CDHP Adoption Rate Still Slow, Halting

A news release by Mercer Health & Benefits said that just 2% of all employers with 10 or more employees offered a CDHP and a scant 1% of all covered employees were enrolled in one in 2005.

However, some of the nation’s largest employers added a CDHP in 2005. As employer size increases, so does CDHP prevalence, reaching 10% among employers with 5,000 to 9,999 employees and 19% among employers with 10,000 to 19,999 employees. The fastest growth has been among jumbo employers (20,000 or more employees); offerings of CDHPs among jumbo employers jumped from 12% in 2004 to 22% in 2005. In 2005, the majority of large employers offering a CDHP used a Health Reimbursement Arrangement (HRA) (62%), while the majority of small employers offering a CDHP used a Health Savings Account (HSA) (76%).

“HR and benefits professionals at large companies have spent the last three years educating themselves and their organizations on CDHPs and consumerism concepts, and are now at a comfort level to move forward decisively,” said Sander Domaszewicz, head of the consumerism group at Mercer Health & Benefits, in the news release. “While HSAs are not yet mainstream, we see significant interest on the part of employers and employees.”

In Mercer’s 2004 survey, a much greater percentage of employers – particularly small employers – said they were likely to offer a CDHP in 2005 than actually did so. Employers complete the survey in the late summer and early fall, when few small employers have finalized their plans for the upcoming year. Larger employers were far more accurate in their predictions.

Jumbo employers will continue to add plans over the next two years, although at a somewhat slower pace. A total of 29% of these employers are likely to offer a plan in 2006, and 31% are likely to do so by 2007.

Moving forward, nearly two-thirds of all large employers (60%) said they would be more likely to offer an HSA if regulations were changed to permit unspent FSA balances to be rolled over in the HSA, and 57% said they would be more likely to offer an HSA if they could coordinate the HSA with the FSA so that employees could spend the FSA funds first.

Helping Employees

CDHP sponsors were asked how much help employees required with the CDHP compared to other medical plans, both during open enrollment and afterwards. About two-thirds of large employers said employees require more assistance, and about a fourth said they require much more. More than one-quarter of large employers (27%) said that employees have a lot of difficulty deciding whether they will receive better or worse coverage under the CDHP than under another plan. Only 10% said employees have no difficulty.

The average per employee cost of CDHP coverage was $5,480 in 2005. This figure includes employer contributions to the HRA or HSA account. This is 18% lower than the average PPO cost per employee ($6,480), and 13% lower than the average HMO cost ($6,210).

When asked to rate the importance of a number of possible program objectives, large HRA sponsors are most likely to select “reducing cost over time” and “promoting consumerism” as very important objectives. About half agree that their most important objectives have been met, though only 1% strongly agree.

Other Consumerism Steps

Many employers who were not ready to implement a CDHP in 2005 took other steps to promote consumerism among their employees. The majority of large employers (69%) and many small employers (40%) now give their employees access to a health Web site. Nearly half of large employers (49%) provide Web-based information on provider quality and cost, and over a fifth (21%) provide a plan selection tool that allows employees to input expected health plan utilization (this rises to 47% among employers with 20,000 or more employees, which are the most likely to offer multiple medical plans). In fact, 57% of all employers, and 83% of all large employers, say they took action to promote consumerism in 2005.

Mercer’s report on the National Survey of Employer-Sponsored Health Plans 2005 will be available in early March for $500. A separate appendix of survey responses to approximately 90 questions, broken out by employer size, region, and industry, costs an additional $500. To order, contact Tara Lewis at Mercer Health & Benefits, 1166 Avenue of the Americas, 29 ^th Floor, New York, NY 10036, telephone 212 345 2451, or at http://MercerHR.com/ushealthplansurvey .