Employers Say Consumer-Driven Health Plans Likely To Grow,
But Have Concerns That Sicker Employees Won’t Enroll

Health Affairs Article Says Employers Believe Plans Can Reduce Costs
And Lead To Smarter Health Care Buying, But Won’t Improve Quality

BETHESDA, MD — Employers are becoming increasingly familiar with various types of “consumer-driven” health plans, according to a new article published today on the Health Affairs Web site.

Thirty percent of U.S. workers may be eligible for just one type of consumer-driven plan in the spring of 2005 under a “best-case” scenario for growth, a 15-fold increase over two years. However, only a small minority of employees who are offered such plans are likely to enroll in them.

The Commonwealth Fund-supported survey, the first of its kind, shows that employee benefit managers, while interested in such plans, are nonetheless skeptical of such plans’ ability to improve quality.

Jon Gabel, vice president of health systems studies at the Health Research and Educational Trust, and three colleagues surveyed employee benefit managers at more than 1,800 employers of all sizes to gauge their familiarity with and likelihood of purchasing consumer-driven coverage in the near future.

The survey found extensive familiarity with the term “consumer-driven health care.” About 66 percent of employees work for a firm where the employee benefit managers were “very” or “somewhat” familiar with the term, and familiarity with the term grows with firm size.

Employee benefit managers were most familiar with health reimbursement arrangements (HRAs), those high-deductible plans in which employees can pay for a portion of their out-of-pocket costs from a spending account established as part of the plan. Eighty-two percent of all employee benefit managers were familiar with HRAs.

The employee benefit managers were less familiar with personalized plans, which allow employees to design their own networks and benefits packages (47 percent), and with customized-package plans, which allow employees to choose the size of their provider network and the richness of their benefit package (49 percent).

The familiarity with HRAs did not necessarily mean that employers were embracing HRAs, however. While strong majorities of employee benefit managers “strongly” or “somewhat” agreed that HRAs will result in lower health care use and spending, along with more intelligent medical care purchases, strong majorities also believe that HRAs won’t improve the quality of care and won’t be popular with employees, and will attract only healthier employees.

In spring 2003, 2 percent of employees worked for firms that offer a high-deductible health plan coupled with an HRA. The larger the firm, the more likely that employees are eligible for such plans. Only 1 percent of employees in small firms (those with 3-199 workers) were offered such an option, but 2 percent of employees were in large firms (200-5,000 workers), and 4 percent were in jumbo firms (5,000 or more workers).

The survey found that employers were most likely to begin offering HRAs in the next two years. Thirty-one percent of employers said they were “very” or “somewhat” likely to consider offering HRAs, compared with 13 percent for personalized plans, 14 percent for customized plans, and 19 percent for tiered provider networks.

“Employers retain considerable skepticism about HRAs’ ability to control costs and improve consumers’ decision making and quality of care,” Gabel says. “Very few employers thought that HRAs would be highly popular with employees. Nonetheless, our survey findings indicate that HRA enrollment may take off in the next two years.

“A best-case scenario for HRAs would have roughly 30 percent of employees able to choose an HRA plan in the next two years,” Gabel says. “This figure would equal the percentage of employees that can choose a point-of-service plan and would be double the number that can choose an indemnity plan.”

A further complication is the implementation of the Medicare Prescription Drug, Improvement, and Modernization Act, which authorizes the use of tax-free health savings accounts portable from employer to employer. Those accounts, which must be coupled with high-deductible health plans, have the potential to supplant HRAs in the large- and small-group market, Gabel says.

The article can be read at http://content.healthaffairs.org/cgi/content/abstract/hlthaff.w4.210.

Health Affairs, published by Project HOPE, is a bimonthly multidisciplinary journal devoted to publishing the leading edge in health policy thought and research.

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©2004 Project HOPE–The People-to-People Health Foundation, Inc.