As it becomes increasingly clear that health-care reform alone will not slow the steady annual increase in the cost of medical services and insurance, the allure of consumer-directed health plans seems to be brightening.
More than 50% of employers now offer them, mostly as one of several options, and that number looks likely to top 60% in the coming year, according to a recent report by Towers Watson and the National Business Group on Health (NBGH). CDHPs now cover 15.4% of employees, according to a survey of some 12,300 employers by United Benefits Advisors, an industry group for insurance brokers. That’s more than HMO plans cover.
For employers, such high-deductible plans hold the promise of smaller cash outlays on premiums. Further, they offer incentives for employees to make cheaper (and, hopefully, smarter) choices about their health care as they pay for more items out of pocket. To offset the hit to the employee, many employers charge lower monthly contributions to employees who choose them and/or make contributions to health savings accounts (HSAs) or health reimbursement accounts (HRAs).
But the plans are not without controversy. For one, many employees push back on the idea, afraid they will not be able to pay for the services they need. Secondly, some of the cost savings associated with the plans are now coming into question, as nearly a decade of data provides some insight into how sustainable the savings are.
A recent analysis of the data by Towers Watson and the NBGH suggests that at least some employee concerns may be unwarranted. “The perception is that because CDHPs are based on a high deductible, employees pay considerably more, but we’re just not finding that to be the case,” says Ted Nussbaum, senior consultant for Towers Watson. While employees at companies that offer a CDHP will pay a higher proportion of costs at the point of service — 19% compared with 15% at companies that don’t — they are likely to face lower monthly premium costs to balance out the equation. “They might pay 4% more out of pocket, but their premiums may be 30% lower, so the difference disappears,” says Nussbaum. (At least half of the companies offering CDHPs lower premiums by 30% or more for those enrolled in them.) And out-of-pocket maximums should help insulate those with major health issues from excessive costs, he says.
Employers subsidize or fully cover many preventive measures under the CDHPs. Ninety-four percent make annual physicals, well-child visits, and mammograms free to CDHP users, while about 80% or more cover prostate screening, colonoscopies, and flu vaccines. Those are higher rates than non-CDHP plans record.
Participating in a CDHP is also correlated with higher participation in many wellness efforts, including health-risk assessments and disease-management programs. The most dramatic difference occurs in weight-management programs, says Nussbaum, with CDHP enrollees participating at nearly twice the rate of others.
At the same time, CDHPs are by no means a magic bullet to reducing costs; savings depended heavily on how widely used the plans were, according to Towers Watson/NBGH data. Compared with the $7,826 average cost per employee in a non-CDHP plan, those with more than 50% of the workforce enrolled in CDHP plans saw an average $978 savings per employee, while those with under 20% enrollment saw only an $83 savings per employee.
Average cost increases also varied depending on how long the plan had been in place. Companies that adopted a CDHP plan in 2009 saw a 3.1% decrease in their annual median per-employee costs, while those that adopted in 2007 saw a 2% increase in 2009, compared with 1.6% for non-CDHP plans.
That phenomenon occurs in part because renewal rates for the plans are running higher than they are for other types. In their second year or more, CDHPs increased an average of 10.6% last year, according to UBA data, compared with an average 7.3% increase for all plans.
Most importantly, among the companies that have seen the lowest cost increases over the past two years, CDHPs are only part of the equation. “High-performing companies have a higher percentage of employees enrolled in CDHPs, but that’s not really what drives their results,” says Nussbaum. Instead, it’s using a data-driven approach to assess which disease-management programs are needed and tracking their results, along with other analytical efforts.
A key one involves gathering hospital-level data by medical procedure to make sure employees are using the best in class for any given procedure to reduce unnecessary readmissions and follow-up care. “CDHP is clearly a delivery mechanism that makes some of the incentives work better,” says Nussbaum, “but it is not the only way to deliver a result that focuses on the improved health of the population.”