onsumer-driven health plans, typically a combination of high-deductible medical insurance coupled with a health savings account, are capturing employers’ attention as a way to curb runaway benefit costs.

    The idea has been embraced by many health economists and benefit consultants, who see such consumerism as a solution to the nation’s health-care cost crisis. They attribute the crisis largely to overutilization by benefit plan members exercising little or no discretion in health-care purchasing decisions.

    But critics contend CDHPs encourage members to forgo essential medical care, including preventive screenings and maintenance medication for chronic conditions. They also charge that, because the plans put the onus on members to pay for health-care services, they discriminate against less healthy and lower-paid workers.

    As a result of this early tension, initial enrollment in CDHPs lagged that of managed care plans—considered the last “silver bullet” to cure the nation’s enduring health-care malaise—when they were introduced. Enrollment in the first HMOs totaled about 3 million after the first year, compared with 1.5 million enrolled in CDHPs as many as four years after their launch.

    "The market penetration, considering how long they’ve been in the market, is not as high as it was projected to be," said Sara Collins, assistant vice president at the New York-based Commonwealth Fund, which has been studying CDHPs in conjunction with the Washington-based Employee Benefits Research Institute.

    But that changed in 2008, when word of the some early plans’ success at holding down costs started to spread among the employer community. Not only do CDHPs cost employers 20% less than other health plans, but also the year-to-year rate of increase in those costs is lower, averaging just 3.5% compared with 6.1% for other plans, according to the 2007 National Survey of Employer-Sponsored Benefit Plans by Mercer L.L.C.

    In some cases, employers allowed members to roll over unspent funds in the HRAs at year end, but the HRA was the property of the employer and therefore not portable.

    Passage of the Medicare Prescription Drug Improvement and Modernization Act of 2003 created another funding option for these newfangled CDHPs: health savings accounts. The advantage of the HSA over the HRA was that it could be funded with pretax contributions from both the employer and the employee.

    It was thought that because employees’ own money was at risk, employees would be more stingy about how they used the funds in their HSAs. And because HSAs were the property of the employees, they could take the money with them when they changed jobs or retired. Money remaining in the HSA also could be used to pay post-retirement insurance premiums. Employees also could invest HSA account balances much like they do their 401(k) retirement plan assets.

    Another development also helped to boost the appeal of CDHPs: To keep health benefit premium increases at bay, many employers had been raising deductibles on preferred provider organization plans, almost to the point where CDHPs were beginning to look like an attractive alternative. Why enroll in a PPO with a $1,000 deductible and higher premiums when you could enroll in a CDHP with a $1,100 deductible, lower premiums and perhaps a $500 contribution from your employer to help offset the deductible?

    Today, 5.5 million people are enrolled in consumer-driven plans, 3.2 million of whom have HSAs, according to the annual Kaiser Family Foundation/Health Research & Educational Trust survey released in September. Although PPOs continue to dominate the employer market, covering 58% of covered workers, the percentage enrolled in CDHPs had surged to 8% in 2008 from 5% in 2007 and 4% in 2006, the survey found. Some 20% of U.S. workers are enrolled in health maintenance organizations, 12% in point-of-service plans and 2% in traditional indemnity plans.

    While the survey reported that growth was strongest among small businesses—those with fewer than 200 workers—where 13% are now enrolled in this type of plan, up from 8% in 2007, today more than half of large employers offer CDHPs as an option, according to Tom Billet, a senior consultant at Watson Wyatt Worldwide.

    "They're going to get a share of the market, and that share will continue to grow," he predicts.

    Mercer projects that 19% of employers with 10 or more employees will offer HSA-eligible CDHPs in 2009.

    "Now that the concept has been validated, more employers are taking a look at CDHPs," said Jay Savan, a principal with consultant Towers Perrin in St. Louis. "They see HSAs as a way to reduce overhead while not reducing benefits."

    To encourage more employees to enroll in these lower-cost plans, some employers are offering generous financial incentives that significantly shrink those high deductibles that were the hallmark of the early CDHPs.

    At Towson, Md.-based Black & Decker Corp., for example, employees who enroll their families receive $1,000 from the company to reduce the $3,000 deductible to $2,000. Then, the difference in the employee premium contribution lowers the deductible amount by another $1,744, bringing it to just $256—less than half the $650 family deductible for the company’s PPO plan.

    Employers are able to offer such generous incentives because premiums for CDHPs are significantly less than for other types of plans. On average, employers pay a total of $8,291 annually toward the cost of family coverage for a consumer-driven health plan with an HSA, including a $1,522 contribution to the account, according to the research from KFF/HRET. In comparison, employers on average contribute $9,495 toward the cost of family coverage in non-CDHPs.

    Because CDHPs cost about 20% less than PPOs on average, employers save more as enrollment rises, said Beth Umland, director of research at Mercer in New York.

    CDHP advocates are hoping that as current economic conditions strain employees’ personal budgets, more might consider these health plans as a viable option.

Skipping prevention
    But some CDHP critics have raised concerns that members of consumer-driven plans might cut back on preventive care and other essential medical services such as maintenance medications used to manage chronic conditions.

    A November 2006 study by the Kaiser Family Foundation found that CDHP members were less likely (73% vs. 85%) than their non-CDHP counterparts to have received any health-care services since enrolling in their current plan. They also are less likely (63% vs. 74%) to have had a medical checkup.

    The KFF study also found that 25% of CDHP members skipped a recommended test or treatment, compared with just 15% of their non-CDHP peers.

    A study conducted by researchers at the University of Oregon that was published in the July/August 2008 issue of Health Affairs examining patterns in prescription drug use among CDHP members found that individuals enrolled in CDHPs were much more likely than those with other coverage to discontinue use of antihypertensives, which lower blood pressure, and statins, which lower cholesterol.

    "Patients still don’t know how to decide what's a high-value treatment," said Meredith Rosenthal, associate professor of health economics and policy at Harvard University in Cambridge, Mass., who has been studying medical care utilization by CDHP members.

    Because of CDHP’s high deductibles, plan members "have the same incentive to cut back on high-value care as they do on low-value care," she said. "So you will see lower utilization in CDHPs. Whether that’s an improvement is a little unclear, because it seems that they cut back on important things like medication for hypertension."

    To counteract this unintended consequence, employers and health plans are enhancing benefit communications to remind plan members of the importance of seeking preventive care. Some 62% now cover all of a defined set of preventive services, up sharply from 45% in 2006, according to Mercer’s Ms. Umland. Another 16% cover preventive services at 100% up to a defined dollar limit per year. Only 15% treat preventive care the same as any other covered expense, she found.

    So far, the stepped-up communications, coupled with financial incentives, appear to be working. At CIGNA Corp., for example, members of its CDHP were 2% more likely to seek preventive care services in their first year of enrollment, but 12% to 16% were more likely to seek the services in their second year, according to Meg Woolley, director of Choice Fund product management based in Bloomfield, Conn.

    At Aetna Inc. "our CDHP members access preventive care 20% more than our non-CDHP members," said Pam Kehaley, head of corporate sector national accounts in Woodland Hills, Calif.

    CDHP critics contend another reason the plans cost less is because they attract mostly the healthy and wealthy, an assertion supported by the Commonwealth/EBRI research. Adults in CDHPs are less likely to have chronic health conditions or to smoke, and are more likely to exercise than are people in more comprehensive plans.

    And, a Government Accountability Office report from May 2008 found that taxpayers with HSAs had average adjusted gross incomes of $139,000 in 2005, compared with just $57,000 for those enrolled in other types of health plans.

    The EBRI/Commonwealth Fund study found a similar trend: In 2007, 31% of adults in CDHPs had incomes of $100,000 or more, up from 22% in 2005; just 19% of adults in CDHPs were in households with incomes under $50,000, down from 33% in 2005. But Minnetonka, Minn.-based UnitedHealth Group is finding that these plans are not the exclusive domain of high wage earners, according to Meredith Baratz, vice president of market solutions for UHC’s CDH portfolio.

    She said an analysis of more than 200,000 of UHC’s 1.4 million members enrolled in HSA-eligible health plans during 2006—the last period for which a full year of data was available—showed that enrollment rates were highest among lower-income individuals, defined as those earning less than $25,000 per year. Those individuals represent 64% of UHC’s book of CDHP business.

    And even if the plan members do have lower health risk scores than members of other health plans, that doesn’t necessarily mean they’ll use fewer health-care services, according to Elizabeth Dudek, vice president of practice leadership at Thomson Reuters in Ann Arbor, Mich. Her research of CDHPs has shown that while statistically the plans may attract healthier workers, once they are enrolled, they use more medical services than would be expected of that population.

    "Our data on 260,000 CDHP members shows their risk score is 80, which means, you would expect them to have costs equal to 80% of the costs for the overall average of the population," Ms. Dudek explained.

    But when the medical and prescription drug utilization of the group is measured against the norm, it’s at 109%, not 80%, she said. In addition, actual costs average $3,157 per CDHP plan member, about 10% higher than projected average per-member costs for that population of $2,884. In addition, the amount CDHP members spend on individual services is about the same as for PPO plan members, she said.

    "That tells me that the CDHP members are not going to great lengths to find great deals. They’re using the network just like the PPO members," Ms. Dudek said.

    The only area where CDHP members showed lower utilization was in physician inpatient services, she said, "but they’re still higher than their risk suggests they should be."

    But even if CDHPs initially attract healthier workers, that doesn’t mean they always will. A report by Seattle-based Milliman Inc. reminds employers that "CDHPs are not the first health-care option whose early adopters are healthier….This trend is consistent with historical models of change in health-care options, in particular HMOs and managed care."

    And just as has happened with enrollment in managed care plans, "with time and further enrollment growth, some of the favorable risk difference between CDHPs and other plans may diminish," Milliman’s April 2008 Consumer-driven Impact Study predicts.

Joanne Wojick is a reporter for Business Insurance. To comment, e-mail editors@workforce.com.