Who’s Driving the Bus? The Rise of Consumer-Driven Health Plans
By Steve Toman, Account Director, Palio+Ignite Managed Markets email@example.com
It’s no big surprise that healthcare expenditures have risen dramatically over the past few decades. The Centers for Medicare & Medicaid Services estimated that the United States spent nearly $2.6 trillion on healthcare in 2010, which is over 10 times the $256 billion it spent in 1980. And these costs have continued to escalate. Aon Hewitt reported in its “2012 Health Care Survey” that employers have seen the amount they spend on healthcare increase by 40% over the past 6 years, to an average of $8000 per employee. During that same time period, employee payroll and out-of-pocket expenses have increased more than 80%, to an average of $5000 per year. According to the US Bureau of Labor Statistics, healthcare costs represented 5.4% of total compensation in 1999 vs 7.3% of total compensation 1 decade later. This increase in costs to employees has had a significant impact on take-home pay, and has applied negative pressures to the overall economy. Some experts have suggested that the increase in employer health plan costs has been a major contributor to wage stagnation over the past 10 years.
So what are employers and payers doing about rising healthcare costs? One thing they are doing is offering consumer-driven health plans (CDHPs). These are generally defined as tax-advantaged payment accounts (health reimbursement accounts [HRAs] or health savings accounts [HSAs]) coupled with a high-deductible plan (deductibles typically in the thousands of dollars). Because CDHPs are less expensive than traditional low-deductible indemnity plans, as well as PPO, HMO, and POS plans, employers are moving more and more employees into consumer-driven plans. The idea is for employees to assume more ownership of their own health, and to bring some of the efficiencies of consumerism to healthcare. Other factors that are contributing to the development of CDHPs include:
- Health insurance exchanges (HIXs), brought about by the Patient Protection and Affordable Care Act (ACA)
- Legislation providing consumers with more options and transparency
- Increased consolidation of providers (integrated delivery networks [IDNs])
- New care models (accountable care organizations [ACOs])
- Private companies and payers promoting cost-of-care transparency
CDHPs have the potential for significant savings in healthcare costs. Haviland et al studied the potential impact of CDHPs and reported last year in Health Affairs that if enrollment in CDHPs were to increase to 50% of the employer-sponsored non-elderly population, the national savings in healthcare expenditures would total $57.1 billion annually. That’s real money. Potential savings like these are driving the increase in CDHPs. Aon Hewitt found that in 2012, CDHPs overtook HMOs as the second most common benefit design. PPOs are the most commonly offered plans (79%), followed by CDHPs (58%), then HMOs (38%). In addition, 52% of employers who offer a CDHP do so as a choice for their employees, while only 11% offer a CDHP as a full replacement plan.
Although CDHPs may help participants and employers lower costs, participants may not always get the quality they have become accustomed to with more traditional benefit designs. The Employee Benefit Research Institute reported that CDHP enrollees have a lower satisfaction rating (52%) than those enrolled in traditional plans (66%). And only 45% of CDHP enrollees would recommend their plan to friends or coworkers, compared with 55% of those in traditional plans.
Despite these shortcomings, CDHPs are becoming an increasingly popular choice for employers, payers, and employees. These plans represent significant savings in terms of premiums, but employees do need to shoulder significantly higher out-of-pocket payments than they have in the past. With an increasing number of patients behind the wheel of their own healthcare bus, CDHPs represent a unique set of challenges to hospitals, physicians, pharmacies, pharmaceutical manufacturers, and other healthcare providers.
Source: Haviland A, Marquis MS, McDevitt R, Sood N. Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually. Health Aff. 2012;31(5):1009-1015.
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