This was published as a Wall Street Journal Think Tank column on January 15, 2015.
Like a quiet revolution in health insurance, deductibles have been steadily increasing for many years. But a mountain was made out of a mole hill when Harvard University’s plan for employees to pay modest deductibles and other forms of cost sharing kicked off a firestorm at the university and a broader discussion about whether Harvard was somehow affirming conservative principles by giving its employees a little more skin in the game.
As the chart above shows, the cost sharing instituted at Harvard was modest by any reasonable standard. Harvard employees now pay deductibles of $250 for single coverage. The average deductible for employer-based insurance is $1,217 for single coverage and $2,563 for the “silver plan” most commonly selected in the Affordable Care Act insurance marketplaces. Many people in the marketplaces do, however, receive subsidies that offset their cost sharing.
But some people get cost-sharing subsidies at Harvard as well. Harvard has a subsidy program that cushions employees earning less than $95,000 a year from excessive cost sharing. It also operates a progressive premium contribution program, with premiums tiered by salary level. Overall, Harvard’s plan covers about 90% of the costs of employee health coverage. Very few employee health plans in the country are as generous and progressive.
Some observers assumed that Harvard’s health economists, or at least some of their ideas, were behind the move. I would bet that the health economists at Harvard were not handed the reins by top administrators and the university’s large human resources staff to determine health benefits policy. As respected as Harvard’s health economists are, large universities are also major employers and while they might solicit input they do not shift benefits decisions to faculty.
Harvard was doing what many, if not most, employers do: increasing cost sharing a little in a given year to avoid a larger premium increase. It’s the only tried-and-true way employers have to hold down premium increases, and it’s one reason that deductibles and other forms of cost sharing are rising.
We need a broad and substantive national discussion about the changes occurring in health insurance and the growth of high-deductible plans. Some cost sharing is an appropriate part of a health insurance plan. The question is: When does cost sharing get so high that it endangers economic security, access to care, and health, especially for people who are sick and need more care?
But Harvard’s change is a very small-scale version of a much larger transition from more to less comprehensive health insurance playing out in workplaces across the U.S. Harvard is not the canary in the coal mine on deductibles and cost sharing; it’s barely a lagging indicator.