Evolution of Consumer Driven Health Plans Blog Series: Part 4

February 9, 2016

Evolution of Consumer Driven Health Plans Blog Series: Part 4

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Part 4: Impact of Consumer Driven Health Plans on Employees

This is the fourth in our five-part series, “The Evolution of Consumer Driven Health Plans: From Cost Shifting to True Healthcare Consumerism.”  The goal of the series is to help employers and plan managers assess both the positive and negative consequences of CDHPs, and to recommend steps they can take to better equip employees to be informed healthcare consumers.  In our last article, we defined the various forms of CDHPs available on the market and explored the rapid adoption of these plans. Here we will assess the impact of CDHPs on employee finances, health and satisfaction.

Rapid adoption of CDHPs is a natural consequence of the rise in healthcare costs with both employers and employees seeing these plans as a way to reduce costs. The broader impacts of this trend, however, are just now beginning to emerge.

Financial Impact on Employees

In recent years, employee wages have stagnated while healthcare costs (premiums, co-pays, drug costs and deductibles) have risen dramatically. This means that net household income is actually declining.

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Switching to a CDHP is seen as an easy way to lower costs, however, many households lack the resources to meet the higher deductibles and co-insurance that accompany these plans which has led to avoidance of treatment. According to a Kaiser Family Foundation study, the average liquid financial assets of a one-person household total $2,503 and of a multi-person household are $5,527. These savings levels are well below the corresponding annual spending caps of $6,450 and $12,900. Less than half of households above the poverty level have sufficient liquid assets to cover their out-of-pocket maximum. Subsequently, the Consumer Financial Protection Bureau reports that medical debt is the biggest factor driving negative credit reports.

Healthcare Utilization Impact

Multiple studies have confirmed that individuals on CDHPs utilize less healthcare services than those on traditional plans.  According to research by the Rand Corporation, overall healthcare spending was, on average, 14 percent lower for families enrolled in CDHPs with at least a $1,000 deductible. This spending difference was not evident with moderate deductibles — from $500 to $999.

Healthcare Avoidance

Reductions in outpatient services and prescription drug use were the biggest drivers of the spending reduction; however, in the Rand research, families on CDHPs also cut back on preventive care such as immunizations and cancer screenings — even though that care is not subject to a deductible.

The spending decreases came from both lower utilization of services and use of less expensive services. 

Is Lower Utilization Impacting Health?

No conclusive data points are available on the impact of these lower utilization rates on overall population health. To date, studies suggest no adverse impact of lower healthcare utilization on the population as a whole, but they have identified some potentially negative impacts on lower income employees and employees with chronic diseases.  The RAND Health Insurance Experiment (HIE) found that low income employees with identifiable health problems using CDHPs were less likely to have their blood pressure controlled and their vision corrected than similar people in traditional plans.

High cost sharing for prescription drugs, whether in traditional plans or CDHPs, has been shown to have adverse effects on adherence to recommended care. For some chronic conditions, including congestive heart failure and diabetes, increased cost sharing is associated with lower adherence, more frequent discontinuation, and increased use of other health care services.

Impact on Enrollee Satisfaction

Several studies suggest there is a significantly lower level of satisfaction for members enrolled in CDHPs than those enrolled in traditional PPO plans. The Employee Benefits Research Institute (EBRI)/Commonwealth Fund's Consumerism in Health Care Survey found that only 47 percent of CDHP  enrollees and 35 percent of HDHP enrollees stated being very or extremely satisfied with their plans, compared with 64 percent of those with more comprehensive insurance. Employee dissatisfaction largely stems from the lack of available information to help make informed care decisions and lack of transparency about physician costs and quality. 

Satisfaction Gap

Access to services is another issue driving low satisfaction rates, with 38 percent of individuals in CDHPs reporting problems accessing the health care system.

While CDHPs are resulting in reduced healthcare spending, this trend is likely driven more by avoidance of services than by smarter healthcare purchase decisions, and healthcare avoidance could have long term impacts on employee health, satisfaction and retention.  In the final installment in our series on the “Evolution of Consumer Driven Health Plans” we will recommend best practices empower a consumer driven model that drives savings through smarter healthcare management instead of avoidance and cost shifting. To learn more, download the full white paper.

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