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Life Health > Health Insurance > Health Insurance

Re-Assessing Consumer-Driven Health Plan Assumptions

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U.S. health care costs are escalating at an astronomical pace. The 2006 national average to maintain an employee’s medical plan is expected to be upward of $8,400.

What’s more troubling is the majority of employees supported by work-sponsored health care plans aren’t even reaping the benefits of their coverage. Approximately half of American employees require such little care that their expenses account for only 3% of employer health care spending, while 15% of the population will account for more than 80% of employer health care spending.

Clearly, traditional health care plans aren’t addressing employee demographics in an efficient and consistent manner.

CDHP Success

As the concept of consumerism takes root, the early performance of the new consumer-driven health care plans is encouraging.

According to a report by Aetna Inc., Hartford, based on total replacement plans that incorporated a health reimbursement arrangement, the CDHP resulted in a two-year annualized trend that was two percentage points lower than the 10.3% average increase for a traditional preferred provider organization plan over the same period.

On average, the typical employer who offered a CDHP as an option experienced a rate increase at renewal of just 5.3%.

The 2004 Mercer National Survey of Employer-Sponsored Health Plans shows that CDHPs had the lowest costs of all medical plans for large employers on a per-employee per-year basis, providing more than $800 in savings per employee.

The results have to do with many facets of the plans, and the plans are still in the early stages. However, the power of consumerism is clearly one of the driving factors in CDHPs’ ability to control costs.

United Healthcare, the health insurance unit of UnitedHealth Group Inc., Minnetonka, Minn., found CDHP participants displayed a 15% to 18% reduction in emergency visits, that 94% were using generic drugs when generics were available, and that 55% of the members reported being more likely to think twice about going to the doctor for minor health care needs.

In addition, Aetna says 83% of its CDHP members were more conscious of health care costs.

Demographic Trends

CDHPs help flush out the health care imbalances employers traditionally have faced. Demographic analysis played a key role in properly assessing the medical coverage costs of employees at the onset of the CDHP movement, for insurance carriers and brokers alike.

When the CDHP concept was being developed, it was assumed that the demographics of early program adopters would be similar to those of the early adopters of health maintenance organization coverage. The early adopters of HMOs were primarily young, male and healthy.

However, CDHPs have defied all assumptions, surprising almost all experts in the industry. According to a four-year study conducted by United Healthcare–the largest provider of CDHPs–58% of purchasers bought family coverage in 2004, and 63% were over the age of 40. About 23% of the CDHP enrollees were single females, and only 19% were single males.

Because CDHPs have deductibles in excess of $1,000 per individual, another assumption was that participants would try and save their health savings account money and not seek adequate preventive care. Once again, the actual results are exactly opposite of what was expected. According to a McKinsey & Company study published in June 2005, participants in a CDHP were 20% more likely to participate in a company-sponsored wellness program, over 30% more likely to get an annual checkup (because they thought it would save them money in the long run), and over 20% more likely to follow treatment regimens for chronic conditions very carefully.

In addition, Aetna’s initial 2005 HSA results showed there were no significant changes in care for members with diabetes or heart conditions and members taking common antihypertension drugs or using common treatments for asthma.

There were no significant reductions in use of preventive care services at Aetna, and United Healthcare has reported an 8% to 9% increase in use of preventive care by CDHP members.

Finally, and perhaps most surprising, the majority of CDHPs involve a single deductible of more than $1,000. While experts were skeptical that people could afford HSAs and thought only the wealthy would enroll, the results have been overwhelmingly contrary.

According to the 2004 United Healthcare HSA statistics, more than 30% of all high-deductible health plan purchasers were earning less than $50,000 per year.

Even more surprising is that 17.8% of CDHP members previously were uninsured, meaning the lower cost of CDHP coverage is attracting the attention of the uninsured population.

CDHPs are still new and have a long way to go. As any actuary will tell you, it takes a large number of people to enroll in a plan over an extended period of time before the results can be 100% accurate or reliable. However, all of the early indicators suggest CDHPs are engaging the consumer in the health care process for the first time. This engagement, coupled with the emergence of widespread medical data dissemination, is proving to be a powerful tool in helping to control the rising cost of health care inflation.


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