Watson Wyatt on employer costs and CDHPs
12th Annual National Business Group on Health / Watson Wyatt Survey Report 2007
Watson Wyatt Worldwide
March 15, 2007
Annual cost increases for all employers remained at 8 percent for the second year in a row (about twice the rate of inflation) and are expected to stay at this level through 2008.
CDHPs (consumer-directed health plans) continue to gain popularity. Thirty-eight percent of employers now offer such a plan, and 25 percent offer a health savings account (HSA). Yet, the median employee enrollment rate in CDHPs remains a relatively low 8 percent. While CDHPs can help control cost increases when combined with other tactics, the use of CDHPs alone does not correlate with a lower cost trend.
http://www.watsonwyatt.com/research/resrender.asp?id=2007-US-0031&page=1
And…
Employers up use of high-deductible health plans
By Kim Dixon
Reuters
March 15, 2007
Nine percent of U.S. employers in a poll by a health consulting firm (Watson Wyatt Worldwide) said they plan to offer only one health insurance option next year — a high-deductible policy that may encourage workers to skimp on care.
This type of plan charges higher monthly deductibles, typically about $1,000 for individuals, in exchange for cheaper monthly premiums and preventive services. The aim is to stem a rise in overall medical costs, which are climbing at twice the rate of general inflation.
“There is a concern about whether we are working our way toward a system where high deductibles are the norm and consumers don’t have a choice,” Gail Shearer, a health policy analyst at the advocacy group Consumers Union, said.
“If you are a person of low or moderate income, if the deductible is very high, there will be financial barriers to care.”
Late last year, another survey (Employee Benefits Research Institute and Commonwealth Fund) found that the plans encourage workers to scrimp on care and that people who were in the plans were more likely to cut back on basic care such as prescriptions or doctor visits.
http://today.reuters.com/news/articleinvesting.aspx?type=companyNews&storyid=26135+16-Mar-2007+RTRS
Comment:
By Don McCanne, MD
This report from the industry confirms that more employers are offering high-deductible health plans (HDHPs), and in some instances as the only option for the employee. Many employers are not including the other component of consumer-directed health plans (CDHPs) - health savings accounts (HSAs).
Other studies have confirmed that high-deductible plans create financial barriers to care which cause patients to reduce their use of basic, beneficial health care services and medications. Thus HDHPs have been a major contributor to the growing epidemic of underinsurance.
Perhaps the most important finding of this new study is that CDHPs alone do not correlate with a lower cost trend.
Decreased utilization of services without a decline in cost trends would seem to be an enigma, but it really isn’t. High-deductible plans have very little impact on our total health care spending because most high-cost care is given after the deductible has been met and is no longer a disincentive to care. On the other hand, high-deductible plans potentially do decrease office visits and prescription drug use for the majority of us who have not met our deductibles. Thus a great opportunity for preventive and early intervention health care is passed by for many, even though the cost of that care is so small that it does not shown up in cost trends in this study.
Since the underinsurance of CDHPs/HDHPs has failed to reduce health care cost trends that are twice the rate of inflation, then why are we expanding these programs that violate the fundamental rule of first do no harm?