost.37

Poorer families choose to forgo caremore often than families with higherincome.38

Market mechanisms depend criticallyon price signals for consumers to beable to make market decisions, but fewprices from clinicians, laboratories, orspecialized and diagnostic servicesare publicly available online or even byrequest to the office.39 Indeed, pricesnegotiated between practices andhealth plans are confidential by theterms of the contract. In addition, theprice of a visit is uncertain before-hand, because the level of the servicerendered by the physician cannot bepredicted. On the other hand, becausegeneric drugs are used more fre-quently and tests and hospitalizationsare used less frequently than withconventional plans, one can surmisethat when the primary care physicianis involved in the decision making,costs can be alleviated. EconomistVictor Fuchs commented, “The idea ofsick patients shopping for the lowest-price medical care … is a fantasy.”40

Finally, critics of HDHPs suggest thatbecause patients lack medical knowl-edge, one of the most importantfunctions of the primary care physi-cian is to guide the patient in choosingamong health care options. Thus, itwould seem counterintuitive to en-courage laypeople not to use the pro-fessional knowledge and judgment ofa primary care physician, especiallywhen a primary care visit is perhapsthe least expensive encounter in theentire spectrum of health care services.

Aspects of HDHPs That ApplySpecifically to Children

In health care financing, as with pe-diatric health care, children are notsimply smaller adults. Unfortunately,there is little research on the specific

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effects of HDHPs on children. None-theless, certain features of these planspose significant concerns.

Families with small children tend to behigh users of primary care services.As such, HDHPs would seem to beparticularly inappropriate for them.Because young families are oftenstruggling financially, they will beparticularly prone to choosing thelower-premium HDHP plan but then betorn whether to make a visit for a sickchild. As noted earlier, the statistics oflower use of preventive visits andlower immunization rates is sobering.

Pediatrics places special emphasis onchildren with special health care needs.These children and their families arespecifically disadvantaged by HDHPs. Ifthe family is insured by an HDHP, theywill experience higher health care coststhan under conventional insurance. Ifthey instead obtain conventional in-surance, the premiums and paymentsthey face will be higher because ofadverse selection—that is, patientswithout special needs will be payingless into the common pot.

In addition, some have suggested thatthere might be legal and ethical as-pects to enrolling children in HDHPs.Although adults may be free to takechances with their own lives and healthcare, the state has a recognized func-tion in protecting children. There isa risk in delaying health care that isexacerbated by financial considera-tions. It is possible for adults to delayseeking care for their children thatturns out to have been necessary.Foreseeing this situation, it might be inthe state’s interest to disallow HDHPsfor children.

Finally, health care for a child costs, onaverage, about half that for an adultyounger than 65 years and approxi-mately one-quarter to one third thatfor a Medicare patient. The problemsof the excessive cost of Americanhealth care can hardly be attributed to

children. It would seem to make sense,then, to save money on children’shealth care only where it is clearlyineffective and inefficient. That publicpolicy in America favors adults andthe elderly over children has beenwell documented; saving on healthcare of children while the bills of theelderly are unconstrained would seemto be foolish.

The Flow of Resources Within MedicalCare Sectors

A subtle point of economic theory isworth mentioning. If HDHPs put pres-sure on initial care, but there is nosuch force on the higher-cost itemsexperienced by higher-intensity patients,commercial innovation and researchwill favor the area where funds flowmore freely. Costs will thus not beconstrained in the areas where theymost need to be, and less effort will bespent on innovation in primary care,which already lacks sufficient attention.

Disparities

Disparities in access, service, andoutcomes have been a persistentconcern of the AAP and health policyanalysts. It is therefore important toreflect on the effect of HDHPs on dis-parities. If an HDHP plan is linked toa highly funded HRA or HSA, thereshould be little difference in accessbetween HDHPs and conventional plans.To the extent that the HRA or HSA is lesswell funded, however, patients whoexperience high costs and patientswho have lower income will experiencea higher percentage of their incomesdevoted to health care. In some states,the coverage envisioned under the ACAcould be as high as 8% to 27% of in-come for a family of 4 whose income is200% of the federal poverty level.21

Although income effects are not theonly cause of disparities, the effectsof HDHPs will be to exacerbate theeffects of disparate wealth, both by

making HDHP policyholders less ableto seek care and by making the pre-miums of conventional polices moreexpensive because of adverse selection.

To be more clear: even under the ACA,patients with low incomes—either100% of the federal poverty level or lessor 133% of the federal poverty level orless (depending on the state)—will beeligible for Medicaid. Their access tocare will not be limited financially,although it will be constrained by thenumber of providers accepting Med-icaid patients. For patients who haveprivate insurance, the difference inability to obtain care will depend onthe level of their incomes. Higher-income patients will be only some-what impeded by financial constraints,but those who are just over theMedicaid-eligible line will find the fi-nancial constraints more daunting. Inother words, it will be the people in themiddle, those “just making it” finan-cially, who will feel most strongly thetension of balancing worry over neededcare with worry over money. The con-clusion, therefore, can be drawn thatHDHPs not accompanied by fully fundedHRAs or HSAs contribute to disparity ofaccess to care on the basis of income.28,38

SUMMARY

HDHPs are an understandable re-sponse by the insurance industry andemployers to the rising cost of healthcare. The major effect of HDHPs is toincentivize patients to balance theperceived need for initial care againstthe cost before the deductible is met.HDHPs have led to lower expenditureson care by their subscribers. Sophis-ticated medical care utilizers andhealthy and higher-income patientscan save significant amounts of moneyunder HDHPs. High funding by employersof HRA and HSA plans can ensure thatpatients as well as employers benefit.

Critics point out that the lower-cost sec-tors of health care are less important for

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cost savings than higher cost areasthat are unaffected by HDHPs; thatlower-cost patients are affected byHDHPs, but higher-cost patients aremore of a cost problem; that primarycare is affected negatively by HDHPs,which goes against established healthpolicy goals; that health care qualitymight be negatively affected by HDHPs;that health care disparities may beaccentuated by HDHPs; that using amarket mechanism to induce morepatient choice might be inappropri-ate; and that HDHPs might be par-ticularly inappropriate for children,who are a lower-cost population thanadults and who are large utilizers ofprimary care.

RECOMMENDATIONS

The AAP cautions that HDHPs may bea less desirable way to lower healthcare costs than other means that canbe found, even if “other means” re-quire more work by government,insurance companies, and otherhealth policy participants. Consider-ation should be given to mandatingthat HDHPs be offered only to adultsand not children.

Benefit Design

1. HDHP policies should permit a gener-ous number of primary care visitsto be allowed without the deductibleeach year or that outpatient visitsbe exempted from the deductible,as is proposed by the BipartisanPolicy Center for Medicare patients.41

A list of other important and benefi-cial services and procedures usuallyprovided by medical subspecialiststhat would be exempted from HDHPdeductibles should be compiled.Examples might be insertion of tym-panostomy tubes, appendectomy, andreduction and casting of fractures,for instance.

2. If children are to continue to beoffered HDHP coverage, insurers

should define children with certaindiagnoses as “children with specialneeds” using the Maternal and ChildHealth Bureau’s definition, and elim-inate the burden of a deductible forthese children.

3. HSA and HRA health savings ac-counts should be required to befunded at high levels by the pur-chasing employers.

4. All elements of the PCMH should beincluded in the plan benefit pack-age and paid, without applicationof the deductible, appropriate tothe relative value units, includingtelephone and electronic commu-nication services. Insurers shouldcover and pay appropriately for allservices described by the CurrentProcedural Terminology manual.

Insurance Company AdministrativePolicies

1. Insurance companies issuing HDHPpolicies should be required to de-vise procedures so that medicaloffices can easily and rapidly de-termine the complete bill of thepatient at the time of a visit, en-abling the office to try to pursueproper collection from the patientat the time of the visit.

2. Patients with HSA and HRA ac-counts should be issued debit orcredit cards that allow medical offi-ces to access the accounts at thetime of service.

3. Because practices will incur signif-icant additional overhead costs inadministeringHDHPs, insurance com-panies should compensate practicesfor those costs. One alternativewould be to pay practices per-patient-per-month overhead allow-ances.

4. Insurers should take positive stepsto emphasize the importance ofpreventive visits to its policyhold-ers and to inform them that suchservices are not subject to the de-

ductible or copays. Plans shouldbe held responsible for continuallyassessing the completeness of pre-ventive services utilization by itspolicyholders and to take appropri-ate steps as conditions warrant.

5. Because of the complexity of HDHPplans, especially when one consid-ers that each company would haveits own specific rules and proce-dures, insurance companies shouldensure that they enable bothpatients and providers to under-stand provisions. Handouts forthe offices and Web site explana-tions should be available in realtime. Insurance companies shouldhave specifically assigned repre-sentatives for each office for gen-eral issues and should be able todeal with problems in real time,and insurers should facilitatetraining of office staff membersin handling HDHPs. Materials forpatients should specifically counselpatients not to stint on primarycare services, especially preventiveservices.

Actions by the Primary Care Offices

1. A staff member in each officeshould be knowledgeable enoughabout HDHPs to be able to explainthe concept and the details to a po-tentially confused patient. Patienthandouts describing HDHPs andespecially the fact that preventivecare is not subject to copays ora deductible would be helpful.

2. Offices should continue to givefeedback on problems with HDHPsto the AAP by using the Hassle Fac-tor forms (available online at MyAAP at www.aap.org/moc, see MoreResources).

Alternative Cost-ReductionStrategies

1. Policy makers should continue to de-vise alternative strategies that will

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reduce costs in ways that do notnegatively affect primary care. Exam-ples include reduction of high pricesrather than utilization, particularlyof hospitals, procedures, pharma-ceuticals, and medical devices42; of-fering incentives and support topractices to serve high utilizers withintensive primary care; increasinguse of hospices and decreasing useof ICUs for end-of-life care; promotingaccountable care organizations; pro-moting centers of excellence43; devel-oping further value-based insuranceplans; increasing use of publiclyreported physician report cardsfor both primary care and spe-cialists issued by independentpractice associations as well ashospitals and medical groups;

enacting tort reform; and manyother strategies.44,45

Legislation

1. State governments should takesteps to make the knowledge ofprices for services at various insti-tutions readily available to the pub-lic and primary care offices.

2. The federal government shouldconsider restricting HDHP plansto those older than 18 years.

Research

1. Significant efforts to study theeffects of HDHPs, especially on chil-dren, should be made. The poten-tial foci of research are multifoldand deserving of a report solely

devoted to the topic of the specificneeds for research on HDHPs.

LEAD AUTHORBudd N. Shenkin, MD, MAPA, FAAP

COMMITTEE ON CHILD HEALTHFINANCING, 2013–2014Thomas F. Long, MD, FAAPSuzanne Kathleen Berman, MD, FAAPMary L. Brandt, MD, FACS, FAAPMark Helm, MD, MBA, FAAPMark Hudak, MD, FAAPJonathan Price, MD, FAAPAndrew D. Racine, MD, PhD, FAAPBudd N. Shenkin, MD, MAPA, FAAPIris Grace Snider, MD, FAAPPatience Haydock White, MD, MA, FAAPMolly Droge, MD, FAAPEarnestine Willis, MD, MPH

STAFFEdward P. Zimmerman, MS

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