CDHP Cost-Savings Maintained over Time, Researchers Find

Cost reductions driven by spending decreases in outpatient care and pharmaceuticals

By Stephen Miller, CEBS March 30, 2015

Consumer-directed health plans (CDHPs) have aided employers in containing health care costs without necessarily leading to more expensive health care for patients, according to a March 2015 working paperfrom the nonprofit National Bureau of Economic Research.

CDHPs combine high deductibles (at least $1,300 for individual coverage in 2015) and tax-preferred savings or spending accounts that workers and their families can use to pay out-of-pocket health care expenses—primarily health savings accounts and health reimbursement arrangements (here’s how they differ).

“Prior research shows that CDHPs reduce spending in the first year,” according to the working paper. “However, there is little research on the impact of CDHPs over the longer term. We add to this literature by using data from 13 million individuals in 54 large U.S. firms to estimate the effects of a firm offering CDHPs on health care spending up to three years post offer. … We find that spending is reduced for those in firms offering CDHPs in all three years.”

Annual health care spending, according to the findings, was 6.6 percent, 4.3 percent and 3.4 percent lower on average for the first three years respectively for companies with CDHPs when compared to companies without them.

The researchers found that the CDHP savings effect varied considerably across spending category:

Prescription drugs. Relative firms not offering CDHPs, annualized spending growth on pharmaceuticals was 5 to 9.5 percentage points lower in the three years after firms offered CDHPs.

Outpatient services. Spending growth on outpatient care was 3.0 to 6.8 percentage points lower in the first three years relative to non-offering firms.

Emergency room use. No differences were detected in cost growth for emergency room care in any of the first three years after a CDHP was offered.

“Three years out, there consistently seems to be a reduction in total health care spending” at employers offering CDHPs, Amelia Haviland, a professor of statistics and public policy at Carnegie Mellon University’s Heinz College and co-author of the paper, told Kaiser Health News. Although the study didn’t extend beyond a three-year horizon, “this was interesting to us that it persists for this amount of time.”

The research also suggests that “the impact of CDHPs is greater when paired with HSAs (versus HRAs) and when employers make smaller account contributions,” which is more likely to promote cost-conscious decision-making by employees. However, separate research by United Benefit Advisors indicates that generous employer contributions to HSAs are correlated with an increase in employee selection of high-deductible health plans when they are presented with both traditional health coverage and CDHP options.

An unrelated 2014 study by the Society for Human Resource Management found that 19 percent of HR professionals at organizations that provide employee coverage said offering consumer-driven plans was the most successful activity for controlling the costs of health care.

A Look at Lower CDHP Premiums

Evidence of lower annual premiums for consumer-directed health plans was highlighted in separate study findings published in March 2015 by United Benefit Advisors (UBA), an alliance of more than 140 independent benefit advisory firms.

According to new data released from UBA’s 2014 Health Plan Survey, the average annual health plan premiums per employee for all plan types in 2014 was $9,504. CDHPs had the lowest annual premiums per employee, specifically 6.4 percent less expensive than average. In contrast, preferred provider organization plans cost 9.7 percent more than CDHPs.

Source: United Benefit Advisors’ 2014 Health Plan Survey.

Costs shown for preferred provider organization (PPO) plans, health maintenance organizations (HMOs), point of service (POS) plans, consumer directed health plans (CDHPs) and exclusive provider organization (EPO) plans.

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


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