If consumer-directed health plans (CDHPs) grew to account for half of employer-sponsored insurance in the U.S., health costs could drop by $57 billion annually—about 4 percent of health care spending for the nonelderly, according to a Rand Corp. study, published in the May 2012 issue of the journal Health Affairs.
The study estimates that if CDHPs encompassed 25 percent of the policies selected by people with employer-based insurance, cost savings in the nonelderly population would be in the range of 1 to 2 percent of health care spending. At 75 percent penetration, savings would range from 5 to 9 percent.
Researchers from Rand, Towers Watson and the University of Southern California (USC) examined the claims experience of 59 large employers across the U.S. to determine how consumer-directed health plans influenced health care spending. The study was funded by the California HealthCare Foundation and the Robert Wood Johnson Foundation.
Enrollment Continues to Climb
CDHPs, which include high deductibles and personal health accounts, are a market-based approach that many U.S. employers have adopted over the past decade to address health care spending. These plans typically have annual deductibles of at least $1,000 per person and are coupled with a tax-exempt health savings account (HSA) or health reimbursement arrangement (HRA) to help enrollees pay for out-of-pocket expenses (see the SHRM online article "Consumer-Driven Decision: Weighing HSAs vs. HRAs").
Workplace enrollment in CDHPs jumped from 4 percent of workers in 2006 to 13 percent in 2010, the Rand study found. The trend continued in 2011, reaching 17 percent of workers with employer-provided coverage, according to the Kaiser Family Foundation/Health Research & Educational Trust 2011 Health Benefits Survey.
"Continued pressures to cut costs, combined with incentives in the federal Affordable Care Act, make the 50 percent enrollment level plausible over the coming decade," said study leader Amelia M. Haviland, a statistician at Carnegie Mellon University and Rand Corp., a nonprofit research organization. "But given the limited information available to consumers regarding costs and quality, we need to carefully examine whether additional upfront patient costs will diminish the quality of health care."
Enrollees Make Different Choices
Among families enrolled in CDHPs, about two-thirds of the savings were the result of fewer encounters with health care providers, the researchers found. The remaining third was caused by lower spending per encounter, suggesting that patients were making different choices about tests and treatments. Families in consumer-directed plans used fewer brand-name drugs, had fewer visits to specialists and had fewer elective hospital admissions than families in traditional plans.
"People in consumer-directed plans initiate health care less often and when they do they receive fewer or less costly health services than individuals in other health plans," said co-author Neeraj Sood, an associate professor at the Schaeffer Center for Health Economics and Policy at USC and a Rand economist. "What we don't yet know is whether the health care that was eliminated was unnecessary."
The study found modest first-year reductions in use of highly recommended care such as cancer screenings and routine testing to monitor patients with diabetes. This was despite the fact some preventive care was offered at no cost.
"There needs to be better education of enrollees about plan features and how to navigate medical decision-making," Haviland said. "The goal is to get patients to think critically about their care, not reduce high-value care that can help keep them healthy."
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Unnecessary ER Visits Linked to Low Co-Pays, SHRM Online Benefits Discipline, May 2012
For 2013, Higher Limits for HSA Contributions, Out-of-Pocket Expenses for High-Deductible Plans, SHRM Online Benefits Discipline, May 2012
Those in CDH Plans More Educated, Healthier, Wealthier, SHRM Online Benefits Discipline, April 2012
Study: CDH Plans Saved $9,700 per Employee over Five Years, SHRM Online Benefits Discipline, February 2012
Health Accounts Continue to Grow in Numbers, Assets, SHRM Online Benefits Discipline, January 2012
Rand Study: CDHPs Don't Hurt the 'Medically Vulnerable,' SHRM Online Benefits Discipline, April 2011
SHRM Online Benefits Discipline
SHRM Online Health Care Reform Resource Page