Since the turn of the decade, enrollment in consumer-driven health plans has grown each year. The percentage of the nationwide commercial market accounted for by the plans reached 17 percent in July 2015.
Growth has been mainly driven by employers, who have found the economic benefits of CDHP adoption hard to resist. The high cost of healthcare in the United States and the cost of providing generous health benefits is too strenuous a burden for many employers. To add insult to injury, many of these employers are staring down the barrel of the 2020 Cadillac Tax on high-cost health plans unless they can reduce their benefit costs. An effective way to reduce those costs is by offering a CDHP, either as an option or through full-replacement of their existing benefit package.
Individuals are also finding the cost savings tied to CDHPs attractive, and this will provide a boost to enrollment in the coming year as many are priced out of plans with lower deductibles, otherwise known as “traditional” plans. Much of the growth in the individual market will occur through exchanges, where high-deductible health plans are commonplace.
The upfront cost-saving benefits to consumers and employers will continue to push enrollment in CDHPs upward. In New Hampshire and Ohio, two states where CDHPs are highly prevalent, we predict that the percentage of commercial market enrollment in CDHPs will reach 30 percent and 27 percent, respectively, by January 2017. Nationwide, at least 22 states will have 15 percent or more of commercial health plan enrollment in CDHPs by the same date.
While the popularity of CDHPs has surged, published research on consumer behavior paints a mixed picture regarding how the plans and their paired savings accounts are being used. According to Devenir, an independent investment and consulting firm, consumers enrolled in CDHPs with paired health savings accounts held an estimated $24 billion in the accounts as of January 2015, and the firm projects that figure will eclipse $30 billion in the near term. However, recent studies suggest that consumers in CDHPs are reducing their healthcare spending indiscriminately, meaning that they forego both necessary and unnecessary care. Even though people with CDHPs are saving more, they appear to be less willing to use their accumulated funds to pay for services due to the high deductibles.
So, while the positive trend in CDHP enrollment will continue, it will do so with a fair share of growing pains. Over time, efforts to address the drawbacks of CDHPs and fine tune the plans will emerge. Advocates of value-based insurance design have long cried for expansion of the “preventive safe harbor,” which would increase the number of services that are not applied to the deductible within CDHPs. Legislation has also been proposed recently, such as the Health Savings Act of 2016. This bill would, if enacted, lessen restrictions on who can contribute to HSAs by allowing Medicare Part A recipients to continue contributions past the age of 65, by allowing HSA holders to purchase over-the-counter drugs with account funds, and by removing employer contributions to HSAs from being applied to the “Cadillac Tax” threshold. Look for the Health Savings Act of 2016 to pass this year.
Consumer-driven health plans are changing the way people think about and purchase their healthcare, and are drastically altering the employer benefit landscape. Consumer education about the plans and refinement of the plans will become more important as enrollment increases further and the issues tied to the plans become more pronounced. Whether you like them or not, CDHPs are here to stay.
Tyler Dinwiddie is a research associate at DRG and a CDHP expert. Follow him on Twitter at @TylerDinwiddieDRG.