CDHPs—high-deductible health plans (HDHPs) often paired with health savings accounts (HSAs) or health reimbursement accounts (HRAs)—are not achieving long-term savings greater than what would be reached by raising the deductible on traditional PPOs, the 2012 United Benefit Advisors (UBA) Health Plan Survey found. Although nearly 60% of employers surveyed said they plan to offer a CDHP in the next five years, despite some regional variances, PPOs remain the dominant plan type, with 61.7% of U.S. employee enrollment, and currently return a lower average cost per employee than CDHPs at nearly every deductible range.
The greatest savings of a PPO over a CDHP was achieved with a deductible of $2,000 to $2,999, where the PPO cost per employee was $7,811 and CDHP was $8,859—a savings of $1,000 per employee. In a small business with 50 employees, that is a savings of $50,000 annually, or more than $4,000 per month.
The key to savings, UBA contends, is placing an up-front hurdle, a deductible greater than $1,000, on any plan type, in order to positively impact consumer behavior, lower consumption and decrease cost. Despite the high deductibles in CDHPs, employers have removed the employee risk by funding either an HRA or HSA, which does not force lower consumption. Studies show that 80% of all employees will not have more than $700 in annual health care costs, so by funding the first $1,000 of an insurance plan, most employees will never see the cost of their health care, and therefore, not make better decisions, UBA argues.
“Employers are turning to CDHPs as a cost-cutting solution against the relentless upward spiral of health care costs,” said Thom Mangan, UBA CEO. “However, our research shows that small- to mid-size businesses in particular, who may be considering these plans may first want to consider increasing the deductible on the plans they already have to achieve the same initial savings. Or, prior to implementing a CDHP plan, employers should build a culture of health and wellness in their workplace that drives employee behavior towards quality, low cost medical care and prescription drugs.”
The survey indicates that CDHP cost savings appear to be overestimated at the national level as does their popularity. The UBA study found savings created by CDHPs over the plans they were replacing or HSA, averaged 1.75% in 2012, a reduction from prior years. Enrollment also decreased to 15.6% (a 1.8% decrease from 2011), and nationwide enrollment among employers with 1,000 or more employees dropped from 15.9% in 2011 to 11.3% in 2012.
While these statistics indicate CDHP enrollment growth is slowing on the national level, there are areas around the country where the percentage of employees enrolled continues to climb or are adopted in a much higher percentage. The plans in the states seeing savings above other plan designs are a result of active plan management where employers communicate wellness programs and provide proper incentives.
“Health care reform is likely to spur the growth of high-deductible consumer-directed health plans,” said Mangan. “As medical cost information becomes more transparent, and as patients become better consumers, employers have a chance at cost containment. But how they choose to design their health plans should be based on benchmarking data and workplace culture. With careful plan design, employers could see only 5% annual health cost inflation instead of the 10% anticipated in the coming years.”
Data in the 2012 UBA Health Plan Survey are based on responses from 11,711 employers sponsoring 17,905 health plans nationwide. Results support employers of all sizes with data by region, industry and employer size.To download the survey report, visit http://analytics.ubabenefits.com/uba-health-plan-survey-benchmarking/.