Study: CDHP growth could save $57.1 billion per year

Enrollment growth in consumer-directed health plans (CDHP) could trim national health-care spending for the non-elderly by $57.1 billion per year, according to a new study from the RAND Corporation.

Those savings would come if CDHPs grew to account for half of all employer-sponsored health-insurance plans in the country, according to the study, which was published in the May edition of the journal Health Affairs. CDHPs made up 12.4 percent of employer-sponsored plans in 2010, the study’s baseline.

It’s not out of the question for half of the country’s employer-sponsored plans to be CDHPs one day, according to Amelia Haviland, an associate professor of statistics and public policy at Carnegie Mellon University and an adjunct senior statistician at the RAND Corporation who was the study’s lead author.

“A little bit more than half of [surveyed employers] are offering these CDHP types of plans,” she says. “We had a good distribution of enrollment rates across our employers. There were plenty that had 50 percent enrolling, 40 percent enrolling.”

The $57.1 billion cost-savings estimate would represent a 4.2 percent spending decrease for the entire non-elderly population, including those who are not insured through their employers. It would be a 7.1 percent decrease for the population in employer-sponsored health plans.

 CDHPs are high-deductible health plans coupled with tax-exempt personal-health accounts like health-reimbursement arrangements (HRA) and health savings accounts (HSA). 

The RAND study’s estimated $57.1 billion savings assumes half of high-deductible plans are paired with an HSA and half are paired with an HRA. But the projected savings would be slightly higher if more employers paired plans with HSAs, according to the study.

If 100 percent of high-deductible plans were combined with HSAs, health-care spending would drop by $73.6 billion, the study found. If all plans were paired with HRAs, savings would be $41.1 billion.

That’s because employees seem to have more incentive to cut spending with HSAs, according to Haviland.

“HRAs are owned by employers, but you typically forfeit money if you leave the employer,” she says. “There’s a different kind of incentive to save with an HSA. If employees change jobs, the balance moves with them.”

The CDHP savings would come from patients using less health care and spending less when they do seek care, the study found. About two-thirds of estimated savings would result from fewer episodes of care, and one-third would come from lower spending per occurrence.

The lower spending per incident is a result of patients using fewer brand-name drugs, visiting specialists less, and going to the hospital less often than patients in traditional health plans. It also comes from patients undergoing fewer preventive services — something that the study authors found concerning.

“We picked out different kinds of preventive care we don’t want to go down,” Haviland says. “All of them went down. They didn’t go down a lot — 3 to 5 percentage points — but they went in the wrong direction.”

For example, preventive care for cervical cancer for females over age 20 dropped 4.7 percent in CDHPs, the study found. Preventive care for colorectal cancer for adults over age 50 fell 2.8 percent.

That’s troubling because many types of preventive care can actually save money in the long run by helping patients avoid expensive problems in the future, Haviland says.

“It means we would have a short-term drop in costs, but it wouldn’t be sustainable,” she says. “We could see costs rise down the line.”

The dip in preventive-care use comes despite the fact that CDHPs sometimes pay for such services — even if patients have not reached their deductibles. Consumers need to be made more aware of which preventive services their plans cover free of out-of-pocket costs, the study suggested.

“These plans are placing all of the responsibility for making care choices on your employees, and they need help with making those decisions,” Haviland says. “If employers are going to offer these plans, they have increased responsibilities to help their employees understand these plans and to engage insurance companies about providing top-notch cost and quality information to their employees.”

The 2010 federal health-care reform law is likely to encourage future growth in CDHPs, the study said. They are relatively inexpensive, allowing employers to avoid penalties that will be levied against firms that do not offer low-cost health insurance. And they typically include comprehensive benefits the act requires.

The RAND Corporation study examined claims from 59 large employers across the United States from 2003 to 2007. Researchers cannot disclose companies that participated in the study, but they included automobile manufacturers, telecommunications providers, consulting firms, retailers, and businesses in the food industry, Haviland says.

The RAND Corporation is a Santa Monica, Calif.–based nonprofit organization that aims to improve policy by providing research and analysis. Its CDHP study was funded by the California HealthCare Foundation and the Robert Wood Johnson Foundation.