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Lots of Window Shopping, But Modest Consumer-Directed Health Plan Adoption

Optimism Remains Strong for High-Deductible, Spending-Account Health Plans

News Release
March 27, 2008

Alwyn Cassil (202) 264-3484 or

WASHINGTON, DC—While adoption of high-deductible health plans coupled with spending accounts remains modest, supporters believe consumer-directed health plans (CDHPs) will take hold as part of a larger employer strategy to confer more responsibility on workers for health care costs, lifestyle choices and treatment decisions, according to a study released today by the Center for Studying Health System Change (HSC).

National surveys suggest that while CDHPs—typically a high-deductible health plan accompanied by either a health reimbursement arrangement (HRA) or health savings account (HSA)—are being offered by a growing number of employers, enrollment in these products constituted just 5 percent of total enrollment in employer-sponsored health plans in 2007.

"There’s a lot of window shopping going on with consumer-directed health plans, and there’s a lot of watchful waiting to see how early adopters fare," said Paul B. Ginsburg, Ph.D., president of HSC, a nonpartisan policy research organization funded in part by the Robert Wood Johnson Foundation (RWJF).

"In the past two years, health plans have expanded consumer-directed offerings in response to employer demands for products that support broader consumer strategies, where workers take more responsibility for health care costs, lifestyle choices and treatment decisions," said HSC Health Researcher Ann Tynan, M.P.H., coauthor of the study with HSC Senior Consulting Researcher Jon Christianson, Ph.D., of the University of Minnesota. "But so far large employers are hesitant to structure premiums to incorporate strong incentives to steer employees to these plans."
The study’s findings are detailed in a new HSC Issue Brief—Consumer-Directed Health Plans: Mixed Employer Signals, Complex Market Dynamicsavailable here. The study, funded by RWJF, is based on HSC’s 2007 site visits to 12 nationally representative metropolitan communities: Boston; Cleveland; Greenville, S.C.; Indianapolis; Lansing, Mich.; Little Rock, Ark.; Miami; northern New Jersey; Orange County, Calif.; Phoenix; Seattle; and Syracuse, N.Y. HSC has been tracking change in these markets since 1996.

Other key study findings include:

  • In the last two years, many health plans have developed various consumer-support tools, such as online information about hospital and physician quality and efficiency; tools to help enrollees estimate the costs of care; and information about healthy lifestyles and treatment decisions.
  • Plans believe that having CDHP benefit designs and consumer support tools are essential to "get in the door" when marketing to employers of all sizes. Increasingly, employers prefer to use a single carrier for all of their health plan offerings, which plans say requires them to offer a full range of products, including CDHPs, to remain competitive.
  • Some employers believe that CDHPs, especially tied to HSAs, are difficult for some employees to understand and, therefore, require extensive employee education when offered. Employees must understand the federal tax rules and regulations governing HSAs, including contribution caps and what medical expenses can be paid using HSA funds. Further, consumers may have to shop for an HSA provider to administer the account if their employer does not contract with one.
  • Some employers perceive the portability of HSAs as a negative feature, especially in industries with high employee turnover. These employers respond by contributing little or nothing to the account or by offering an HRA instead.
  • Large employers sometimes value CDHPs as part of an overall strategy to shift more responsibility for health care to employees but have not made changes to premium contributions to encourage employee adoption.
  • Smaller employers with low-wage workforces typically offer an HSA as an embellishment to a high-deductible plan and often do not contribute to the account. In contrast, smaller employers with high-wage professionals are more likely to offer HSAs because employees value the tax advantages. These employers also are more likely to contribute to employees’ accounts.
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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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