Health Insurance Health Reform HSA

ASSA 2016: How do high-deductible health plans affect spending levels?

Are high deductible health plans (HDHP) the holy grail for reducing cost? If so, how do consumers go about reducing cost, by reducing all utilization or shopping around for better prices? This is the research question that Ben Handel presented at 2016 ASSA meetings. He uses data from a large firm with 35,000-60,000 employees and 100,000-200,000 lives that went from largely a PPO plan to an HDHP for almost all its workers.

The study–titled “What Does a Deductible Do? The Impact of Cost-Sharing on Health Care Prices, Quantities, and Spending Dynamics“–finds that HDHPs did significantly reduce cost. Annual cost fell by 12-14% reduction of health care spending. Further, even the sickest individuals—those who were very likely to meet the out-of-pocket maximum in the given year—reduced cost.

How did the consumers reduce price? Did they shop around or just reduce cost. The study finds that cost changed because:

  • Provider price changes: +1.2%,
  • Consumer price shopping: +3.6%
  • Consumer quantity reductions: -17.9%
  • Quantity substations: -2.2%

In summary, producers increased prices by a standard amount. Consumers were bad price shoppers in that they went to higher cost providers (conditional on a given CPT code). It is unclear if this is due to the opacity of health care prices, the sensitivity of talking about price with your doctor, whether consumers believe cost is positively correlated with quality, or some other factors.  Cost saving was due almost entirely to reduced quantity of care and doing cheaper treatment versions of available care.

The sickest consumers even reduced the quantity of services by 20%, even though they were likely to meet the out of pocket maximum.  Most of this savings, however, occurs in months where patients began the month under the out-of-pocket maximum; in month’s where the out-of-pocket maximum had been reached, however, there is not cost reduction.


  1. With respect to consumer’s price shopping, how do the authors control for quality or convenience? As a layperson, that would be a big question before concluding that people are bad shoppers.

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