People who are medically vulnerable—those with low incomes or chronic health problems—who enroll in high-deductible, consumer-directed health plans (CDHPs) are at no more risk for cutting back on needed health care than others who enroll in the plans, according to a new Rand Corp. study.
The findings, from the largest study to examine the effects of plans that combine a high deductible with personal accounts, contradicts some earlier smaller studies that found medically vulnerable individuals cut back more than other people enrolled in these plans.
The project examined the first-year experiences of more than 360,000 families throughout the U.S. who enrolled in CDHPs offered by their employers from 2003 to 2007. The study, conducted with consulting firm Towers Watson, was published online by the journal Forum for Health Economics & Policy.
In almost all cases, the study found, CDHP benefit designs affected low-income populations and the chronically ill to the same extent as nonvulnerable populations. These effects included:
• Significant reductions in overall spending that increase with the level of the deductible.
• Greater reductions for high-deductible plans when paired with health savings accounts (HSAs) in comparison to health reimbursement arrangements (HRAs).
"One important issue is whether high-deductible health plans will leave low-income and chronically ill patients with inadequate access to health care," said Amelia Haviland, lead author of the study and a statistician at Rand, a nonprofit research organization. "We did not find greater cutbacks for medically vulnerable families. The evidence suggests that nonvulnerable families, low-income families and high-risk families are equally affected under high-deductible plans."
For all populations, enrollment in CDHPs led to reductions in some care that is considered beneficial though not essential, which could have greater health consequences for low-income and chronically ill people. However, other studies have noted high levels of unnecessary overutilization of health services under low-deductible health plans and have identified this overuse as driving health care cost escalation above the general inflation rate.
Most CDHPs waive the deductible for preventive services as permitted by the legislation authorizing HSAs. Moreover, the Patient Protection and Affordable Care Act required that cost sharing for specific preventive care services be eliminated for nongrandfathered private insurance plans with plan years that started after Sept. 23, 2010. Federal agency guidance on preventive care released in July 2010 requires nongrandfathered plans to provide first-dollar coverage and eliminate cost-sharing requirements for listed preventive services.
The Rand report noted that several case studies suggest that eliminating the deductible does encourage CDHP patients to continue preventive service use even though use of other services is reduced.
CDHPs have been gaining favor as a way to help control health care costs. By 2009, about 20 percent of Americans with employer-sponsored health coverage were enrolled in such plans, according to Rand. In 2010, more than 54 percent of large U.S. employers offered at least one high-deductible health plan to their employees, according to a Towers Watson survey conducted with the National Business Group on Health.
The Rand study provided new findings about CDHP designs that have the greatest impact on reducing costs. High-deductible plans coupled with HSAs reduced spending by a greater amount than high-deductible plans with HRAs, high-deductible plans with no accounts and plans with moderate deductibles.
Unlike HSAs, which are funded by employees or employers and are employee owned, HRAs are employer funded and cannot be taken from job to job (see the SHRM Online article "Health Care Consumerism: HSAs and HRAs").
"The greater spending cuts seen with health savings accounts is consistent with the stronger incentive to save that are created with these types of accounts," Haviland said. "When employees own an account for the long term it seems to eliminate the 'use it or lose it' incentives attached to other reimbursement accounts."
Report: HSA Participants' Savings and Usage Habits
Americans are increasingly relying on health savings accounts (HSAs) to cover current and future medical expenses, according to a report from J.P. Morgan Treasury Services.
“As health care costs continue to rise year over year, Americans are increasingly leveraging HSAs as a means for using pretax dollars on current medical expenses, as well as a way to invest and earn money for future health costs,” said David Josephs, managing director at the firm.
Based on more than 700,000 client HSA programs managed by J.P. Morgan (with total assets under management of more than $1.1 billion), the report revealed that in 2010:
• The average HSA balance was $1,494—up 7 percent from 2009.
• The average account contribution was $1,884 vs. $1,816 in 2009.
• 73 percent of accountholders contributed more than they spent during each month in 2010 vs. 68 percent in 2009.
• The average accountholder age is 43.
• On average, accountholders spent $5 more from their HSAs in each month of 2010 vs. 2009. The average amount spent or distributed from an HSA was $1,377 vs. $1,305 in 2009.
• While purchases at drug stores and grocery stores resulted in the highest volume of transactions per account, hospitals and dental expenses had the highest average dollar amount per transaction ($207 and $195 respectively, basically on par with 2009.)
J.P. Morgan’s HSA Program Snapshot is available here (registration required).
Stephen Miller, CEBS, is an online editor/manager for SHRM.
Sweeping Health Plan Design Changes on Tap, SHRM Online Benefits Discipline, March 2011
HSA Participants: Savers vs. Spenders, SHRM Online Benefits Discipline, March 2011
Aetna Study: CDHPs Saved Employers Millions of Dollars, SHRM Online Benefits Discipline, February 2011
Unexpected Boost for Consumer-Directed Health Plans, HR Magazine, December 2010
Health Savings Accounts Can Build Retirement Wealth, SHRM Online Benefits Discipline, October 2010
Future Bright for Health Savings Accounts, Says Policy Analyst, SHRM Online Benefits Discipline, September 2010
SHRM Online Benefits Discipline
SHRM Online Health Care Reform Resource Page