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Why High Deductible Plans Matter

Someone once showed me an analysis that demonstrated that the sum of workers’ salaries and benefits has stayed remarkably constant in real terms over the last two decades.  This means that companies have compensated for the increasing cost of health insurance over time by holding back on wage increases.

You can understand this.  After all, if companies are not able to increase the price of goods and services they sell to the public, they need to hold factor costs relatively constant.  So if it was costing them more and more to provide health insurance to their workers, an offsetting amount would have to be removed from possible wage increases.

This dynamic is still in place, but it is showing up in a different way, by shifting costs to workers in the form of higher deductible health insurance policies.  Deductibles are different from co-pays, where you plunk down $15 or $20 for each appointment or prescription.  With deductibles, you pay the first costs incurred as you and your family make use of the health care system, the entire cost of the office visit or of the prescription, until a preset amount is reached.  After that level is reached, you still pay the co-pays.  A recent story in the Washington Post documented this trend.

Currently, this kind of high-deductible policy is often combined with health saving accounts that are funded by the employer.  These accounts let patients buy medical services and drugs with pretax dollars.   So, although your insurance plan might require you to pay more of a deductible out of your own money, you could still use the HSA to cover those out-of-pocket expenses.

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