Growth of Consumer-Directed Health Plans to One-Half of All Employer-Sponsored Insurance Could Save $57 Billion Annually

Amelia M. Haviland, M. Susan Marquis, Roland D. McDevitt, and Neeraj Sood

Health Affairs looks at the pros and cons of consumers paying more of their medical costs. As CDHPs grow in popularity, billions of dollars may be saved, but prevention might decline.

May 2012
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Consumer-directed health plans (CDHPs), which feature a high deductible and a personal health savings account, can reduce medical spending by employers and consumers. In this Health Affairs article, RAND researchers used health insurance claims, surveys, and spending benchmarks to understand how CDHPs achieve cost savings, to calculate the effects of higher enrollment in CDHPs on costs, and to uncover the potential for unintended consequences, such as prevention reduction and adverse selection.

Patients enrolled in CDHPs had fewer episodes of care over the same time period than patients enrolled in traditional plans. Furthermore, these patients were found to have fewer visits to specialists, fewer hospitalizations, and lower use of brand-name drugs — all of which lowered their costs.

Patients also were shown to use fewer preventive services; for example, cancer screenings in the first year of CDHP enrollment declined by 3% to 5%. Taken together, these reductions could result in $57.1 billion savings annually if enrollment in CDHPs grew to 50% of the nonelderly US population.

Researchers noted two drawbacks to increased CDHP enrollment:

  1. Reduction in preventive services might have unintended negative consequence to long-term health and costs if diseases are not detected early.
  2. Since employees in good health may be more likely to select CDHPs, traditional plans may enroll a larger proportion of sick people, making those plans less financially stable.

These findings are important considering that the Affordable Care Act of 2010 (ACA) may encourage continued growth in CDHPs. This study was funded by the California HealthCare Foundation and the Robert Wood Johnson Foundation and published in Health Affairs.

The complete article is available free of charge on the Health Affairs site through the External Link below.