Is There an Alternative to the High-Deductible Health Plan? Glad You Asked.

For more than two decades, employers and health insurers have promoted the idea that healthcare consumers must have “skin in the game” through high-deductible health plans (HDHPs).

HDHPs caught on quickly. But all that skin in the game has meant out-of-pocket costs that are so high that many people skip care, says Brooks Deibele, enterprise sales leader for employee benefits at Holmes Murphy & Associates, an insurance broker in Minneapolis. In 2023, for example, someone buying a high-deductible plan on the federal marketplace that complies with Affordable Care Act rules could have an annual deductible of up to $9,100. For a family, the deductible might be as high as $18,200, according to HealthCare.gov.

But now the pendulum is swinging in the other direction, according to Deibele. A growing number of employers are buying so-called alternative health plans, many of which do not have high deductibles and reduce or eliminate copayments altogether.

“The person making an average wage and facing a deductible of $5,000 or $6,000 every year doesn’t use the healthcare system appropriately,” says Deibele. “Designing a plan that removes some of those barriers forces people to become true healthcare consumers.”

Moreover, these alternative health plans cost employers 10% to 15% less in premiums than traditional coverage, according to Deibele. Any type of health plan that offers coverage for less than what traditional health insurers charge will be attractive to employers looking to lower healthcare costs, notes Suzanne Delbanco, Ph.D., M.P.H., executive director of Catalyst for Payment Reform, a nonprofit organization in Berkeley, California, that promotes value-based care.

One way that alternative health plans keep costs down is by using data on the quality and cost of healthcare that physicians and hospitals provide and then adding financial incentives to steer members to the best and most cost-effective physicians and hospitals. Some consultants, however, question whether the plans can yield savings over the long term.

Yet in August 2022, UnitedHealthcare announced that Surest, its alternative health plan offering, was the fastest-growing plan among its self-insured employers. More than 150 employers in 16 states were enrolled in Surest plans, according to UnitedHealthcare. Surest was previously known as Bind. Stacy Hintermeister, MBA, senior vice president of marketing for Surest, says the plan has no deductibles or coinsurance and that out-of-pocket costs for employees drop by as much as 44%. In addition, employers save 15% on premiums compared with traditional health plans, according to Hintermeister.

Other alternative plans include Coupe Health LLC, which is being offered by Blue Cross and Blue Shield of Minnesota. Five years after Coupe was founded in 2016, it acquired SimplePay Health, another alternative plan, from Holmes Murphy & Associates. Gravie, a health benefits company in Minneapolis, has an alternative plan called Comfort. And Centivo, an alternative health plan administrator in Buffalo, New York, says it saves its employer clients 15% to 30% compared with traditional health coverage. Employees get free primary care, predictable copayments and coverage without a deductible, according to an announcement from Morgan Health, a division of JPMorgan Chase & Co. Bloomberg News reported that Morgan Health has invested $30 million in Centivo. JPMorgan started Morgan Health in 2021 to replace Haven, the joint healthcare venture that JPMorgan formed with Amazon.com Inc. and Berkshire Hathaway Inc. that closed early in 2021.

Pursuing lower costs

It’s striking that two traditional health insurers — UnitedHealthcare and Blue Cross and Blue Shield of Minnesota — have ownership stakes in alternative health plans, says Delbanco. “To me, that just shows that they’re getting scared about the competition,” she adds.

A rising proportion of insured Americans cannot afford their deductibles, leaving many people burdened with medical debt, Delbanco notes. “Health insurers have been unable to keep prices down, and there’s no correlation between the prices we pay and the quality of care that people get,” she says. “For all these reasons, the traditional health insurance model isn’t working for a lot of people.”

Deibele agrees, noting that traditional insurers are watching the trend of alternative health plans closely.

Distinguishing features

Alternative health plans are using data to identify efficient providers that deliver high-quality care (see sidebar, “How two alternative health plans assess provider quality and cost”). By linking such data to financial incentives, the plans can steer members to better and more efficient physicians and hospitals, Delbanco says.

“Twenty years ago, I couldn’t tell you if a provider was low quality, high cost or high quality, low cost,” Delbanco notes. “But now, even if the data aren’t perfect, there are data these companies can mine to keep costs down. Then workers can choose providers that have a track record for being efficient and following guidelines, all of which can save a lot of money.”

Traditional health plans have long offered various healthcare navigation and shopping features to members and extended financial inducements to employees to go to low-cost, high-quality physicians and hospitals. But these alternative health plans go a step further by reducing employees’ out-of-pocket costs when they choose the best providers, with “best” defined as some combination of cost and quality metrics.

For example, before members choose a provider, Surest presents the actual prices members would pay for more than 490 healthcare services. When those members choose high-quality providers, more than half get the lowest price for hip replacement, reflux surgery or other procedures, according to Surest. “It may feel like it’s an alternative, but Surest is just like we shop for
everything else,” Hintermeister notes. “Ultimately, what people want is a better health plan, better benefits, and they want to save money.”

Some alternative plans pay providers directly, shifting that responsibility from workers and saving physicians and hospitals from having to chase consumers for payments. At least two alternative plans provide low-cost or no-interest loans so that workers can make payments over time for any costs the plans don’t cover.

Costs disclosed upfront

By eliminating deductibles, Coupe Health can tell members when they choose providers how much the plan will pay and how much is their responsibility in terms of copayments, says Wally Gomaa, M.H.A., MBA, who co-founded SimplePay Health. For example, if a member requires hospital care with a high copayment, the member might need to pay several hundred dollars depending on the service required, he explains. “For many families, an out-of-pocket cost of $400 or more is unaffordable,” he says, adding that a no-interest line of credit from Coupe Health allows those members to avoid using a credit card with a high interest rate for the copayment. For each covered procedure, Coupe Health uses physician and hospital performance data to rank providers on three levels: The red level is OK; yellow, better; and green, the best.

Christopher Fanning, president of commercial markets for Blue Cross and Blue Shield of Minnesota, explains how these tiers affect payment. “A primary care visit might cost a member $10 to go to a green physician, $30 for yellow, and $50 for red,” he says. “Once you make a selection, there’s price certainty and an incentive to choose a higher-quality provider because you’ll pay less out of pocket.”

Employers’ overall costs for Coupe Health are about 14% lower than what they would pay for a traditional plan, Gomaa says, and savings for workers come out to about the same percentage. Coupe Health contracts with administrative service organizations to pay providers directly for the cost of care and workers pay their employers for their remaining share of the cost.

In addition, Coupe Health contracts with a bank to provide financing so that workers and dependents with high healthcare costs can spread out payments over months using no-interest lines of credit, says Gomaa.

“In this model, workers get a monthly statement of what they owe,” he explains. “They can pay the balance in full or pay it over time.”

Another alternative health plan is Comfort, which says it provides 100% coverage on almost 90% of members' health care costs. Some musculoskeletal care, telehealth, fitness and other services are included in the plan at no cost, the company adds.

“That means visits to primary care or specialists, lab tests, imaging, urgent care and other services are all provided with no out-of-pocket cost at the time of service,” comments Marek Ciolko, Gravie’s co-founder. “Our plan design essentially insulates members from the cost of services because that member would access care with no copay or deductible.”

Delbanco says she’s not sure if alternative plans will have a transformative effect on U.S. healthcare. “But,” she says, “there are many, many employers who could be attracted to these plans because they don’t necessarily want to go back to the days when they used to manage many different vendors.”

Alternative plans may not signal the end of HDHPs so much as serve as yet another way of paying for and covering healthcare costs — an alternative, as their name denotes, not a replacement. But they are on the leading edge of the movement toward health plan price transparency. For policies that begin Jan. 1 or later, most group health plans need to disclose personalized price data to all members for all covered care and services, according to a new price-transparency rule from CMS.

This story was updated on Feb. 26