28 Pages Posted: 15 Aug 2010
Date Written: August 2010
Employers began offering consumer-driven health plans (CDHPs) in 2001 when a handful started offering health reimbursement arrangements (HRAs). They then started offering health savings account (HSA)-eligible plans after the Medicare Prescription Drug, Improvement, and Modernization Act of 2003 included a provision to allow individuals with certain high-deductible health plans to contribute to an HSA. This paper summarizes what is known about CDHPs, which include both HRAs and HSAs. Surveys show that employers offering a CDHP increased from less than 5 percent in 2005 to between 12-15 percent by 2009. Growth in offer rates can be seen across all firm sizes. Recently, the percentage of small firms that offered a CDHP declined while larger firms continued to add a CDHP as an option. Overall, 19.1 million, or 11 percent of individuals with private insurance, were enrolled in a CDHP in 2009. More recent data suggest that by 2010, 10 million people were in an HSA-eligible plan. Generally, premiums for CDHPs were lower than premiums for non-CDHPs. A number of studies have tried to explain the differences in premiums. One found savings ranged from 15.5 percent to a low of -4.7 percent, with average savings of 4.8 percent. However, the study found that most of the savings was due to younger, healthier workers choosing CDHPs and concluded that once typical risk- and benefit-adjustment factors were taken into account, CDHPs saved only 1.5 percent. There is strong evidence that initially CDHP enrollees will be healthier than non-CDHP enrollees, but that over time the CDHP population has a significantly higher illness burden. The studies agree that use of preventive services did not change (upward or downward) as a result of the CDHP. The studies found that overall use of brand-name prescription drugs fell and, while there was some offset from increased use of generic drugs, some enrollees stopped their use of prescription drugs. CDHP enrollees increased their use of the mail-order pharmacy option. Overall use of prescription drugs among CDHP enrollees with certain chronic conditions fell, or did not increase when enrollees met their deductible. One study found that the financial incentives of the plan are not sufficient in driving behavior, and that educational outreach also matters.
Despite the growing body of evidence on the effect of CDHPs on cost and quality, there are many unanswered questions about these plans. Most of the research to date has focused on HRA-based plans. Little systematic research has been conducted on HSA-eligible enrollees. The differences between these plans are significant enough to warrant separate analyses. Also, most of the research to date has ignored the impact of the account on the use of services and on spending. Individuals may use health care services differently depending on how much money is being contributed to the account, especially relative to the deductible, amounts rolled over, and portability of the account.
Keywords: Account-based health plans, Consumer-driven health care, Employment-based benefits, Health care costs, Health care utilization, Health insurance coverage, Health reimbursement arrangements (HRAs), Health savings accounts (HSAs)
JEL Classification: I1, I11, J3, J32
Suggested Citation: Suggested Citation
Fronstin, Paul, What Do We Really Know About Consumer-Driven Health Plans? (August 2010). EBRI Issue Brief, No. 345, August 2010. Available at SSRN: https://ssrn.com/abstract=1658498