Why CDHPs Are Still Wait And See

Consumer-Driven Trends Of 2005

So CDHPs aren’t exactly the new HMO. As we head into 2006, employers and individuals aren’t climbing aboard the consumer-driven bandwagon as quickly as predicted. Here’s how CDHPs fared last year:

1. Small employers are thinking about CDHPs…but they’re not embracing them yet.

CDHPs are on the horizon for employers, with 34% of all employers seeing consumerism as a significant cost-management strategy for the next five years, according to a survey conducted by MercerHR this fall.

In the meantime, small employers have shown more interest in CDHPs than have actually adopted them: In 2004, I2% of small employers said they were likely to offer a plan in the next year, yet only 2% actually did so in 2005 (MercerHR).

11% of small employers said they were likely to offer a consumer-directed plan in 2006, but this could be yet another optimistic projection.

2. Consumer information is still limited.

In CDHP theory, the more the consumer has to spend out of pocket, the more they will consider cost before purchasing health care.

In 2005, CDHP enrollees did begin showing signs of cost consciousness: Over 70% of CDHP enrollees say their plan’s terms have caused them to think about cost when deciding to see a doctor, according to a recent survey conducted by the Employee Benefit Research Institute (EBRI).

Yet these cost-conscious consumers still don’t have much more than their doctor’s word to go on when it comes to price.

Insurers and providers are still slow to meet the needs of comparison shopping consumers. Information on health care quality and prices is still vastly undisclosed, meaning consumers have little choice but to make their health care purchases blindly – or not at all. A handful of carriers, including Aetna and Hartford, have got the ball rolling by posting consumer-friendly prices on their websites.

3. Consumer satisfaction is lower.

Individuals aren’t as happy with their CDHPs as those with traditional coverage, according to the EBRI survey. In fact, 42% of individuals with CDHPs who responded reported being satisfied with their health plan, compared with the 63% that is satisfied with traditional plans.

Satisfaction may have also dipped due to higher levels of out-of-pocket spending: 31% of CDHP enrollees spent 5% or more of their income on out-of-pocket costs and premiums, compared with 12% enrolled in traditional plans (EBRI).

Whether it’s a lack of price information or just a tight budget, those enrolled in consumer-driven plans are also more likely to skip care.

4. Insurers have high hopes.

At least if you look at the big moves made in 2005. The Blue Cross and Blue Shield Association announced in December their plans to launch a bank to help administer their high-deductible plans, including Health Savings Accounts (HSA).

That makes Blue just the second insurer to cross over into banking, following United Health Group’s 2002 move, when they chartered Exante Bank to integrate financial services into their business. Exante meanwhile continued to diversify their investment options for consumers with HSAs in 2005.

In May, the nation’s leading provider, WellPoint, placed their money on consumer-driven plans ($185 million, to be exact), when they purchased CDHP trailblazer Lumenos.

On the CDHP horizon: The Flex HSAs Act introduced into legislation late in 2005 aims to seriously reform consumer-directed health care. If passed, consumers could use FSAs and HRAs with their HSA/high deductible plans to pay out of pocket expenses. The bill would also raise the allowable contribution amount consumers can make to their HSA accounts. If the legislation passes, the more flexible CDHPs could be increasingly attractive to consumers and employers.