CDHPs may be the new face of affordable healthcare.
Ken Haderer
The evidence is building. Employers are embracing consumer-focused solutions to manage healthcare costs and encourage employee engagement. Mercer’s 2013 National Survey of Employer-Sponsored Health Plans reports an increase in high-deductible, consumer-directed health plans (CDHPs). In fact, the survey revealed that enrollment in CDHPs is now on par with that of HMOs.
Nationally, enrollment in CDHPs rose from 16 percent of covered employees in 2012 to 18 percent in 2013. This is the same portion that enrolled in HMOs, which remained stable in 2013 after experiencing a drop from 20 percent the year before. Something of note: In the Midwest, CDHP enrollment is now more than double that of HMOs (27 percent compared to 10 percent). Nearly two-thirds of all large employers and about one-third of small employers say they expect to offer a CDHP within three years.
Clearly as healthcare reform moves forward and employers are required to cover more part-time employees, CDHPs are an alternative to traditional healthcare. They are often a cost-effective option for organization extending coverage to additional employees.
According to the Mercer survey, the average cost of coverage in a CDHP paired with a tax-advantaged health savings account (HSA) is 17 percent less than coverage in a PPO, and 20 percent less than in an HMO. Here is a breakdown:
- $8,482 per employee for CDHP
- $10,196 for PPO
- $10,612 for HMO
The CDHP momentum will only increase for employers that need to lower costs in 2018, when they will be required to pay a 40 percent excise tax on health coverage that costs more than $10,200 for an individual, or $27,500 for a family. Mercer’s estimates show that about one-third of employers are currently at risk for triggering the excise tax in 2018 if they make no changes to their most-costly plan.
What About Employees?
The annual Mercer Workplace SurveyTM found the perceived value of benefits is dissipating among workers who complain about out-of-pocket healthcare expenses. The fall-off is most pronounced among workers under 50. Only 30 percent of this group reported benefits are “definitely worth it,” which is down from 45 percent in 2011.
The proportion of survey participants who say their employer offers a high-deductible health plan is higher than it was the last time the question was asked in 2008—and now more than half of participants (54 percent) are enrolled in one. This is a 10 percent increase from 2008. That’s a significant number. It aligns with the rise in CDHPs, which typically provide a high-deductible plan along with a health savings account (HSA) to which employees and employers can make defined contributions, and which remain portable assets for employees even if they leave the organization.
New data from 2014 open enrollment from 1.1 million employees reveals that 10 percent of client health plan participants eligible for HSAs have chosen to enroll in them, up from 4 percent last year, and 3 percent the year before At the same time, this data tells us that the average HSA contribution amount per employee has lessened steadily.
Employees are being asked to take greater responsibility as healthcare consumers, and yet there are real constraints on how much they can save and allocate for their healthcare needs. There’s definitely more to be seen from CDHPs and this rising tide of responsible consumerism.
Notes: The 2013 National Survey of Employer-Sponsored Health Plans garnered responses from 2,842 employers, with results representative of more than 105 million full- and part-time employees.
The annual Mercer Workplace SurveyTM, a national cross-section of active 401(k) participants enrolled in their employers’ benefit plans, interviewed 1,506 plan participants in 2013.
Ken Haderer is Mercer’s US Benefits Administration Leader, based in Norwood, Mass.
