U.S. employees saved an average of $187 a year in total out-of-pocket costs by using a high-deductible consumer-driven health plan (CDHP). Families saved an average of $204 a year by using a CDHP, according to 2011 data compiled by HighRoads, a provider of health care costs and compliance services, and the Corporate Executive Board, a research and advisory services company.
While CDHPs provide savings in premiums and in overall maximum out-of-pocket exposure, the savings might be too small and the deductible too high relative to traditional preferred provider organization (PPO) plans and health maintenance organization (HMO) plans to encourage a larger percentage of employees to switch to a CDHP. As such, PPOs remain the most popular health care plan offering.
The 2011 data, from over 10,500 medical plan designs and rates representing over 30 million Americans, revealed the following trends:
• PPO plans remained the most widely offered employer plans in the U.S., despite heavy communications around consumerism strategies with high-deductible CDHPs. PPOs represented 39 percent of U.S. employer plans; HMOs represented 27 percent; and high-deductible CDHPs, which can be linked to a health savings account (HSA), represented 17 percent.
• Monthly employee premiums for traditional (non-high-deductible) plans were consistent across the board, with an average monthly employee-only premium of $132.11. PPO premiums average $149.88 per month. HMO premiums average $132.73 per month. Exclusive provider organization (EPO) plans average $111.36 per month.
• Monthly employee premiums for CDHPs were much lower, with an average monthly employee-only premium of $62.14.
• For most individual employees and families, CDHP plans offered a lower annual total out-of-pocket cost compared to PPOs. When adding the average out-of-pocket costs for annual premiums, in-network deductibles and HSA contributions, the average total annual individual out-of-pocket cost was $2,128 for CDHP plans vs. $2,315 for PPOs. For families, the average total annual out-of-pocket cost was $5,656 for CDHPs vs. $5,860 for PPOs.
• For plans requiring co-payments (non-CDHPs), the average in-network co-pays were $19 per visit for primary care providers, $31 per visit for specialists and $103 per visit for emergency room.
The data shows "that employee education around the cost savings possible with CDHPs may help many employees reduce their out-of-pocket health care expenses while offering them increased flexibility and control over their health care decisions,” said Eric Parmenter, vice president of consulting at HighRoads.
The Shift to Full-Replacement CDHPs: Implementation Tips
Because encouraging employees to enroll in a CDHP may not provide sufficiently high enrollment numbers for significant cost reduction, more companies are considering offering only one or more CDHPs.
According to a 2011 Towers Watson/National Business Group on Health study, 8 percent of employers offered full-replacement CDHPs to at least a portion of their workforce. It’s anticipated that this rate could reach nearly 13 percent by 2012 if companies follow through with their current health plan strategy.
“Before companies make the commitment to full-replacement CDHP, there are a number of factors they need to consider," advised Jennifer Benz, founder and CEO of Benz Communications, an HR communications strategy boutique.
"They need to look at the needs of low-income employees, especially those with families, and ensure they are protected from high out-of-pocket costs with a generous employer contribution to the health savings or health reimbursement account. They also need to weigh the challenge of doing a full replacement against the opportunity to drive high voluntary participation in CDHPs through well-crafted plan design, costs and communication.”
To help companies successfully implement a full-replacement CDHP, Benz suggested the following:
• Connect change to the big picture. Think about the over-arching benefits strategy. Is there a wellness component, for example, that can be tied in to full-replacement CDHP communications? Is the CDHP part of an evolving benefits package? Be sure to explain clearly how this change is connected to your overall strategy. Likewise, help employees and their families see the big picture for themselves. Teach them how health decisions are connected to retirement decisions and the benefits of saving for future health expenses through tax-advantaged HSAs.
• If employees are offered a choice among CDHPs, make it meaningful. Offering multiple consumer-directed health plans can still allow for some employee choice. But many people are overwhelmed by health care decisions and will not be able to decipher the complexities of high-deductible plans and various account options. If offering more than one plan, make sure that the options are differentiated enough to help employees make clear and confident decisions about which plan is best for their personal situation.
• Involve all key stakeholders and address the news media proactively. Stop the rumor mill before it starts and prevent news of the company’s move to a full-replacement CDHP from hitting the news before it has been announced. Get media relations people to send out news releases with the full what and why of the company’s move to a full-replacement CDHP. Make sure that union heads, managers and other important stakeholders are kept up-to-date so that they can answer questions and calm any fears.
• Test the plan with focus groups. Listen to employees. Ask them what they need to use the plan well. Use their feedback to adjust the communication strategy and get testimonials that can be incorporated into communications.
• Use the right mix of media to reach diverse audiences. It's important to reach all generations in the workforce using a combination of print media and new media. A benefits website is just the beginning. Twitter and blogs can be used to have a conversation with your team at minimal cost. The vast majority of health care decision-makers are women. Find ways to get the information to them, such as a robust benefits website and strategic, targeted print materials.
• Communicate early and often; remember to listen and respond. Employee reactions will vary. Some might be upset with only a CDHP option or afraid of the impact. Others might already be enrolled in a CDHP and might wonder what the big deal is. Communications should anticipate these reactions and give employees enough time and information to be on board with the changes. Communicate at least three months before annual enrollment. Include user guides and tip sheets that explain how CDHPs work. Anticipate employees’ need to vent; expect the call center to light up. Listen and respond.
• Help people relate. Similar to testimonials, “people like me” scenarios help reach all of the demographic groups in your workforce. For example, a young, single person will use the plan differently than a parent.
• Communicate year-round. No matter what media are being used, keep the conversation going all year. Social media tools like Twitter and blogs are a cost-effective way to publish fresh streams of news and information about employee benefits.
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Health Savings Account Enrollment Continues to Grow, SHRM Online Benefits Discipline, June 2011
Employer Medical Costs Expected to Rise 8.5% in 2012, SHRM Online Benefits Discipline, May 2011
Consumer-Driven Decision: Weighing HSAs vs. HRAs, SHRM Online Benefits Discipline, May 2011
Cost-Shifting 2.0: Employees Likely to Contribute More, SHRM Online Benefits Discipline, April 2011
Sweeping Health Plan Design Changes on Tap, SHRM Online Benefits Discipline, March 2011
Aetna Study: CDHPs Saved Employers Millions of Dollars, SHRM Online Benefits Discipline, February 2011
SHRM Online Benefits Discipline
SHRM Online Health Care Reform Resource Page