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4 in 10 Workers in Consumer-Directed Health Plans Lack Choice of Other Plans

When Workers Do Have a Choice of Plans, Less than 1 in 5 Opt for Consumer-Directed Health Plans

News Release
Dec. 1, 2006

Alwyn Cassil (202) 264-3484 or

WASHINGTON, DC—While consumer-directed health plan (CDHP) proponents often assert that the high-deductible plans linked to savings accounts offer enrollees greater choice and autonomy in the health care marketplace, 39 percent of the estimated 2.7 million workers enrolled in employer-sponsored CDHPs had no choice of another type of health plan in 2006, according to a national study released today by the Center for Studying Health System Change (HSC).

Moreover, among workers with a choice of plans, relatively few (19%) choose CDHPs when offered another type of plan option, such as preferred provider organizations (PPOs) or health maintenance organizations (HMO). Comparable take-up rates for PPO and HMO plans when employees have a choice of another plan type were 55 percent and 40 percent, respectively, the study found

"Despite the buzz, consumer-directed health plans have barely gained a toehold among Americans with employer-sponsored insurance," said Jon Gabel, lead author of the study and vice president of HSC, a nonpartisan policy research organization funded principally by the Robert Wood Johnson Foundation.

"Ironically, a large proportion of workers in consumer-directed health plans have no choice of plans, and while the cost of their coverage is comparable to other types of health plans, they face potentially much higher out-of-pocket costs if they need care," said Gabel, who coauthored the study with HSC Health Researcher Heidi Whitmore and HSC Statistician Jeremy Pickreign.

The study’s findings are detailed in a new HSC Issue Brief—Behind the Slow Enrollment Growth of Employer-Based Consumer-Directed Health Plansavailable here. The study, funded by the Robert Wood Johnson Foundation, is based on the 2006 Kaiser Family Foundation/Health Research and Educational Trust Employer Health Benefits Survey-a random sample of 2,112 private and nonfederal public firms with three or more workers. The response rate was 48 percent.

A CDHP is typically defined as a high-deductible health plan combined with a tax-advantaged savings account—usually either a health reimbursement arrangement (HRA) or a health savings account (HSA). HRAs are owned and funded solely by employers, while HSAs are employee-owned. Both employees and employers can contribute to HSAs, but employer contributions are optional. For both types of accounts, the plan deductible typically exceeds the employer contribution to the spending account, leaving the employee at risk for higher out-of-pocket costs.

Of the approximately 70 million American workers who obtain health benefits from their employer, about 2.7 million, or 4 percent, were enrolled in a high-deductible health plan with a savings account in 2006—an estimated 1.4 million workers in HSAs and an estimated 1.3 million workers in HRAs. Firms covering 14 percent of insured workers offered a CDHP in 2006.

Thirty-nine percent of the 2.7 million people enrolled in employer-sponsored CDHPs had no choice of another type of health plan in 2006. The majority of employees enrolled in an HSA-eligible plan (53 %) were not offered a choice of plans, while 24 percent of enrollees in HRA plans had no choice of plans.

When workers did have a choice of a CDHP and another type of plan, including PPOs, HMOs and point of service (POS) plans, relatively few workers chose a CDHP. Of the 8.9 million employees with a choice of a CDHP and at least one other health plan, less than one in five workers (19%) chose a CDHP in 2006. In contrast, when PPOs were offered as a choice among other types of plans, 55 percent of employees chose the PPO. The analogous proportions for HMO and POS plans were 40 percent and 35 percent, respectively.

The study also examined the average cost to employers of providing CDHP coverage compared with the cost of traditional plans, finding that once employer contributions to the savings account were included in the calculation, there were no statistically significant cost differences. This was true regardless of whether the employer offered a choice of health plans or not.

For example, when enrollees have a choice of plans, average monthly employer contributions for CDHPs were $297 for single coverage, including the savings account contribution, while the employer contribution for HMO, PPO and POS coverage were $288, $303 and $307, respectively.

However, employee cost sharing is significantly greater in CDHPs than in traditional plans. In 2006, the average annual in-network deductible in CDHPs—when offered as a choice to workers—was $1,459 for single coverage, considerably greater than for HMO plans ($30), PPO plans ($261) and POS plans ($94).

Moreover, CDHPs largely use coinsurance for physician office visits (only 15% of people were enrolled in a plan using copayments for office visits), while traditional plans overwhelmingly rely on copayments for office visits. With copayments, employees pay a fixed amount for a physician office visit. With coinsurance, employees pay a percentage of the total negotiated bill. Seventy-nine percent of workers in PPOs were enrolled in plans that use copayments for physician office visits, as were 95 percent and 98 percent of workers in HMO and POS plans.

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The Center for Studying Health System Change is a nonpartisan policy research organization committed to providing objective and timely research on the nation’s changing health system to help inform policy makers and contribute to better health care policy. HSC, based in Washington, D.C., is funded principally by The Robert Wood Johnson Foundation and is affiliated with Mathematica Policy Research, Inc.



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