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The Myth of Consumer-Directed Health Plans
A recent survey reveals that cost trends for high-deductible health plans eventually rise at the same rate as those for other types of health plans. Lack of employee engagement, inadequate quality measurements and skyrocketing healthcare-delivery costs are factors.
A recent survey from Towers Watson reveals that the cost trends for consumer-directed healthcare plans are rising at the same level as other types of health insurance at companies where the CDHPs have been in place for a few years. Meanwhile, a survey conducted late last year by Segal/Sibson Consulting found that healthcare cost trends for CDHPs were slightly higher than for preferred-provider-organization health plans. The findings illustrate the fact that even high-deductible health plans, which are designed to save companies money and encourage employees to be more careful with their healthcare dollars, are subject to the same price pressures as other types of plans, says Ted Nussbaum, a principal at New York-based Towers Watson. "The cost of healthcare delivery is simply too high," he says, adding that the recently signed healthcare reform bill doesn't do enough to address this. The survey, conducted jointly by Towers Watson and the National Business Group on Health, found median healthcare costs are expected to increase by 6.5 percent this year, down slightly from 7 percent in 2009. The survey queried 507 U.S. employers with at least 1,000 employees. Although CDHPs are designed to sensitize employees to the true cost of healthcare, in practice, this isn't working out as well as hoped, says Nussbaum. "Companies have created an infrastructure to encourage employees to identify and address their health risks, but employees aren't engaged enough to make the return-on-investment as good as it could be," he says. Nearly two thirds (67 percent) of respondents said employees' poor health habits are a top challenge to maintaining affordable healthcare coverage, and more than half (58 percent) said the biggest obstacle to changing such habits is the lack of employee engagement. Respondents also said they felt they were getting little help from their medical vendors: 67 percent felt vendors are falling short with programs designed to change member behavior to drive more efficient use of healthcare services. Meanwhile, 66 percent rated vendor programs designed to encourage healthier lifestyle choices among members as not at all or only slightly effective. The survey found companies that adopted a CDHP in 2009 reported significantly lower healthcare-cost increases last year than those that added a CDHP in previous years and than non-CDHP companies. However, it found that companies that have had a CDHP in place for at least a few years saw healthcare cost trends for those CDHPs rise at the same rate as those for other types of plans. Companies that offer CDHPs as a "full replacement" -- i.e., offering them as the only available health plan instead of as an option among other types of health plans -- tend to fare better from a cost perspective, says Bill Sharon, a senior vice president at Chicago-based Aon Consulting. But controlling costs long-term requires more than just changes in plan design, he adds. "It's not about putting in a CDHP; it's about consumer engagement," he says. In order to make a significant difference in costs, a CDHP must be accompanied by effective wellness incentives and strong disease-management programs. The new healthcare law includes a wellness provision that will raise the amount companies can spend on wellness incentives from 20 percent of premiums to 30 percent, says Sharon. "The reality is that very few companies bump up against the 20 percent limit now; but, in the longer term, it's going to motivate more companies to beef up their wellness efforts." Wellness efforts must be matched with powerful informational tools from vendors that give employees the data they need about provider cost and quality, says Sharon. However, most tools in this area are falling short, says Dean Hatfield, a senior vice president at Segal/Sibson Consulting in New York. "The tools and resources haven't caught up to the plans," he says, adding that Segal/Sibson's healthcare-cost-trend report revealed that costs for CDHPs were going up 1 percent higher than those for PPO plans. "The quality measures available to employees differ from insurer to insurer." Hatfield cites his own recent history as a case in point: Not long ago, he shattered his arm in an accident. But the surgeon who initially treated him failed to do certain things, with the result being that Hatfield was left with limited mobility in his arm. By that point, Hatfield had switched insurers, and the surgeon who fixed the previous doctor's mistakes was covered by a different insurance company, as were the follow-up treatments and rehabilitation costs. However, those additional costs and complications had no effect on the previous surgeon's quality ratings because the two insurance companies didn't communicate with each other, he says. "As far as the previous insurer was concerned, my experience had been a success because they only had that initial surgery on their records, not the stuff that followed" he says. "There needs to be national uniformity and transparency -- the more information you can give plan participants, the better consumers they can be." Another important factor that can make a difference in lowering costs is pairing CDHPs with health-savings accounts (in which employees contribute their own money to tax-exempt savings accounts, often seeded with money from employers) rather than health-reimbursement accounts (which are funded by the employer), says Sander Domaszewicz, a principal at Mercer's Newport Beach, Calif., office. "HSAs can get you to the notion of `shared accountability' that HRAs can't," he says, adding that Mercer data shows three out of four companies implementing CDHPs are using HSAs instead of HRAs. "By getting employees to contribute their own money, HSAs encourage them to track the money much more closely." CDHPs can't change health habits all by themselves but they can serve as critical "nudges" to pressure employees to improve their health habits and pay greater attention to providers' quality and pricing, says Domaczewicz. "It's behavioral economics that will get employees to say `The path of least resistance is for me to do the right thing.' " All of these efforts to control costs will be limited in their effect, however, unless more is done to address the No. 1 factor driving healthcare costs: the widespread disparity in healthcare-delivery costs between different doctors, hospitals and regions of the country, says Nussbaum. "The quality of care varies significantly from hospital to hospital -- the ones that provide the highest-quality care almost always are able to do so at less cost," says Nussbaum. "Prices are too high and utilization is too high -- those are the reasons why healthcare costs more in the United States than in any other industrialized country and yet our outcomes aren't better." The federal government needs to do more with regard to this by pushing for greater uniformity in standards of care, he says. "There need to be more comparative effectiveness studies; there need to be national standards," says Nussbaum. "You hear that medicine is both an art and a science -- well, there's a lot more science than art in medicine." March 31, 2010 Copyright 2010© LRP Publications |
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© Copyright 2010 LRP Publications. All rights reserved.
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