How many people will be on high-deductible health plans (HDHPs) in the future? And are the growing number of employers who are using HDHPs going about it the right way?
These are questions we learned at a recent half-day Catalyst for Payment Reform (CPR) Summit on the Future Evolution of HDHPs and Consumer Incentives in Benefit Design.
Serving Everyone by 2050
During the summit telecast, Alexander Domaszewicz, principal and senior consultant for Mercer Health and Benefits, shared projections that show a growing role for HDHPs.
“It’s not hard to project that everyone will be on a HDHP by 2050,” Domaszewicz said. It’s worth noting that other speakers at the event suggested employers’ transition to offering only HDHPs could happen even faster.
“The question is, will it be a consumer-directed health plan (CDHP)?”
A CDHP is an HDHP that has been coupled with a health reimbursement account (HRA) or a health savings account (HSA). Mercer’s survey showed that 33 percent of all employees were covered by a CDHP in 2016.
Domaszewicz said using a CDHP is “the number one employer tactic to manage costs.” The HSA is typically offered in a CDHP because it has “a much broader value proposition” for employees, with no tax on either deposits or withdrawals when used for qualified purposes.
He backed that statement with data from Mercer’s annual survey on employer-sponsored health plans, offering a comparison of the average medical plan cost per employee by plan type.
|HSA-eligible CDHP||PPO with $1,000 deductible||HMO||PPO|
Health benefit leaders at two large companies – FedEx Corporation and First American Corporation – also reported significant savings from HDHPs during the CPR summit.
Going Beyond Costs
CDHPs save money because employees pay a bigger share of health benefit costs in the form of higher deductibles, co-pays and out-of-pocket maximums. But Domaszewicz said behavior change is also a factor in CDHPs’ cost savings because employees who pay higher out-of-pocket costs are more likely to use consumer tools that help them examine the cost of health care in advance.
Employers can offer several tools along with CDHPs to help support behavior change. Domaszewicz cited several options that work well with CDHPs:
- Telemedicine reinforces “right care at the right time” messages. Employers have the option to waive co-pays to make telemedicine more attractive to employees.
- Value-based insurance designs (VBID) are used to encourage patients to take preventive prescription medications to manage chronic conditions. Domaszewicz said 45 percent of employers that offered a CDHP also covered preventive drugs in an enhanced way, such as eliminating or lowering co-pays.
- Expert medical opinion services, also known as “second opinion” services, link employees to expertise. Employers can design benefits so these services are covered at 100 percent post-deductible.
- Surgical centers of excellence direct employees to high-quality care for specific procedures. Among jumbo employers with 20,000 or more employees, 31 percent offer this service.
The Employee Experience
Employers were cautioned to keep the employee’s experience in mind when creating a HDHP strategy. Dr. Mark Fendrick, Director, University of Michigan Center for Value-Based Insurance Design, agreed HDHPs are a popular “lever” for reducing health care spending.
Yet employers must recognize that consumers are already worried about their ability to cover co-pays, co-insurance and deductibles. Fendrick noted that a survey showed 41 percent of people are considering getting a second job to pay health care bills.
“It’s only going to get worse,” Fendrick said.
HDHPs have the biggest impact on two groups: people with multiple chronic conditions and people with lower socioeconomic status. Fendrick said these groups tend to use less care as out-of-pocket costs rise. Designing HDHP plans with VBID in mind will motivate employees to get the clinical care they need.
HDHPs can also impact employee recruitment, according to Dr. Robert Galvin, chief executive officer for Equity Healthcare and an operating partner in Private Equity, Blackstone. He said that in tight labor markets, employers have reported that some job hunters choose an organization with a PPO plan over an organization that only offers a HDHP.
Sending the Right Signals
Galvin said employers have learned that they cannot use HDHPs to “magically create shoppers,” but HDHPs can help control costs.
Employers are now paying attention to the challenges of offering health benefits for the lower-income workers, how to set deductibles at the right level and how to send the right signals for consumer decision-making.