The game is three-card monte. Maybe you’ve seen it on a street corner (or, more likely, on the big screen). It looks easy. A dealer hunches above three playing cards—two jacks and a queen—each resting face down. He shows you the cards, mixes them up and tells you to “find the lady.”
You’re confident you can’t lose. The dealer knows you’ll never win. That’s because this is a “short con,” a quick swindle guaranteed to leave you dumbfounded and emptyhanded.
Because people have gotten better at spotting (and staying away from) from illegal cons like these, three-card monte has all but disappeared from city streets. However, there’s a similar hustle happening all over the country, drawing in more than half of all U.S. workers—and this one is perfectly legal.
The game is called high-deductible health insurance. Just like three-card monte, what you think you see isn’t what’s really happening. To understand how it works, you need to know the players involved: the dealer, the shill and the mark.
The dealer: health insurers
There’s one important rule health insurance has in common with three-card monte: the dealer always wins. Even in 2020, when every other sector of the U.S. economy struggled amid a raging pandemic, the nation’s top health insurance companies—UnitedHealth Group, Anthem and Humana—were doubling their profits.
These companies are used to winning. But believe it or not, money wasn’t always the endgame in health insurance. In fact, the original goal was to make sure hospitals didn’t go bankrupt (while also sparing patients from the financial devastation of a major medical crisis).
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Until the 1990s, insurers spent a whopping $0.95 of every $1 on medical care, taking a scant 5% from enrollee premiums to cover their overheads, with just enough left over for a small profit.
But as medicine became more sophisticated and lucrative, insurers shifted focus from protecting patients to maximizing profits. Before long, health insurance was a massive enterprise, one in which execs earn tens of millions of dollars for delivering strong financial results.
By the 2000s, however, everyone was getting in on the healthcare money grab. Doctors and hospitals began raising prices so aggressively that the cost of healthcare began outpacing overall inflation by a large margin, rising at a rate of nearly 6% annually.
Insurers, fearful that American businesses could no longer afford to pay high annual premium increases, had to figure out new ways to generate big profits. One approach would have been to force doctors, hospitals and drug companies to work more efficiently so as to lower the cost of medical care, but insurers knew that would be an extremely tough task.
So, instead, they designed an ingenious con of their own: high deductible health plans (HDHPs). Rather than asking companies to foot the higher premiums, insurers helped employers shift much of the financial burden to unsuspecting employees. The hustle worked brilliantly.
In 2007, HDHPs accounted for just 5% of all employer-based plans. By 2013, the number had jumped to 20%. Today, 51% of all U.S. employees are enrolled in an HDHP. As a result, Americans now pay more out of their own pockets than ever before—up to $6,650 for an individual or $13,300 for a family.
The shill: U.S. employers
In three-card monte, the dealer’s impressive sleight of hand is just one part of the scam. The other essential part is making the game look winnable. That’s where the shill comes in. Shills are the folks gathered around the dealer. Their job is to get onlookers excited to play (without making it obvious that they’re part of the con).
Just as dealers need shills in three-card monte, insurers need the help of the employers to make the HDHP hustle work. After all, U.S. employers provide coverage to more than 150 million Americans, representing the largest customer base in a $1.32 trillion health insurance industry.
Rather than risking the loss of a business customer to rising premiums, the insurer offers an ideal solution: “I’ll raise your premiums by only 3% this year if you agree to increase the employee deductible by $500.” And here’s the best part, “Your employees will be motivated to lower healthcare costs because now they’ll have more skin in the game.”
Like the shills in three-card monte shill, the employer helps generate excitement for this new plan. The benefits manager or HR lead points out that people can end up paying far less than in the past, provided they make smarter healthcare choices. It sounds too good to be true. And it is.
Most Americans assume they’ll stay healthy and, hopefully, save money. Insurers know that statistically, the average American will have paid enough out-of-pocket to reach their max deductible by May 19.
No matter whether patients avoid medical care or require it, HDHPs give insurers the revenue they need to keep profits up. Employers also do well for themselves by sidestepping a sizable portion of the premium. And all of the other healthcare system players—from doctors to drug makers—get to keep charging higher and higher prices year after year.
Just like in three-card monte, everyone wins except the mark.
The mark: American workers
In 2020, a study found the average annual deductible for single person coverage was $4,364 while families paid $8,439. Health insurers continue to defend these outrageous out-of-pocket expenses by insisting that employees are being more judicious with their healthcare spending. But behind closed doors, they know full well that patients have minimal control over the cost of medical services.
U.S. healthcare isn’t nearly transparent enough for patients to compare prices, bargain shop for services or significantly reduce the total cost of their care. Thus, it’s absurd to think that Bob from accounting will drive around town, bargain shopping for the best deal on his emergency appendectomy. It’s equally ridiculous to think Peggy from sales could negotiate with the pharmacy or drug company over the price of her new, life-essential medication.
Research shows that as out-of-pocket costs rise, patients don’t make better healthcare choices. They just go without. High deductible health plans have been proven to result in delays for breast cancer diagnosis and treatment. Similarly, research from Harvard on Medicare patients demonstrates that a $10 increase in the out-of-pocket expense of a prescription causes a 23% reduction in people taking their medications and a 33% increase in deaths.
Ever since the introduction of HDHPs, employees have had far more “skin in the game” and far less money in their savings. It’s not their fault. That’s just how the game is played. Everyone knows it’s rigged, except the workers.