A study by the U.S. Government Accountability Office (GAO) finds evidence that health care spending by plan enrollees with health reimbursement arrangements (HRAs) generally increased by smaller amounts or decreased compared with spending by those in traditional health plans.
Consumer-directed health plans (CDHPs) combine a high-deductible health plan with a tax-advantaged account that enrollees can use to pay for health care expenses—typically either an HRA or a health savings account (HSA), as described in the box below.
HRAs and HSAs: An Overview
Enrollees in consumer-directed health plans must keep track of funds in their accounts. If the funds are exhausted before the deductible is met in a given year, enrollees are responsible for paying for the difference out of pocket.
After an enrollee meets the deductible, the plan operates much like a traditional PPO plan. That is, generally the plan pays for most of the cost of covered services and the enrollee contributes a cost-sharing amount—which varies by plan—until meeting the maximum out-of-pocket spending limit, at which point the plan pays 100 percent of the cost of covered services.
Any unspent funds in the account may be rolled over to the next year, thereby reducing or eliminating the enrollee’s share of the deductible in subsequent years.
HRAs must be funded solely by employers, whereas HSAs may be funded by employers and/or employees. On termination of employment, accumulated funds in HRAs generally revert back to the employer—unlike HSAs, which are employee owned and portable.
In its July 2010 report, Consumer-Directed Health Plans: Health Status, Spending, and Utilization of Enrollees in Plans Based on Health Reimbursement Arrangements, GAO looked predominantly at the use of HRAs.
In an effort to restrain cost growth, several employers, including the federal government through its Office of Personnel Management, have offered HRAs for several years. GAO analyzed data from two large unidentified employers—one public and one private—that introduced an HRA option in 2003. GAO compared changes in health spending and use of medical services ("utilization") before and after 2003 for enrollees who switched from a traditional preferred-provider organization (PPO) plan into an HRA plan (the HRA group) with those who stayed in the PPO plan (the PPO group).
In addition, GAO reviewed published studies that included an assessment of the health status, spending and utilization of enrollees in HRAs and other CDHPs compared with traditional plan enrollees.
What GAO Found
Generally, spending and utilization by enrollees in HRAs increased by a smaller amount or decreased compared with those in traditional plans that GAO reviewed. At the time GAO made its data requests to each employer, 2007 data from the public employer and 2005 data from the private employer were the most current and complete data available. Key findings by GAO are noted below.
For private-sector employer plans:
• From the two-year period before switching (2001 and 2002) to the three-year period after switching (2003 through 2005) average annual spending for the HRA group increased by $152 per enrollee compared with $206 for the PPO group.
• This smaller increase for the HRA group was driven partially by smaller increases in spending for physician office visits and decreases in spending for emergency room services.
• Average annual utilization of services per enrollee increased by a smaller amount or decreased for the HRA group compared with the PPO group for four out of seven services GAO reviewed.
For public-sector employer plans:
• From the two-year period before switching (2001 and 2002) to the five-year period after switching (2003 through 2007) average annual spending for the HRA group increased by $478 per enrollee compared with $879 for the PPO group.
• This smaller increase for the HRA group was driven partially by decreases in spending for prescription drugs.
• Average annual utilization of services per enrollee increased by a smaller amount or decreased for the HRA group compared with the PPO group for six out of eight services GAO reviewed.
Similarly, in its review of the findings in 21 published studies related to consumer-directed health plans, GAO found that:
• Seven of eight studies that examined spending and controlled for differences in health status or other characteristics reported lower spending among HRA and other CDHP enrollees relative to traditional plans.
• Three of four studies that assessed visits to the emergency room found a decrease in emergency room utilization among HRA and other CDHP enrollees relative to traditional plan enrollees.
• Six of eight studies that assessed the utilization of preventive services found an increase among HRA and other CDHP enrollees relative to traditional plan enrollees (most HRAs and other CDHPs exempt preventive services from the deductible).
Stephen Miller is an online editor/manager for SHRM.
Just the Stats: What's Known About Consumer-Driven Health Plans, SHRM Online Benefits Discipline, August 2010
Controlling Health Costs: Success Tips Shared, SHRM Online Benefits Discipline, July 2010
Increased Health Care Cost-Shifting Expected in 2011, SHRM Online Benefits Discipline, June 2010
Employers Change Health Benefits to Cut Costs, Alter Behavior, SHRM Online Benefits Discipline, March 2010
Studies Quantify Savings with Consumer-Driven Health Plans, SHRM Online Benefits Discipline, February 2010
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