Estimates on the level of market penetration for consumer-directed health-care plans, or CDHPs, vary considerably. Across Lockton’s client base, about 11 percent of employees were participating in a CDHP in 2012, although other studies put the current national participation rate as high as 17 percent. But there is little question that a growing number of employers are choosing to offer these types of plans, and more and more employees are choosing to participate.
A CDHP is typically defined as a plan that pairs a high deductible with a pre-tax payment account such as a Health Savings Account that can be funded by the employee. In 2012, almost 30 percent of Lockton’s clients who offer a medical plan were offering a CDHP—up from 23 percent the previous year—and 93 clients established a CDHP for the first time in 2012. Some experts predict that within 10 years, CDHPs will hold over 50 percent of the employer-provided health-care benefits market.
We asked Pauline Sobelman, Lockton consultant and vice president, who manages numerous client accounts for Lockton in our Northeast region, for her thoughts on the factors driving the growth in demand for these types of plans.
Close to the “Tipping Point”
“I think we are at, or close to, the ‘tipping point,’ where employers have moved past their initial reluctance to offer a CDHP as a full replacement for traditional plans,” says Sobelman. “And more employees are starting to recognize the potential advantages to taking a more active role in decisions about their own health care.”
Sobelman points to three factors that are driving the growing popularity of CDHPs:
- Continuing need for employers to control increases in the cost of health-care benefits: Employers recognize how valued health-care benefits are for their employees, says Sobelman. “They want to continue to provide health-care benefits, and are looking for creative solutions that will help them moderate the escalation in costs. Offering a CDHP is one way to keep cost increases in line.”
- Potential cost savings for participants: CDHPs typically carry lower premium charges than traditional plans, and allow employees to pay for health-care expenses with pre-tax dollars. One recent study by the Rand Corp. found that families enrolled in a CDHP spent 14 percent less than similar families enrolled in a traditional plan. “The data we see from major carriers tends to support this trend,” says Sobelman. “There is some debate about whether higher deductibles are driving consumers to forgo needed care, but the data we see from carriers points to just the opposite: equal or higher utilization of preventive services and evidence-based measures.”
- Improvements in transparency regarding cost, quality and value: “You can’t be an effective, informed consumer without information,” says Sobelman, and she admits that the health-care industry still has a ways to go in providing customers with comparative data on cost and quality. “But we’re finally starting to see real progress in this area, with more providers and carriers communicating this information and making comparison tools available,” she says. “Even more encouraging, we’re learning that, when employees DO have access to this information, they USE it!”
What’s been your experience with CDHPs? Weigh in below. For more information on how Lockton can help your organization identify the best solution for your employee health-care benefits program, please contact me at firstname.lastname@example.org.