CDHPs Enroll Nearly a Quarter of Covered Employees

Employers of all sizes added consumer-directed health plans in 2014

By Stephen Miller, CEBS November 26, 2014

Enrollment in consumer-directed health plans (CDHPs) spiked from 18 percent to 23 percent of all covered employees in plan year 2014, according to findings released in November from Mercer’s annual National Survey of Employer-Sponsored Health Plans.

Meanwhile, enrollment in health maintenance organizations (HMOs) fell to just 16 percent, the lowest level of enrollment seen since the survey began in 1993. Enrollment in traditional plans—including preferred-provider organizations (PPOs), point of service (POS) plans, and indemnity plans, combined—fell from 64 percent to 61 percent.

*The diminishing number of POS plans were combined with PPO plans in the chart above beginning in 2008, and traditional indemnity plans were added to the combination beginning in 2013.

Source: Mercer, National Survey of Employer-Sponsored Health Plans

Mercer’s annual survey includes U.S. public and private organizations with 10 or more employees; for the 2014 survey, 2,569 employers responded.

CDHPs are typically higher-deductible, lower-premium health plans linked to either a health savings account (HSA) or health reimbursement arrangement (HRA). The SHRM Online article Consumer-Driven Decision: Weighing HSAs vs. HRAs provides details.

Employers of all sizes, but especially large employers, added CDHPs in 2014. Offerings of CDHPs jumped from 39 percent to 48 percent among employers with 500 or more employees, and from 63 percent to 72 percent among jumbo employers with 20,000 or more employees.

Source: Mercer, National Survey of Employer-Sponsored Health Plans

Lower Employer Costs

Many employers that did not already cover all employees working 30 or more hours said they would add a lower-cost plan for newly eligible workers, and this may have helped fuel CDHP growth in 2014, Mercer’s analysis noted.

The average cost of coverage in a CDHP paired with a tax-advantaged HSA is 18 percent less than coverage in a PPO and 20 percent less than in an HMO: $8,789 per employee, compared to $10,664 for PPOs and $11,052 for HMOs, the survey found.

Source: Mercer, National Survey of Employer-Sponsored Health Plans

These plans are also a top strategy for employers looking for ways to avoid paying the “Cadillac tax” in 2018—a These plans are also a top strategy for employers looking for ways to avoid paying the “Cadillac tax” in 2018—a 40 percent excise tax on high-value health coverage that costs more than $10,200 for an individual or $27,500 for a family. Mercer estimates that about a third of employers are currently at risk for triggering the tax in 2018 if they make no changes to their most costly plan.

“While new plan implementations are driving up CDHP enrollment, we are also seeing growth in enrollment in existing plans as employees become more comfortable with consumerism and employers provide them with tools to help manage the higher deductible,” said Beth Umland, Mercer’s research director, in a news release accompanying the survey findings.

An Option versus Sole Replacement

Most employers still offer a CDHP as a choice alongside a traditional PPO or HMO. Just 7 percent of all large employers, and 11 percent of jumbo employers, offered a CDHP as the only plan available to employees at their largest worksite in 2014, the survey showed.

While this practice may become more common—18 percent of large employers say it’s likely they will offer a CDHP as a full replacement within the next three years—for now it remains the exception.

Source: Mercer, National Survey of Employer-Sponsored Health Plans

Transparency Tools and Supplemental Benefits

Employees are being given an increasing amount of financial responsibility in all types of plans, not just CDHPs. While the median individual deductible in an HSA-based plan is $2,500, it’s still a substantial $1,500 in a PPO—and growing (large employers raised PPO deductibles by 15 percent on average in 2014), the survey revealed.

As a consumerism strategy, high deductibles are meant to give employees a financial incentive to shop more carefully for health services. But employees need help from employers to do so. The growing availability of transparency tools is allowing more employees to compare health provider price and quality information and factor cost into their decision-making.

More than three-fourths of large employers (77 percent) say their employees now have access to this type of information, either by telephone, on the web or through a mobile app.

In addition, 2014 saw a surge in offerings of telehealth services, from 11 percent to 18 percent of all large employers—and from 18 percent to 34 percent of jumbo employers. These services allow employees to access primary care services over the phone at a low cost to help keep out-of-pocket spending low.

Voluntary benefits like critical care coverage or a hospital indemnity plan allow employees to supplement a less-expensive medical plan at a low cost. The majority of employers say that they offer voluntary benefits specifically to help employees fill gaps in employer-sponsored benefits.

Source: Mercer, National Survey of Employer-Sponsored Health Plans

“It’s a major shift from the old ’first-dollar coverage’ mentality,” said Tracy Watts, Mercer’s national leader for health reform. “These tools put the consumers in the drivers’ seat, giving them the ability to make smart financial decisions about their health care spending.”

Age and Income Affect Choice of High-Deductible Plans

More than four in 10 Americans (44 percent) prefer a high-deductible plan with a lower monthly premium, according to a December 2014 pulse survey report; 36 percent would rather choose a low-deductible plan with a higher monthly bill, and 9 percent would not choose either of these two options.

Millennials and Americans with household incomes of $30,000-$49,999 were the most likely to prefer a high premium/low-deductible plan, while higher income Americans ($50,000 and up) and those ages 30-64 years-old were more likely to prefer a low premium/high-deductible plan. Specifically:

52 percent of Americans making $50,000 a year or more would rather have a plan with a low premium but high deductible, while just 39 percent of those earning less would make the same choice.

46 percent of young people between the ages of 18 and 29 prefer a plan with a high monthly premium and a low deductible, compared with just 33 percent of those 50 or older.

16 percent of seniors 65 or older say they like neither option, versus just 3 percent of the youngest respondents.

The findings are based on phone interviews conducted Nov. 20-23 among 1,004 adults living in the continental United States.

Stephen Miller, CEBS, is an online editor/manager for SHRM. Follow him on Twitter @SHRMsmiller.

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