Consumer Driven Health Plans gaining wide appeal
Health care consumerism continues to grow through both consumer-directed health plans and tools that provide all health care consumers with more information about their health care choices and costs. Here are some examples of their growth:
- The number of employers with 500 or more employees offering CDHPs increased from 14 percent in 2007 to 20 percent in 2008
- Thirty-one percent of new coverage issued in the Small Group market was for HSA/HDHPs
- Companies that offered an HSA for 3 years saw significant growth each year, reaching 29 percent in the third year
- In 2008, enrollment in CDHPs reached 7 percent of all covered employees, up from 5 percent the previous year
- In companies that offer CDHPs, employee enrollment also continues to rise – from 8 percent in 2006, to 10 percent in 2007 and 15 percent in 2008
The top two reasons that plan sponsors give for offering a consumer-directed health plan (CDHP) are lowering benefits costs and promoting consumerism. Both of these reasons are likely to become even more important as plan sponsors deal with the current economic situation.
During a recession, health care use tends to increase. Consumers get care they might otherwise delay because they’re concerned about losing their employer-provided health coverage. People paying for coverage under COBRA also tend to have higher usage than active employees. And there is a higher incidence of stress-related medical and behavioral health conditions.
How CDHPs can help plan sponsors with benefits costs
CDHPs save money. According to one survey, companies with at least half of their workforce enrolled in a CDHP had a 2-year median cost trend, almost half that of companies without a CDHP. Another study found that CDHPs cost 4.8 percent less than PPOs and HMOs.5 One explanation for this cost difference is the fact that CDHPs have higher deductibles than other medical plans. But they still cost more than $400 less per employee when compared to PPOs with $1,000 or higher deductibles.
High deductibles are a growing trend among non-CDHPs. Over the last 2 years, the percentage of covered workers in a plan with at least $1,000 for single coverage grew from 10 percent to 18 percent. The jump was even greater for smaller companies – 16 percent to 35 percent.6 Plus, a recent Mercer study found that the median deductible for more traditional health plans is also rising, from $500 in 2007 to $1,000 in 2008, possibly due to the influence of CDHPs. The minimum deductible for an HSA-qualifying high-deductible health plan (HDHP) is $1,150 in 2009.
Higher deductibles are just one way plan sponsors are cutting costs. In the next year, 40 percent of companies report that they’re likely to increase employee premium contribution amounts, 45 percent are likely to increase office visit cost sharing, and 41 percent are likely to increase the amount employees pay for prescription drugs.
Healthier employees also reduce costs
The increase of CDHPs is also tied to a more general increase in health care consumerism. A survey by the Employee Benefit Research Institute found that CDHP participants make better-informed health care decisions and are generally healthier. That’s because employers who offer CDHPs also provide more and better health information tools to their employees. In most cases, these companies promote healthy lifestyles to all their employees, not just those participating in CDHPs.
CDHPs are here to stay
As more plan sponsors of all sizes adopt consumer-directed health plans, their impact on the entire health benefits industry will continue to grow. In fact, current economic pressures are likely to accelerate the growth of CDHPs.
HSAs accounted for most of the CDHPs added in 2008. Unlike HRAs, HSAs don’t require an employer contribution. In fact, 29 percent of large HSA sponsors do not contribute. This makes these plans particularly attractive to plan sponsors struggling to offer health benefits to their employees. They also provide attractive tax incentives.