Health Affairs article on saving through consumer-directed health plans
Growth Of Consumer-Directed Health Plans To One-Half Of All Employer-Sponsored Insurance Could Save $57 Billion Annually
By Amelia M. Haviland, M. Susan Marquis, Roland D. McDevitt and Neeraj Sood
Health Affairs, May 2012
Abstract
Enrollment is increasing in consumer-directed health insurance plans, which feature high deductibles and a personal health care savings account. We project that an increase in market share of these plans ā from the current level of 13 percent of employer-sponsored insurance to 50 percent ā could reduce annual health care spending by about $57 billion. That decrease would be the equivalent of a 4 percent decline in total health care spending for the nonelderly. However, such growth in consumer-directed plan enrollment also has the potential to reduce the use of recommended health care services, as well as to increase premiums for traditional health insurance plans, as healthier individuals drop traditional coverage and enroll in consumer-directed plans. In this article we explore options that policy makers and employers facing these challenges should consider, including more refined plan designs and decision support systems to promote recommended services.
From the Study Results
Consumer-directed enrollees in these large employer plans spent less on health care than enrollees in traditional plans even in the year prior to their enrollment, and the estimates above controlled for this favorable selection into the consumer-directed plans. In particular, the diagnosis-based prospective risk scores predicted 25 percent lower spending per capita for those who selected a consumer-directed health plan.
Thus, continued growth in enrollment in consumer-driven health plans implies premium increases in traditional plans that will retain somewhat sicker enrollees.
From the Discussion
Cost
Consumer-directed plans raise concerns about out-of-pocket spending because deductibles are high, and federal regulations allow health savings account plans to impose family out-of-pocket maximums of up to $12,100 in 2012. Out-of-pocket maximums for health reimbursement arrangements are not constrained by law until 2014, when all exchange plans must comply with the health savings account limit.
There is particular concern regarding health care access for vulnerable familiesāthose with low incomes or family members with high-cost chronic conditionsāwhich might face higher costs under consumer-directed plans.
Preventive Care
The use of all six of the preventive treatments examined in this article was negatively affected in the first year of consumer-directed plan enrollment, despite plan provisions that reimbursed some of these preventive services at 100 percent of allowed charges.
Decision Making
Our findings that reductions in spending occur through lower spending per episode, more use of generic versus brand-name drugs, less use of specialists, and lower inpatient hospitalization suggest that these plans do induce changes in treatment choices and not just access. Further research is required to determine whether these are appropriate changes, and our findings concerning preventive care demonstrate that more information is needed to improve consumer decision making.
Choice of Plans
When employers offer a new consumer-directed plan as an option, it typically attracts employees and families who are healthier and whose health care costs are less than those of people who enroll in other plans. Left unchecked, this can produce adverse selection and higher premiums in traditional plans.
Risk selection and consequent increases in premiums for traditional plans could destabilize the health insurance exchanges, where diverse plan offerings will be encouraged.
Conclusion
Enrollment in consumer-directed health plans probably will grow in the coming years, motivating enrollees to cut back on spending and producing savings for employees, employers, and the nation as a whole. But we need better information to help enrollees and their health care providers identify high-value care, and we need more refined plan designs and decision support systems to promote the use of such care. Promising developments include the investment in comparative effectiveness research by the Affordable Care Act and employersā efforts to develop value-based insurance designs that reduce enrollee cost sharing for certain high-value services.
Existing research does not adequately address the long-term effects of consumer-directed health plans on health care spending and recommended care. Current evidence about reductions in preventive care is a concern, and it will be important to monitor indicators of care quality in consumer-directed and other plans. In the individual and small-group markets, it will be important to adopt effective risk-adjustment methods to maintain a broad choice of plans that includes both higher cost-sharing and lower cost-sharing options.
http://content.healthaffairs.org/content/31/5/1009.full
And…
Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually
California HealthCare Foundation
May 2012
This link is to a press release on the Health Affairs article above. It also includes a link which allows free access to the full article.
http://www.chcf.org/publications/2012/05/growth-cdhp-could-save
The title of this Health Affairs report seems to encourage the widespread adoption of consumer-directed health plans (CHDPs) – a theme repeated in the press coverage of this article. Yet much has been written about the adverse consequences of these plans, especially their impact in reducing the use of beneficial preventive, diagnostic, and therapeutic health care services.
Even if it were true that putting half of all employees and their dependents into CHDPs would reduce spending by $57 billion, that is only two percent of our national health expenditures. Reducing spending by causing harm is terrible policy, especially when other measures such as single payer would reduce harm instead, while controlling costs more effectively.
The California HealthCare Foundation release (link above) included a Reader Comment by Betty Hillman. Her insightful words express our concerns:
“CDHPs only work well for the healthy. Speaking for someone who works for a top 100 company that offers ONLY CDHPs, and has chronic health issues of genetic origin, I am officially defined as ‘underinsured’, because my out-of-pocket costs are very high; they have nearly bankrupted me, even while working in a professional position.
“It is yet another way for corporations to reduce spending on employees and give it to investors. Welcome [back] to the 19th century. The almighty dollar continues to reign supreme. It is sad that so many do not understand that there is no way that corporations, inc insurance companies, will ever provide low-cost insurance without being forced to — by the government or the people, take your choice.”
Even if efforts were made to force them to, the insurance companies can no longer provide low-cost insurance that provides adequate financial protection for those who need health care. Ms. Hillman would be served best if we were to adopt an Improved Medicare for All.