When high-deductible health plans first appeared on employers' radar around 2006, they were met with skepticism by employees and employers alike. What a difference time and a health care reform law makes.
Today, not only are employers embracing these less-expensive plans, but also many are considering dropping their traditional health benefits for these consumer-driven health plans, or CDHPs. There are number of reasons for this, experts say, including the need to manage spiraling health care costs and to offset fees associated with health care reform, like the 2018 excise tax on high-cost plans, also known as the "Cadillac Tax."
And employees seem to be onboard, too, with 30 percent enrolled in a CDHP, up from 8 percent in 2006, according to a just-released employer survey by Towers Watson & Co. and the National Business Group on Health.
Among large employers 66 percent offer a CDHP with another 13 percent expecting to add one in 2014, the survey shows. And the number of employers offering these plans as their only option has doubled since 2010 from 7.6 percent to 15 percent in 2013.
That is a "significant number," according to Brenna Haviland Shebel, director of the Institute on Health Care Costs and Solutions at the National Business Group on Health.
"A lot of employers are looking aggressively at full replacement, even those who were not considering it before. What I've heard from some employers is that employees know that benefits are changing so the thinking is, 'Let's strike while the iron is hot.' "
Indeed, the proof is in the statistics, says Maureen Fay, Aon Hewitt senior vice president and head of the CDHP working group. The Lincolnshire, Illinois-based consultancy released its own survey last year showing that these plans have surpassed HMOs as the second-most-common plan design offered by U.S. employers.
"The statistics show growing employer interest," Fay says. "And that's driven by reform, which is driving additional costs and fees being imposed on employers and insurers. And that's leading employers to look for new solutions. Most employers in the past would tweak their plans from year to year, shifting contributions here and there, but they were finding that they couldn't keep pace with health care trends. A different model is required."
At Cigna Corp., the number of companies offering CDHPs surged after passage of the Patient Protection and Affordable Care Act in 2010, according to Joseph Mondy, a spokesman for the Bloomfield, Connecticut-based insurer. Employer participation grew by 26 percent during 2013, he says.
"As people become more familiar with CDHPs you'll see migration," Mondy says. "Why? Because they work. CDHPs will cost you less as an employee and as an employer, but you'll see improvements in health outcomes. We have seven years of data to support that."
Mondy is referring to the seventh annual Cigna Choice Fund Experience Study, which compares claims data of Cigna customers who are enrolled in a CDHP, a traditional Preferred Provider Organization or an HMO.
Whether employees are embracing the plans is unclear. CDHPs are complex and often confusing for many employees, experts say. In addition to higher out-of-pocket costs, these plans also require more employee involvement in health care spending decisions.
"If employees are coming from a PPO where there's not a lot to think about, it's a big change," Fay says. "Now they're responsible for paying bills, keeping proper documentation for reimbursement, and dealing with additional tax-filing requirements. It becomes more onerous for the employee."
Typically, employees contribute to a health savings account, or HSA, to pay for their medical costs, which is a tax-advantaged savings account similar to a health reimbursement accounts. Unlike HRAs, health savings accounts must be paired with a consumer-driven health plan.
Despite their complexity, enrollment is steadily increasing, surveys show. But Shebel of the National Business Group on Health points out that those numbers are growing in part because more employers are replacing their traditional health benefits with account-based plans. Others are designating CDHPs as the default option for workers who fail to choose a health plan during open enrollment, she says.
But enrollment in account-based health plans will continue to grow as employers get better at helping employees understand how these plans work, she says.
"At first employers weren't sure how to communicate these plans, but the more employees use them, the more they are telling their co-workers that these plans aren't so bad. Word is really getting out that these plans aren't as scary as they seemed at first."