Lots of Window Shopping, But Modest Consumer-Directed Health Plan Adoption
Optimism Remains Strong for High-Deductible, Spending-Account Health Plans
March 27, 2008
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WASHINGTON, DCWhile adoption of high-deductible health
plans coupled with spending accounts remains modest, supporters believe consumer-directed
health plans (CDHPs) will take hold as part of a larger employer strategy to
confer more responsibility on workers for health care costs, lifestyle choices
and treatment decisions, according to a study released today by the Center for
Studying Health System Change (HSC).
National surveys suggest that while CDHPstypically a high-deductible health
plan accompanied by either a health reimbursement arrangement (HRA) or health
savings account (HSA)are being offered by a growing number of employers, enrollment
in these products constituted just 5 percent of total enrollment in employer-sponsored
health plans in 2007.
"Theres a lot of window shopping going on with consumer-directed health
plans, and theres a lot of watchful waiting to see how early adopters fare,"
said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research
organization funded in part by the Robert Wood Johnson Foundation (RWJF).
"In the past two years, health plans have expanded consumer-directed offerings
in response to employer demands for products that support broader consumer strategies,
where workers take more responsibility for health care costs, lifestyle choices
and treatment decisions," said HSC Health Researcher Ann Tynan, M.P.H.,
coauthor of the study with HSC Senior Consulting Researcher Jon Christianson,
Ph.D., of the University of Minnesota. "But so far large employers are
hesitant to structure premiums to incorporate strong incentives to steer employees
to these plans."
The studys findings are detailed in a new HSC Issue BriefConsumer-Directed
Health Plans: Mixed Employer Signals, Complex Market Dynamicsavailable
here. The study, funded by RWJF, is based on HSCs 2007 site visits to 12
nationally representative metropolitan communities: Boston; Cleveland; Greenville,
S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey;
Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y. HSC has been tracking
change in these markets since 1996.
Other key study findings include:
- In the last two years, many health plans have developed various consumer-support
tools, such as online information about hospital and physician quality and efficiency;
tools to help enrollees estimate the costs of care; and information about healthy
lifestyles and treatment decisions.
- Plans believe that having CDHP benefit designs and consumer support
tools are essential to "get in the door" when marketing to employers
of all sizes. Increasingly, employers prefer to use a single carrier for all
of their health plan offerings, which plans say requires them to offer a full
range of products, including CDHPs, to remain competitive.
- Some employers believe that CDHPs, especially tied to HSAs, are difficult
for some employees to understand and, therefore, require extensive employee
education when offered. Employees must understand the federal tax rules and
regulations governing HSAs, including contribution caps and what medical expenses
can be paid using HSA funds. Further, consumers may have to shop for an HSA
provider to administer the account if their employer does not contract with
- Some employers perceive the portability of HSAs as a negative feature,
especially in industries with high employee turnover. These employers respond
by contributing little or nothing to the account or by offering an HRA instead.
- Large employers sometimes value CDHPs as part of an overall strategy
to shift more responsibility for health care to employees but have not made
changes to premium contributions to encourage employee adoption.
- Smaller employers with low-wage workforces typically offer an HSA
as an embellishment to a high-deductible plan and often do not contribute to
the account. In contrast, smaller employers with high-wage professionals are
more likely to offer HSAs because employees value the tax advantages. These
employers also are more likely to contribute to employees accounts.
The Center for Studying Health System Change is a nonpartisan policy research
organization committed to providing objective and timely research on the nations
changing health system to help inform policy makers and contribute to better
health care policy. HSC, based in Washington, D.C., is funded principally by
the Robert Wood Johnson Foundation and is affiliated with Mathematica Policy