4 lessons from 20 years of health care consumerism

The rich amount of global data, coupled with my personal and business experience, have led me to four main conclusions about consumer-driven health plans:

1. CDHPs do control health care inflation for a period, reduce unnecessary spending and cut out much of the waste in the health care system.

2. They do this with no deleterious effects on members' health or financial position, relative to traditional preferred provider organizations.

3. There are several ways to make CDHPs work better and faster by understanding exactly how and why they work.

4. Finally, the better and faster CDHPs work, the sooner they stop working. In fact, the reasons they work in the first place are the same reasons they stop working. The temporary relief that they give employers should not be an opportunity that is squandered, and savings from CDHPs can be applied in a way that offers employers a real chance at long-term health care cost control.

The first strong piece of evidence that CDHPs work is the very rapid adoption curve at both the employer and member levels. Over 30% of large employers now offer a CDHP, and over 13.5 million members have health savings accounts. These plans are the fastest growing of any plan type in the U.S. today.

But growth alone cannot be the sole indicator of whether or not these plans work. Remember the growth of health maintenance organizations in the 1990s and the subsequent backlash against them? Will CDHPs be sustained once this growth has matured, or will there be a CDHP backlash too? In the U.S., it's too early to tell. But in other countries, it's not.

South Africa has had CDHPs for 20 years now and these plans now make up the majority of privately funded health insurance plans. Similarly, Singapore's Medisave system is alive and well after nearly 30 years. In fact, the only problem it occasionally has is an embarrassment of riches: overfunded Medisave accounts.

This provides some encouraging evidence that the U.S. might have a similar experience. My prediction is that CDHPs will reach at least 50% penetration by 2020, barring any more changes in legislation.

Most carriers have experienced lower inflation in CDHPs relative to traditional PPOs, with one important exception: When employers offer CDHPs as a slice option, the cost inflation on these plans is often greater than for the PPO plans. This is because, in the first years, the healthiest members join the CDHP. Over time, as others follow their example, the average risk pool worsens as the higher risk lives move to the CDHP. This risk pool worsening often hides the real and lower rates of inflation of CDHPs. Many carriers and self-funded employers, when adjusting for risk pool changes, are seeing early CDHP cost inflation rates of as low as 50% of the inflation rates on traditional PPOs.

Do members use less care, or do they simply use less expensive care? Both. The majority of savings comes from members making smarter decisions by choosing more appropriate and less expensive settings for care when they have a direct financial stake in their care.

Contributing Editor Andrew Sykes is chairman of Health at Work. He can be reached at andrew@healthatwork.com.

For reprint and licensing requests for this article, click here.
Healthcare plans
MORE FROM EMPLOYEE BENEFIT NEWS