Consumer-Directed Health Plans: Implications for Health Care Quality and Cost

RAND

Confronted with double-digit health care premium increases, employers are turning to high-deductible health plans, tiered benefit designs, and information tools that shift greater financial responsibility and decision-making to employees.

June 2005

Health care premiums make up a growing percentage of corporate spending, leading employers — large and small — to search for new ways to contain costs.

Under the rubric of "consumer-directed" health care, employers are adding high-deductible health plans, personal health care spending accounts such as Health Savings Accounts (HSAs), and tiered benefit designs to their plan offerings. They are also providing tools to help employees make more informed decisions.

Proponents of high-deductible plans believe that financial incentives, coupled with decision-making tools, will encourage consumers to eliminate unnecessary care and seek lower-cost, higher-quality providers. Critics wonder if such incentives (or disincentives) may lead patients to skimp on care that could drive up costs in the long run.

This report provides an overview of trends in the adoption of these consumer-directed approaches and a synthesis of what is known about their effectiveness.

Key findings include:

  • Spending by those in a high-deductible plan without a personal spending account would likely be 4% to 15% lower than in today's typical plan, but the effects on health care costs over time are unknown.
  • Although only 10% of businesses offer a plan with at least a $1,000 deductible, the percentage is rising rapidly.
  • At least 75% of insurers offer health plans compatible with Health Savings Accounts. One estimate foresees five million enrollees by the end of 2005.
  • Although past studies have found that cost sharing has little effect on choice of provider, insurers report that tiered products can reduce premium costs.

The full report and an executive summary are available under Document Downloads.