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AIS's Health Business Daily
Featured Story April 22, 2008 Health Care Cost Hikes Are Significantly Lower for Companies With High Enrollment in Consumer-Directed Health PlansReprinted from INSIDE CONSUMER-DIRECTED CARE, a biweekly newsletter with timely news and insightful analysis of benefit design, contracts, market strategies and financial results. By Bruce Goldfarb, Editor, (bgoldfarb@aispub.com) A consumer orientation in health benefits appears to have a halo effect with advantages that go beyond those enrolled in consumer-directed health (CDH), according to a new study from Watson Wyatt and the National Business Group on Health (NBGH). Health cost increases for companies with high CDH enrollment are about half of those offering only traditional coverage, the authors of the report say. "As CDHP [consumer-directed health plan] enrollment goes up, trend numbers consistently decline," Ted Nussbaum, Watson Wyatt's director of group and health care consulting in North America, tells ICDC. "That was pretty unexpected and astounding." The survey — the 13th annual study conducted by NBGH and Watson Wyatt — included 453 large employers. Overall, 47% of respondents now offer a CDH plan, up from 38% in 2007 and 33% in 2006. The proportion is expected to rise to 54% by 2009, according to the report. Enrollment is rising as CDH plans are more widely adopted by employers. Enrollment is 15% among companies offering them, up from 10% in 2007 and 8% in 2006. Only 6% of companies report 100% enrollment in CDH, a proportion expected to rise to 9% in 2009, the report says. The best performers among the companies surveyed — those with the lowest rise in annual health care costs — had increases of only 1% during a two-year period, the analysis showed. The "poor performers" on the list reported increases of 10% in health care costs during the same period. "The most unexpected finding is the trend rate for the best performers and the differential between the best and worst performers," says NBGH President Helen Darling. While the trends for top performers have been steadily improving for several years, "I did not expect to see a 1% trend," she says. A median trend of 1% over a two-year period "is a huge difference between best and worst performers and a significant improvement over previous years," says Nussbaum. Companies Adopt CDH-Like Strategies Nussbaum and Darling report a strong correlation between lower health care costs and the presence of CDH, even among employees not enrolled in a CDH plan. Overall, companies that offered CDH had a two-year cost increase trend of 5.5%, compared with 7% for companies without CDH, according to the report. Companies with at least half of their work force enrolled in a CDH plan had a two-year increase trend of 3.6% — almost half that of companies that don't offer CDH. "As CDH enrollment goes up, trend numbers consistently decline," Nussbaum says. "It isn't the CDH plan design that is driving these results, because even if you have 20% or 30% or 50 % in CDH, the trend is still significantly lower." The observation is more than coincidence, the report's authors contend. The link reflects a change in corporate culture and employee behavior, Nussbaum says. Many companies that don't formally offer CDH plan are using CDH-like strategies such as paying 100% for preventive services and offering financial incentives for participation in wellness or disease management programs. "The companies
that are offering CDH have a commitment to the consumerism model and
all the things that go with it — providing the tools, educating,
creating a data warehouse," he says. "They're more likely
to be involved in initiatives to improve the health of employees."
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