The traditional health plan approach to managing member medical costs and resources might be less effective during the phase when members have not met their deductible requirement. Because the deductible requirement is focused solely on a dollar amount, the focus of deductible management must also be on the cost, versus units of service and resources. Because the member bears financial responsibility for services rendered until the deductible requirement is met, and these services are the first to be rendered (for applicable benefits) to the member during a plan year, the focus must also be consumer oriented. The concept of Deductible Management is to ensure certain consumer centric tools are in place, including price transparency, provider selection, and account status, and to promote plan resources that can further support members to most effectively use resources during the deductible consumption phase. Furthermore, a Deductible Management for a plan should proactively provide disease management and other services during the deductible consumption phase for targeted members, and strive to encourage members to receive needed medical services instead of deferring them solely for economic reasons.

A deductible requirement in a health plan policy provides that payment for covered benefits will be net of a fixed dollar amount stipulated to be the deductible. For purposes of this discussion, Deductibles will be considered to be an annual requirement. (There are also specific service “deductibles” in various health policies that are per incident or episode, but these really function as a copayment.) By definition, an annual deductible requirement means that no payments for any applicable covered benefits will be applied during a plan year until covered cumulative claims for services exceed the full deductible amount during the course of that year. When a new plan year begins, the cumulative claims are reset to zero.   

Deductible consumption refers to the portion of the deductible requirement that has been met at a given point in time (the cumulative claims to date during a plan year compared to the deductible requirement.) Typical analysis of deductible consumption for a plan member population identifies the percentage of members that fall between assigned dollar ranges of cumulative claims per member (or family) after the close of a plan year. Unlike calculations of annual medical costs per member, (which is expressed as the sum of utilization per member * cost per unit for all categories of covered services;) deductible consumption can’t always be broken down for analysis into both a utilization and cost per unit component. Instead the analysis must focus on dollars consumed, based upon multiple factors potentially affecting the consumption.

• Plan Design - other plan design features will impact deductible consumption. For example, exclusions and restrictive limitations on coverage reduce potential consumption. Deductible plan design(s) (discussed below) can have a significant impact, particularly when multiple deductible features are incorporated into the same plan.

• Type of Service – The type of service rendered that is being applied to a deductible largely dictates the other variables involved in deductible consumption. The nature of a service establishes the general price range, utilization and potential patient behavior involved. For example, a typical hospitalization is going to be priced significantly higher than a typical prescription, and the utilization rates for hospitalizations per person per year are going to be significantly lower than prescriptions per person per year. 

• Pricing – Pricing for a given service can vary widely by the provider selected. Pricing for certain services are much more readily available and accessible on a prospective basis than others. 

• Contract Rates – In nearly all managed care policies, contract rates still apply to services rendered by contracted providers that fall under the deductible requirement. Contract rates are typically not as publicly available as retail pricing, although some health plans have recently undergone initiatives to make certain contract rates available to their members.

• Utilization – The larger the deductible requirement, the greater the impact of utilization will be on deductible consumption. Furthermore, the lower the price per unit of a given service, the greater the impact of utilization will be on deductible consumption.

• Behavior – Several aspects of potential member behavior can impact deductible consumption. In general, an assumption can be made the a member can be more financially prudent and motivated in seeking provider services when the member is aware they will be paying for the services due to the deductible requirement. Thus both price (through provider selection and price comparisons) and utilization can be affected. The corollary to this however, is that members might defer needed medical services due to economic reasons. As a member nears completion of a deductible requirement, the opposite can sometimes be true, particularly if it is near the end of a plan year: A member might seek services they had been undecided about receiving in order to get benefit value from the plan. Furthermore, various Behavioral Economics concepts can impact member deductible consumption.

• Regionalization- pricing and utilization are impacted by regional market and health delivery characteristics. Thus deductible consumption based upon the same exact services for patients of the same health condition and demographic categories will still experience variations based upon these regional factors.

• Open enrollment - when multiple plans and or plan options are provided in annual open enrollment periods that involve different plan designs including varying deductible amounts, deductible consumption for a given plan option will be impacted by the demographic of the members selecting that option, in regard to the variances of that demographic in consumption compared to other enrollees for that group.

• General Deductible – A general deductible applies the deductible requirement to all, or nearly all covered benefits under a plan

• Specific Deductible – A specific deductible applies the deductible requirement to just a specific benefit, such as inpatient hospitalizations.

• Individual and Family Deductibles – Plan typically have two separate deductible requirements: an individual deductible for members with single coverage, and a higher family deductible for members with family coverage.

• Aggregate Deductibles - For family deductibles, some plans require an individual deductible for each family member (typically up to a specified maximum number of family members), while others arrange an aggregate (cumulative) deductible that applies to the entire family, regardless of which family members applied expenses towards the deductible.

• Tiered Deductibles – Many plans will tier deductible requirements when there are tiered benefits in that plan. For example, a PPO plan might have a lower deductible requirement when services are received from participating providers and a higher deductible requirement when services are received from non participating providers.

• Other first dollar coverage – Plans will sometimes have specific services that are exempted from a general deductible requirement. For example, many consumer driven health plans provide a first dollar wellness benefit that is not subject to the deductible requirement.

• Coordination of Benefits – If the member is also covered by a second policy, coordination of benefits may occur providing coverage in some situations from that second plan for the services subject to the deductible requirement.

• Embedded Deductibles – An example of an embedded deductible is a family deductible requirement of $1,000 that limits the deductible requirement for any individual to $500. In this case the $500 individual deductible is “embedded” in the family deductible requirement. 

• Carry Over Deductibles – Many plans include a carry over deductible provision, allowing expenses incurred in the last defined period (often 90 days) of the previous plan year to count towards the deductible requirement in the current plan year.

• Doughnut Hole - this refers to a secondary deductible, such as in The Medicare Part D prescription drug benefit . For example, for Medicare Part D in 2009, the standard benefit involves a $295 deductible, with 75% coverage/25% coinsurance between $296 to $2,700 in covered services. Then the “secondary” deductible applies from $2,701 and $6,153.75  in covered services; and finally 95% coverage is provided after the “secondary” deductible requirement is met (or a copayment of $2.40 for covered generics and $6.00 for covered brand-name drugs—whichever is greater)

The following addresses the distribution and prevalence of deductibles in employer sponsored health plans, with data from the Kaiser/HRET Survey of Employer -Sponsored Health Benefits, 2008 http://ehbs.kff.org

• 20% of single HMO coverage employees, and 21% of family HMO coverage employees have a general deductible requirement

• 68% of single PPO coverage employees, and 68% of family PPO coverage employees have a general deductible requirement

• The average single coverage general deductible amount for employers with under 200 employees is $917 for PPOs, and 1959 for High Deductible Health plans.  The average single coverage general deductible amount for employers with over 200 employees is $307 for HMOs, $413 for PPOs, and $1,599 for High Deductible Health plans.  

• The distribution by deductible level for employees with single coverage under PPOs is 52% under $500; 30% $500 - $999; 13% $1,000 - $1,999 and 4% $2,000 or more.

• For families with deductible requirements, 71% with PPO or HMO coverage have an aggregate deductible and 29% have individual deductible requirements for each family member; and 93% of High Deductible Health Plans use an aggregate deductible and 7% have individual deductible requirements for each family member.

• The average aggregate family coverage general deductible amount for employers with under 200 employees is $2,367 for PPOs, and $3,897 for High Deductible Health plans.  The average aggregate family coverage general deductible amount for employers with over 200 employees is $626 for HMOs, $948 for PPOs, and $3,089 for High Deductible Health plans.  

• The distribution by aggregate deductible level for employees with family coverage under PPOs is 11% under $500; 38% $500 - $999; 32% $1,000 - $1,999 and 19% $2,000 or more.

• The following service are not subject to the general deductible requirement (thus having first dollar coverage) for the applicable % of covered employees with a general deductible: Prescriptions (82% HMO,  92% PPO, 82% HDHPs); Preventive Services (85% HMO, 89% PPO, 91% HDHPs); Primary Care Visits (87% HMO, 76% PPO).

• For HSA HDHPs, the distribution of employees with single coverage by deductible level is 38% under $1,500; 24% $1,500 - $1,999; 30% $2,000 - $2,999 and 9% $3,000 or more. The distribution for family coverage is 17% under $2,500; 13% $2,500 - $2,999; 28% $3,000 - $3,999; 10% $4,000 - $4,999 and 32% $5,000 or more

• 57% of employees with HMO coverage and 30%  with PPO coverage have a specific deductible or separate set copay for each hospital admission. .50% of employees with HMO coverage and 26% with PPO coverage have a specific deductible or separate set copay  for each outpatient surgery episode.

• The average specific deductible per hospital admission is $495 for HMOs, and $354 for PPOs.

In regard to expenditure distribution, the most recent data from the AHRQ Medical Expenditure Panel Survey  indicates the following percentage of persons with total health expenditures above selected thresholds by age for services incurred in 2005:

Age	>$7,500	>$15,000
<18	2.5%	1.0%
18-44	6.2%	2.4%
45-64	14.0%	6.2%
65+	29.5%	14.8%
All Ages	10.2%	4.6%

Source: Medical Expenditure Panel Survey
http://www.meps.ahrq.gov/mepsweb 
MEPS Statistical Brief #217, August 2008, Agency for Healthcare Research and Quality

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