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

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.

Reader Comments

We have found in the dental plan space that incentivizing patients to save $ works. We interviewed patients in 2 malls across America and found that people would much rather have control over their own health expenses if they had the proper information to make an intelligent choice. The issue with health insurers is that the healthy pay the same rates as the sick in the dental plan space: something that doesn't work. While age does matter it isn't a strong predictor of caries rate.

The reason HealthSouk works is because premium dollars roll over and the patient is incentivized to save $ but they only roll over if you do your basic preventive care. This solves issue 1 and 2 listed above in the research findings.

We have successfully launched the first dental plan in California with no monthly fees. Thousands of patients get it and want to self-fund their own dental health.
I disagree with - "CDHPs only work well for the healthy". Most individual PPO health plans and many employer group PPO plans these days have Annual Out-of-Pocket maximums ranging from $5,000 to $12,000 (including the plan's annual deductible and all co-payments except prescription drugs). For those insureds with high medical expenses, when they reach their Annual OOP Max, then all of their subsequent expenses will likely be paid 100% by the plan - assuming that only PPO network providers were used and that all medical services were covered expenses under their healthplan. But their Rx co-pays continue all year long, and for those taking high cosr injectible specialty drugs, those cost can add up to many thousands of dollars more (sometimes way more than $10,000 annually for such drugs.

In contrast, all HSA-compatible health plans, all have by federal law- a 6,050 annual out-of-pocket maximum expense for the insured for all medical and prescription expenses - much lower than non-HSAs
Betty makes a valid point in the above comment regarding the article on CDHP's. I have spoken to literally thousands of folks regarding "picking a health plan" and most folks who pick High Deductible plans are normally Healthy and don't frequent Physicians. Years ago I worked as a "Actuary" and I wonder why Consumers just don't look at Health insurance as a "Mathematical Equation"; take the emotion out of the matter. I have sold Health Insurance as a Mathematical equation for years and have often wondered why has it not caught on? Buying Healthcare any other way is just buying on Emotion and not Reason.

Stay Healthy it is the best Solution,
Rudy Lehder Rivas
CDHPs only work well for the healthy. Speaking for someone who works for a top 100 company that offers ONLY CDHPs, and has chronic health issues of genetic origin, I am officially defined as "underinsured", because my out-of-pocket costs are very high; they have nearly bankrupted me, even while working in a professional position.

It is yet another way for corporations to reduce spending on employees and give it to investors. Welcome [back] to the 19th century. The almighty dollar continues to reign supreme. It is sad that so many do not understand that there is no way that corporations, inc insurance companies, will ever provide low-cost insurance without being forced to--by the government or the people, take your choice.