Uncovering the Potential in CDHPs

We’ve emphasized the value of flexible spending accounts, health reimbursement arrangements and health savings accounts for many years. As these options continue to become more widespread, trends show that consumer directed health plans are producing very positive results.

Lower Health Care Risk

Surveys conducted by a major insurance carrier show that when employers moved to CDHP offerings from PPO and HMO plans, plan participants improved their health risk profile by 10% in the first year.

Lower Overall Medical Costs

In consumer directed health plans, the medical cost trend was 16% lower than traditional plans during the first year. Over 5 years combined, cost savings for those enrolled in CDHPs averaged $9,700 per employee. These reductions in cost were achieved without employers shifting out-of-pocket health expenses to their employees.

Surveys by the Kaiser Family Foundation show that more than 17% of workers participating in employer sponsored plans currently have HSAs or HRAs, up from just 4% in 2006. The Health Affairs journal estimates that if half of all employer group enrollees were in CDHPs, 7% of all health care spending, or $57 billion, could be saved annually. Other studies project that the savings could exceed 9% of total U.S. health care spending. While this may sound unrealistic, enrollment in HRAs and HSAs is on the upswing, growing by approximately 14% in 2011.

Increased Awareness

CDHPs prove that increased awareness can go a long way toward creating savings. Not only do surveys show lower use of emergency rooms by employees participating in consumer directed health plans, but they also reflect a greater acceptance of generic drugs, resulting in a 14% reduction in overall pharmaceutical spending.

Many are concerned about the viability of consumer directed health plans, given the recent Supreme Court decision upholding the Affordable Care Act. Unless the act can be modified, HSA contributions will not be taken into account when determining if a group plan meets the 85% medical loss ratio (MLR) threshold. It is important that legislators on both sides of the aisle know that consumer directed health plans achieve positive results. With the ability to increase awareness, lower health care risk and control costs, CDHPs need to be preserved and promoted.

To view other articles from the SIP Summer Newsletter, please click here.

In cooperation with NAEBA

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