Companies Choose Consumer-Driven Health Plans to Curb Costs

Nearly one in five companies (19 percent) of 314 firms surveyed offer a consumer-driven health plan, up from 11 percent in 2003, according to Deloitte Consulting LLP. An additional 14 percent of companies surveyed will definitely offer such a plan by 2006, while another 29 percent are currently reviewing consumer-driven health options and may offer one in the near future.

With more than half (53 percent) of surveyed companies reporting health care cost increases in 2004 ranging from 11 to more than 20 percent, employers are scrambling to adopt alternative health care models that encourage employee consumerism to help rein in costs without compromising benefits. Consumer-driven health care models can vary considerably, but they share a core principle: enabling employees to understand the true cost of health care services and the options available to them for receiving care while requiring employees to take on increased financial responsibility for managing their health care.

“A double digit increase in the number of companies offering a consumer-driven health plan clearly demonstrates that these type of plans are rapidly gaining acceptance,” says Steven Kraus, principal-in-charge of Deloitte Consulting’s Human Capital practice in Chicago. “With double-digit annual cost increases, companies are reaching the limits of their ability to fund traditional health insurance. Cost shifting isn’t working either. Executed properly, consumer-driven health plans will transform care by rewarding employees, employers, providers and payers for doing the right thing.”

Health Care Savings

In general, early adopters of these plans have averaged a drop in utilization of seven to 10 percent, according to Kraus, but how that translates into savings differs widely by company. Among the 19 percent of companies offering these plans, 15 percent expect to save more than 10 percent on health care costs; 35 percent of early adopters say they will save more than 5 percent; and 17 percent expect to save less than 5 percent. Another 29 percent of companies say the plan is cost-neutral, while 4 percent say it will be more expensive.

Levels of Satisfaction

Early adopters report strong satisfaction among employees, senior management and middle management. In fact, respondents report 60 percent of employees in consumer-driven plans are satisfied, 32 percent are neutral, and eight percent are dissatisfied. A full 80 percent of senior managers are satisfied and 20 percent are neutral. Among middle managers, 63 percent say they are satisfied, 33 percent are neutral, and four percent are dissatisfied. Among those respondents that reported being dissatisfied, the vast majority is only mildly dissatisfied.

Although roughly half of early adopters just launched their consumer-driven health plans in January, 2004, early success is leading some respondents to consider eliminating all other forms of health coverage. “We’re looking at possible full replacement within two years. Our initial enrollment goal was 30 percent. We doubled that the first year with 65 percent,” according to a benefits manager for a mid-size durable goods manufacturer.

Enrollment Rates

Enrollment rates overall vary. Among the 19 percent of respondents with consumer-driven health plans, but excluding those whose only coverage option is a consumer-driven plan, 12 percent report that more than half their employees are enrolled in the plan. Another 12 percent estimate between 31 and 50 percent of their employees are enrolled in the plan, while 15 percent of respondents report 21 percent to 30 percent have opted for the consumer-driven plan. The remaining 62 percent of respondents say 20 percent or fewer employees are in the consumer-driven plan. However, 30 percent of early adopters are only piloting the consumer-driven plan with a subset of employees. And no respondents reported a decline in enrollment of these plans from the previous year.

“Consumer-driven health plans confer important benefits, including providing greater financial predictability for both employers and employees,” notes Kraus. “They marry the best of managed care with greater accountability for all concerned, from employees making health care purchases to health care providers and payers that will increasingly be judged on quality and efficiency.”


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