For years, high-deductible health plans have been the most common type of health insurance that employers offer.
HDHPs surged in popularity between 2013 and 2021, peaking at 55.7% enrollment. But in a sharp reversal, enrollment in these plans has now fallen for two consecutive years, dipping to 49.7% in 2023, according to the latest data from ValuePenguin.
The drop in enrollment could reflect a turning point for employees who are increasingly concerned about rising out-of-pocket health care costs and the prospect of not being able to afford a medical emergency.
How HDHPs work — and their drawbacks
An HDHP typically features lower monthly premiums in exchange for a higher annual deductible. These plans are often paired with HSAs, which let workers save pretax dollars to use for qualified medical expenses.
While appealing due to their low premiums, HDHPs can become a financial burden for employees who need more than routine care. A medical emergency, unexpected illness or ongoing treatment for chronic conditions can lead to steep out-of-pocket costs.
In fact, surveys show that nearly three-fourths of Americans worry about affording unplanned medical expenses. As a result, employees are now scrutinizing their options more closely and looking for plans that balance cost, predictability and comprehensive coverage.
Why enrollment is falling
Several factors are contributing to the recent decline in HDHP popularity, according to ValuePenguin:
- Rising deductibles: Even as premiums stay relatively low, the cost burden has shifted to higher deductibles. This trade-off is less tolerable for employees who feel they might need care.
- More plan choices: Around 61% of workers now have access to multiple health plan options. With more choices, many are opting for plans with lower out-of-pocket costs, like PPOs, HMOs or point-of-service plans.
- Shift away from HDHP-only offerings: The number of employers offering only HDHPs has dropped by 33% since its peak in 2020. That shift is reflected in the enrollment decline.
The rise of POS plans
As HDHP enrollment falls, POS plans are quietly gaining ground — especially among small businesses. These plans combine elements of HMOs and PPOs, offering moderate flexibility at a midrange cost.
Employees typically choose a primary-care doctor and need referrals for specialists, similar to an HMO. However, they also retain some out-of-network coverage like a PPO, although usually at a higher cost.
From 2018 to 2023, POS plan enrollment grew from 6% to 10%, reflecting growing interest in plans that offer a balance between cost and flexibility.
For small employers, POS plans can be a strategic middle ground — less expensive than PPOs but more comprehensive than HDHPs. As more employees seek plans that reduce uncertainty without ballooning premiums, POS offerings may continue their steady rise.
When HDHPs still make sense
Despite the downturn, HDHPs aren’t vanishing, and they are still a good choice for certain groups:
- Young and healthy workers: People who rarely use medical services can benefit from the low premiums and use HSAs to build tax-free savings.
- High earners with savings: Employees who can pay upfront costs without financial strain may find HDHPs cost-effective, especially when negotiating reduced provider rates.
- Those committed to using HSAs: For individuals actively contributing to and spending from HSAs, HDHPs can offer both immediate tax benefits and long-term savings growth.
In some states — notably South Dakota, South Carolina and Utah — HDHP enrollment remains high, even increasing sharply in 2023.
Key takeaways
As the health benefits landscape shifts, here’s what employers should keep in mind:
- Diversify plan offerings. Employees want options. Offering more than just HDHPs helps meet a wider range of needs and mitigates risk for workers with varying financial situations.
- Educate your workforce. Most employees, especially younger generations, report confusion about health benefits. Provide ongoing education to help workers make smarter decisions about coverage.
- Monitor enrollment trends. While HDHPs are declining overall, regional and demographic factors still matter. Tailor offerings to the specific needs of your workforce and location.
