The number of large U.S. companies offering consumer-directed health plans (CDHPs) is on the rise, and those with high enrollment are seeing about half the increase in health costs as those offering only traditional health coverage, says an annual survey by Watson Wyatt and the National Business Group on Health.
CDHPs are high-deductible plans offered with a personal account that can be used to pay a portion of medical expense that the employer’s plan does not cover.
The findings are from the 13th annual survey, which looked at employers’ health care purchasing value. They were released during the March 2008 corporate health benefits conference “Innovation, Transformation & Reform in the Healthcare Marketplace.”
The statistics reflect 2007 and 2008 health plan decisions, and in some cases 2009 strategies, for the 453 large U.S. employers surveyed. Those companies collectively employ 8.4 million people.
Nearly half (47 percent) of those surveyed offer a CDHP, up from 39 percent in 2007 and 33 percent in 2006. More than half (54 percent) plan to offer a CDHP by 2009.
Companies with at least half of their workforce enrolled in a CDHP have a two-year median cost increase trend of 3.6 percent, vs. 6.2 percent of companies without a CDHP, according to the report. Overall, employers with a CDHP saw a two-year cost increase trend of 5.5 percent vs. 7 percent for those that did not offer a CDHP.
Having a substantial number of employees enrolled in a CDHP is critical to driving down costs, pointed out Ted Nussbaum, Watson Wyatt’s director of group and health care consulting in North America. Employers with only 15 percent CDHP enrollment, for example, won’t see big savings, he said.
The survey found that best performers see results by combining CDHPs with a range of programs—services, tools, information—to steer employees into becoming better-informed health care consumers.
Best performers, and employers with consumer-oriented health care models, the survey found, are making “significant cost savings” with the following key drivers:
• Offering appropriate financial incentives, such as significantly lowering premiums for CDHP enrollees.
• Communicating information effectively to employees to help them make wise health care choices.
• Using metrics and evidence. Many companies don’t receive information about employee use of their programs, according to the report.
• Offering quality care that is delivered efficiently.
• Maximizing health and productivity by using financial incentives to encourage employee participation in health improvement activities.
CDHPs need to be part of the overall strategy, not the entirety of the plan design, to be effective in driving down health care costs, Nussbaum told SHRM Online.
Using high-quality hospitals, which tend to be less expensive in the long term, is one way to achieve savings, he said. That means doing research to learn such things as a hospital’s infection and readmission rates.
In fact, poor information on provider quality was the third-biggest challenge employers face in maintaining affordable benefit coverage, the survey found. Employees’ poor health habits are the biggest challenge, 64 percent said, followed by poor information on provider costs.
Measuring outcomes of your programs also is important, Nussbaum pointed out.
“Health improvement programs have a longer-term solution set, but you want to at least measure” groups that are identified in programs the employer offers.
Measure the work-loss days of employees participating in an employer-sponsored health care initiative, he suggested, to help determine the success rate of that program.
Strategies that saw major increases among companies surveyed included offering health risk appraisals, offering weight management programs that focus on reducing obesity among workers, and auditing or reviewing eligibility and enrollment in the health plan.
Other survey findings:
• Companies spent an average of $7,211 on health care per employee in 2007; that’s expected to increase to $7,620 in 2008.
• The average annual cost increase for health care was 6 percent, a drop from 8 percent in 2006; costs are expected to increase by 9 percent in 2008 and 8 percent in 2009.
• 83 percent of companies offered health risk appraisals in 2008, an 18 percentage point increase from 2007.
• 27 percent of companies offer CDHPs with a health savings account; 24 percent offer CDHPS with a health reimbursement account.
Kathy Gurchiek is associate editor for HR News. She can be reached at firstname.lastname@example.org.