Consumer-Directed Health Plans Show Mixed Results

May 9, 2012

Employer-sponsored health insurance plans with low premiums and high deductibles could cut U.S. healthcare costs significantly but not without potential risks for workers, according to a study published on Monday.

A Rand Corp. study, published in the May issue of the journal Health Affairs, said so-called “consumer-directed” health plans would cut healthcare costs for the nonelderly by 4 percent, or $57 billion a year, if they accounted for half of all employer-sponsored health insurance.

The plans, which now represent 13 percent of employer coverage, are championed by some reform advocates including Republicans because their market-oriented approach exposes consumers more directly to healthcare costs than do traditional insurance coverage.

The plans typically have annual deductibles of at least $1,000 per person and are coupled either with tax-exempt health reimbursement arrangements or health savings accounts.

The approach has gained popularity with employers over the past decade, as a way to insulate businesses from healthcare cost increases that have long outstripped economic growth and inflation.

The cost-controlling objectives of President Barack Obama’s healthcare reform law could expand the use of consumer-directed plans in future years, researchers said.

“Continued pressures to cut costs, combined with incentives in the Affordable Care Act, make the 50 percent enrollment level plausible over the coming decade,” said statistician Amelia Haviland of Carnegie Mellon University, who led the RAND study.

Cost savings for the nonelderly population would range from 1 percent to 2 percent if consumer-directed plans represent 25 percent of employer coverage, and from 5 percent to 9 percent at a 75 percent market penetration, the study found.

But financial savings could be accompanied by serious problems. “We need to carefully examine whether additional up-front patient costs will diminish the quality of healthcare … including poorer health and health emergencies down the road,” Haviland said.

The study, which examined insurance claims among 59 large employers from 2003 to 2007, found that families enrolled in consumer-directed plans had fewer encounters with healthcare providers and spent less when encounters did occur.

Families used fewer brand-name drugs, paid fewer visits to specialists and had fewer elective hospital admissions than those with traditional insurance.

Researchers warned that some of choices eliminated highly recommended services including cancer screenings and routine blood sugar tests for diabetes patients.

The spread of consumer-directed plans could also mean higher premiums for people with traditional insurance, given evidence that healthier patients tend to drop traditional plans in favor of less costly insurance with high deductibles.

(Reporting By David Morgan; Editing by Steve Orlofsky)

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