As health care costs continue to grow
at double-digit rates, employers have
become increasingly interested in ways to cut costs. Many are looking to the
potential benefits of Consumer-Driven
Health Plans (CDHPs).
In most cases, a CDHP is a high-deductible health plan combined with one
of two tax-advantaged spending accounts: a
Health Savings Account (HSA) or a Health
Reimbursement Account (HRA). Plan participants use money from their spending
account to pay for medical care, including
prescription and nonprescription drugs.
Plan members who deplete their account
must pay for medical care out-of-pocket
until the plan’s high deductible is met.
“Once the deductible has been met, the
high-deductible health plan functions like a
traditional major medical plan,” says Sally
Stephens, president of Spectrum Health
Systems. “CDHPs can be described along a
continuum of health plans with varying
degrees of employer/sponsor and employee/participant responsibility. The most
common type is a catastrophic or high-deductible insurance plan combined with a
health care spending account.”
Smart Business spoke with Stephens
about the benefits and potential risks of
CDHPs.
Why should business owners look into this
type of coverage?
A CDHP controls costs through reduced
demand on the health care system. The
increased cost-sharing associated with a
CDHP shifts costs from the plan to the
employee, resulting in lower premiums for
the employer.
The whole idea is that employees have an
incentive to spend more carefully when
purchasing health care services because
most plans allow unused funds to be rolled
over from year to year. This is not the case
for traditional health plans. In this way, the
consumer can benefit from using fewer
and less costly services. This built-in incentive plan combined with consumer decision-support tools relating to cost, treatment and quality, is a key cost-containment
strategy of a CDHP.
Supporters of these plans also claim that
giving health care consumers more of a
financial stake in their medical care decisions will create more competition in the
health care market place and better contain
costs.
What benefit does this type of plan provide
the employee?
Because the HRA or HSA value can
increase over time, when unused balances
are allowed to be carried over, employees
who consistently incur low levels of spending can actually increase their plan benefits
in subsequent years.
In addition, the most successfully designed CDHPs include resources to assist
plan participants in improving their health
and in making smart medical decisions.
What tools must employers provide employees to make such plans effective?
Employers electing to offer CDHPs are
essentially asking their employees to get
into the driver’s seat and share a greater
percentage of the costs while also getting
more involved in their health care.
The success of CDHPs depends on providing employees the Web-based decision support tools needed to research and select
network offerings and benefit packages.
These tools, similar to what employees are
already familiar with, enable employees to
actually gain visibility into what their health
care costs will be and give them the power
to better manage those costs. When coupled
with the well-researched benefit options
presented by employers, these tools greatly
raise the probability of CDHP acceptance
and enrollment.
These online tools help educate employees, enabling them to become better health
care consumers. By making it easier for
employees to understand their health care
options, they can automatically take an
active part in controlling health care costs.
Is there a risk with this plan? Could overall
health care decrease?
The availability of information upon
which participants can make their health
care decisions is critical. Such information
may be unavailable due to lack of credible
data and systematic, comprehensive methods for accumulating and disseminating
such data. Even if the data is credible, it
might not be easily accessible to all users.
In addition, some users may not be that
savvy to access the Web-based technology.
This can result in poor plan choices made
at the time of enrollment as well as poor
ongoing treatment and choice of providers
at the time of the service.
Another potential concern is that even if
the appropriate information is successfully
gathered, some participants might not have
the necessary skills to evaluate what they
have gathered. Some participants may also
actually postpone treatment until the plan
has enough available funds to cover the
employee gap or until it is funded next year.
It could also affect employment decisions
if low users who have accumulated high balances over several years see this as a cost of
changing jobs or provide an incentive to
incur elective services prior to leaving.
SALLY STEPHENS is president of Spectrum Health Systems.
Reach her at [email protected] or (317) 573-7600.