HLTH 4530 Week 4 Insurance Design Case Example

A High-Deductible Year With Asthma: How a $3,000 Deductible, 20% Coinsurance and a $7,000 Ceiling Moved Costs Onto One Warehouse Scheduler, Month by Month, and What Value-Based Design Would Change

Student Name

Walden University

HLTH 4530: Healthcare Economics From a Population Health Perspective

Instructor Name

Month Day, Year

A High-Deductible Year With Asthma: How a $3,000 Deductible, 20% Coinsurance and a $7,000 Ceiling Moved Costs Onto One Warehouse Scheduler, Month by Month, and What Value-Based Design Would Change

The Plan

A composite regional employer, Bayline Distribution, with about 1,100 employees, replaced its traditional health plan with a high-deductible plan on January 1. The design has four features. Members pay the full negotiated price of most care until they reach a $3,000 deductible for self-only coverage. After the deductible, they pay 20% coinsurance. Their total cost sharing for the year is capped by a $7,000 out-of-pocket maximum. And the pharmacy benefit moved to a narrower network with a single preferred chain. The employer contributes $750 a year to a health savings account for each enrollee. Preventive services required by federal rules are covered before the deductible.

Why the Employer Chose It

The employer's reasoning rests on moral hazard: the tendency of people to use more care when insurance lowers the price they pay at the point of service. Pauly (1968) argued that some of the extra use that insurance causes is a rational response to a lower price rather than a sign of misconduct, and that it leads to inefficiently high use of care whose value to the patient is less than its cost. Higher cost sharing is meant to make members weigh price, cut low-value care and lower premiums. The evidence partly supports the first expectation; it is the second, whether members cut only low-value care, that this case tests.

One Employee's Year

Dana Ruiz, 41, is a scheduler at the employer's main warehouse. She has moderate persistent asthma, controlled for several years on a daily inhaled corticosteroid combined with a long-acting bronchodilator, plus a rescue inhaler. Under the old plan she paid a $40 copayment for each controller refill. The negotiated price of her controller inhaler is about $250 a month, an estimate drawn from the plan's composite fee schedule.

January and February: Each controller refill now costs her the full $250, since she has not met the deductible. She pays $500 in two months, much of it from the $750 account. Her account is nearly empty by March.

March: With the account drained and a car repair due, Dana fills her controller late, paying another $250, and then begins using it every other day to stretch the supply. Her symptoms stay mild at first.

April: She skips the controller entirely for two weeks and relies on her rescue inhaler.

May: After a spring cold, Dana has a severe attack and goes to the emergency department. She is treated and released. The visit is priced at $1,600 under the plan, and she pays all of it toward her deductible, which now stands at about $2,350 met.

June: A follow-up visit, a breathing test and a short course of oral steroids push her past the $3,000 deductible. From then on she pays 20%, about $50 per controller refill.

July to December: With coinsurance in place, she resumes daily use of the controller, paying $50 a month. Her spending for the year reaches about $3,350, well below the $7,000 ceiling but far above the roughly $500 she paid under the old plan.

What the Year Shows

Dana did what the design invited: she weighed price and cut back. But she cut back on the wrong care. The controller inhaler is what keeps her out of the emergency department. The high-deductible design treated it like any other purchase, and the emergency visit it helped cause cost more than all the refills she skipped.

Her story is a composite, but research shows the pattern. In a national study of 343,137 adults with chronic illness, including asthma, Gidwani et al. (2025) found that people moved into high-deductible plans were 4.7 percentage points less likely to receive recommended care overall, and 9.0 percentage points less likely to fill recommended prescription drugs, than similar people in traditional plans. Among commercially insured patients with asthma, Sinaiko et al. (2021) found that those living in the lowest-income areas spent 30% less on controller medicines than those in high-income areas and devoted a larger share of their asthma spending to inpatient and emergency care.

Value-Based Insurance Design

Value-based insurance design starts from the opposite premise: cost sharing should depend on the value of a service, not only its price. Chernew et al. (2007) proposed lowering or removing cost sharing for services that are highly valuable for particular patients, such as maintenance medicines for chronic conditions, while keeping it for services of lower or uncertain value. For Dana, a value-based plan would set her controller copayment at zero or a small fixed amount from the first day of the year, while leaving the deductible in place for other care.

Federal rules allow this within a high-deductible plan. In 2019, the Internal Revenue Service expanded the list of services that health savings account eligible plans may cover before the deductible to include certain care for chronic conditions, among them inhaled corticosteroids and peak flow meters for people with asthma (Internal Revenue Service [IRS], 2019). Bayline's plan could have exempted Dana's controller without losing its tax status. It did not.

The Trade-Off

Exempting chronic maintenance medicines from the deductible would raise the plan's costs somewhat, because the employer would pay for refills that members now pay themselves. Fewer emergency visits and hospital stays would recover part of that outlay, though whether the savings fully cover the cost depends on the condition and the population. The design question is not whether to have cost sharing but where to place it. Cost sharing on a low-value imaging scan asks the member to weigh a choice she can judge; cost sharing on an asthma controller asks her to weigh her breathing against her budget.

Recommendation

Bayline should keep its high-deductible structure but add a value-based tier: no deductible and a low fixed copayment for the medicines and monitoring that the 2019 IRS list permits for asthma, diabetes, hypertension and heart disease. It should also make sure its narrower pharmacy network includes a chain within reach of each work site.

Limits

The employee, plan and prices are composite, so the month-by-month figures illustrate the mechanics rather than predict any member's year. The studies cited are observational, although Gidwani et al. (2025) used firm-level changes in plan options to reduce selection bias.

References

Chernew, M. E., Rosen, A. B., & Fendrick, A. M. (2007). Value-based insurance design. Health Affairs, 26(2), w195-w203. https://doi.org/10.1377/hlthaff.26.2.w195

Gidwani, R., Yank, V., Asch, S. M., Burgette, L., Kofner, A., Peltz, A., & Wagner, Z. (2025). High-deductible health plans and receipt of guideline-concordant care for adults with chronic illness. JAMA Network Open, 8(4), e258045. https://doi.org/10.1001/jamanetworkopen.2025.8045

Internal Revenue Service. (2019). Notice 2019-45: Additional preventive care benefits permitted to be provided by a high deductible health plan under § 223. Internal Revenue Bulletin, 2019-32, 593. https://www.irs.gov/irb/2019-32_IRB

Pauly, M. V. (1968). The economics of moral hazard: Comment. American Economic Review, 58(3), 531-537. https://www.jstor.org/stable/1813785

Sinaiko, A. D., Gaye, M., Wu, A. C., Bambury, E., Zhang, F., Xu, X., Wharam, J. F., & Galbraith, A. A. (2021). Out-of-pocket spending for asthma-related care among commercially insured patients, 2004-2016. Journal of Allergy and Clinical Immunology: In Practice, 9(12), 4324-4331. https://doi.org/10.1016/j.jaip.2021.07.054