The new year, filled with New Year's resolutions and rolling your accumulated out of pocket health care expenses back to zero. In fourth quarter last year, most employees renewed their current employer provided health plan coverage options without question. But for some, they were learning about new coverage plans – perhaps an increase in their out-of-pocket share- be it premiums or copays – beginning on January 1, 2012. Others may have learned about the only employer offering: the Consumer-Driven (or Directed) Health Plan (CDHP).
Under this broad industry category, offerings vary by benefit design, health savings account (HSA) and employer intent. Yet one theme that unites all CDHPs is the premise that when individuals pay close attention to their medical costs, they make more informed decisions about the services they seek and the providers they visit.
Sound familiar?
The CDHP concept reminds me of what happens when my teenagers tell me they “need” some new trendy item. If they think I’m paying, their “need” is urgent. But when they learn they’re paying, they suddenly find time to shop for the best price and wait for coupons, sales or perhaps forego the purchase completely. That’s the idea behind CDHPs. But they’re not right for everyone – at least, not yet. Nevertheless, the rising cost of health care and the struggling economy coupled with changes to the US health-care landscape almost guarantee we’ll continue hearing more about them.
For healthy consumers, CDHPs offer an economical choice. CDHP members usually pay lower monthly premiums than traditional plans charge. Members who remain healthy and require little more than free preventative-care services will enjoy lower annual costs. Conversely, consumers with new or existing illness may face hardships up front. In addition to their premium costs, they may pay nearly $2,000 in out-of-pocket expenses – hence, the creation of HSAs. And when those consumers reach their out-of-pocket maximums, many go for all the elective services they can handle, which reverses employer intent.
Pros and cons
The number of employers offering CDHPs grew for 2012 coverage, according to Mercer, a benefits consulting firm. More than half of large employers and less than one-fifth of small employers offered at least one CDHP. And several large employers for the first time, – including GE, Wells Fargo and JPMorgan Chase among others – only offered CDHP. (According to Reuters, “Wells will still offer traditional plans in California and other states where switching would force too many employees to change their doctors.”)
Why the move to CDHPs? Cost, for one. Mercer estimated employer costs and employee premium costs average 15 percent less under CDHPs compared to conventional PPOs and HMOs. Some contend CDHPs are a way for employers to shift more costs onto their workers while offering them less coverage. To a point, that’s true. Costs aside, CDHPs attract employers looking to give their workers more say in their coverage and care options. CDHPs works well for employees interested in managing their own health care, maintaining certain providers, or having the freedom to shop for less expensive alternatives without navigating the prior approvals or referrals to specialists gauntlet. According to the Kaiser Family Foundation, 17 percent of covered workers elected to enroll in a high-deductible health plan in 2011, up from just 4 percent five years earlier.
What’s missing?
Given the uptake by employers and employees alike, why do I suggest the CDHP is not ready for everyone?
Effectiveness and success depend on too many factors – among them, consumer attitudes and behaviors, access to services and providers, and utilization of preventative services to ensure no underlying conditions exist. We lack sufficient insight into these factors and thus have no basis for ensuring success across a large, broad patient population. Opponents contend CDHPs, in effect, discourage the cash-strapped, demotivate the thrifty and further disincline those who already avoid trips to the doctor from seeking medical care when they need it – instead relying on self-diagnosis and resorting to self-medication. By foregoing proper care now, many will later suffer otherwise avoidable, preventable conditions that will prove costlier to their health, wallets and job productivity. Advocates, on the other hand, point to the cost visibility and personal accountability that the actual health-care consumer gains under CDHP – components lacking under the current US system.
Individual decision support
What will it take to make the CDHP a suitable offering for the population at large?
If the goals of a CDHP are to save money and empower personal choice, health plans must equip consumers with the tools they need to make wise decisions. With so much at stake, workers cannot rely on their knowledge of the system. Nor can they rely on their usual “back of the envelope” calculations to decide how to fund their future HSAs. Instead, plans should offer consumers a robust predictive health-care cost solution that consolidates and models a variety of health-related data to estimate possible spending corridors. Predictive analytics would quantify for employees how much they’re likely to spend on medical expenses next year and thus how much they should invest in their HSAs to soften the blow of steep out-of-pocket requirements.
Employee-specific data as well as CDHP plan history would populate these predictive models. For the employee data, the model would drive the personal health-risk assessment (HRA) along with that individual’s historical health-care spending. Other factors could include behaviors and health-care spending from the CDHP population at large. Predictive analytics would drive deeper insights, such as the impact of lifestyle modifications on overall costs. By putting such rich knowledge in each member’s hands, plans would allow employees to see in real dollars how their health-care decisions impact their future.
As employees utilize their coverage in 2012, many continue to feel jittery about the economy. Concerns about household income and future health-care costs prompt some workers to change their household spending, delay medical care or feel anxious about future medical costs. In a less-than-certain labor market, individuals will continue to rely on – and expect – better tools for managing personal expenses. Health plans have most of the data, the interest, the power and hopefully soon, the predictive health analytics to help them.
In one of the most quoted 
every few years I go through the process of buying one. Regardless of my dislike of buying a car I do not spend time and research. I evaluate my choices based on many dimensions – time, value, price, outcome, and customer service experience. I can easily narrow down my choices using the internet and or calling car dealerships to help with my decision. I determine the value based on my personal expectations along with market variables. There is a baseline expectation and I can add things that I value and am willing to pay for.