Mercer Offers Insights On Consumer-Driven Plans

December 10, 2002 ( - Early indications are that employers are increasingly interested in consumer-driven health-care alternatives - and not just because it saves them money, according to data from Mercer Consulting.

As part of Mercer’s National Survey of Employer-Sponsored Health Plans (see Employers Near Pain “Threshold” on Health Care: Mercer at ), employers were asked if they offered a consumer-directed health plan (CDHP).   Based on that survey, a brief follow-up survey was sent to 50 employers who said they offered CDHPs.   The information that follows was based on 21 of those responses.  

Positive Reactions

Based on preliminary results of that followup survey, Mercer said survey respondents report surprisingly high levels of employee satisfaction with their CDHPs: 45% say the response has been “strongly positive,” and another 40% say it has been “more positive than negative.”   None reported a “strongly negative” reaction, and only one respondent said the response was “more negative than positive.”  

Most (71%) that offered the program did so with all employees in 2002, rather than trying it out with a more select group first.   Among employers who offered workers other choices, approximately 15% of eligible employees, on average, enrolled in the CDHP

Defined contribution health plans, also called consumer-driven health plans, are a new concept, and no generally agreed-upon definition of their basic elements exists. The principal idea, however, is to shift responsibility for health insurance choices from the plan sponsor to employees, with the sponsor fixing costs (see Spend Thrifts at Lower Costs .  Among those respondents offering other medical plan choices, about three-fourths (74%) report that the organization’s cost for the CDHP is lower than, or as low as, the cost for any other medical plan offered, while an even larger 85% say the CDHP is their employees’ lowest-cost health plan option.  

Of four possible objectives for implementing a CDHP, “promoting health care consumerism” was most often selected as being very important (85%).   “Lowering our organization’s health benefit cost” was a very important objective for 50%, as was “improving employees’ package of benefits; adding choice.”

However, while many CDHP proponents have touted the flexibility of coverage afforded by the plans (e.g. employees could use their account dollars for any qualified medical expense, or QME):

  • only 29% of respondents allow employees to use account dollars for any QME
  • 24% allow most QMEs (with some exclusions), and
  • 19% allow a limited number of specific QMEs.  

In fact, in nearly a fourth of these plans (24%), only expenses covered by the overlaying insurance plan are eligible.

Funding Trends

As for funding of the accounts, the median amount provided by the employer in the employee’s health-care reimbursement account (HRA) is $750 (for employee-only coverage).   The median deductible for employee-only coverage is $1,500.   On average, for all levels of coverage (employee-only, employee and spouse, and family), the surveyed employers fund about 60% of the deductible amount, according to Mercer.

To discourage CDHP participants from skimping on preventive care, nearly two-thirds of the sponsors surveyed (65%) cover preventive care at 100% through the overlaying insurance.   In 10% of plans, a portion of the HRA money may only be spent on preventive care and may not be rolled over at the end of the year.  

Almost 1 in 5 respondents is allowing roll-forwards into retirement so that workers can use it to purchase retiree medical coverage.

Looking Ahead

All the respondents through December 2 indicated they will offer a CDHP again in 2003.   About half will make no changes to plan design, while among those planning changes:

  • 10% will increase their HRA contribution;
  • 10% will increase covered services; and
  • 5% will decrease the deductible.