CDHPs for the Wealthy & Healthy?

By: Anne Elmlinger

Greenwald & Associates is celebrating its 30th anniversary this year. It’s a time of remembering how things were and also looking ahead to the future. The experience has led me to also think about the 10th anniversary of our Consumer Engagement in Health Care Survey (CEHCS), about what has changed since the early years of the consumer driven health care plans (CDHP) and what we might expect to see ten years from now.

A little background…CEHCS is an annual online survey of privately insured Americans aged 21 to 64 that we co-sponsor with Employee Benefit Research Institute (EBRI), with the support of generous corporate and not-for-profit funders. The study focuses on the CDHP population and compares them to those with high deductible plans that are HSA-eligible but do not have a funded account, and to those with traditional plans.

What’s Changed Since 2005?

Of course, the product has grown in popularity in the past ten years. More people have CDHPs; 3% of the privately insured population had a CDHP in 2005, and in 2014, it’s up to 15%. The assets in the Health Savings Accounts (HSA) have grown, up to $22 billion in 2014, and average account balances that started at $700 are now three times larger at $2,100.

CDHP owners today are richer and healthier. Compared to the product’s early years, CDHP owners are twice as likely to have incomes of $150k or higher (20% vs. 10%). Importantly, consumers who have CDHPs are more likely to be in very good health – about 6 in 10 reported being in excellent or very good health in recent years, compared to just over half in the early years.

All of these factors work together. If richer, healthier people choose CDHPs, of course, their balances will be higher. They are able to contribute more and withdraw less. So the CDHP has certainly helped some people, primarily the wealthier parts of society to increase their assets and lower their taxes.

But what were policymakers trying to do when they established HSAs in 2003?

A lot of the talk then was that consumers would make smarter choices about the health care services they consumed if they had more “skin in the game.” This would reduce waste and overuse of the system and save everyone money. They also might be more motivated to find lower cost providers, which could increase competition based.

The results are mixed overall. There is some evidence that consumption is lower. In 2014, Paul Fronstin of EBRI wrote an interesting paper describing the results of their analysis of 5-years of claims data which found that utilization of some types of unnecessary services was lower among those with CDHPs. The study also found that, over time, usage of some important preventive screenings also increased, although not typically in the first year of having the plan. However, other types of preventive care are underutilized and medication adherence is lower in the CDHP population, compared to those with traditional plans.

To counter the cynical demographic view of CDHPs’ impact and mixed results in terms of utilization, we also find that CDHP members now are more likely to exhibit consumer behaviors compared to the early years. They are more likely to check the price of a service and/or quality ratings before receiving care. Use of cost-tracking tools is also higher than in 2005, with about a quarter now using these.

The bottom line is that CDHP owners are now more satisfied, more likely to recommend their plan, and more likely to renew their plans, compared to early adopters. So good news: some people are using the product as designers intended. But there is also evidence that increasing exposure to health care costs encourages the avoidance of needed and important care, even with increased consumer research.

What do I expect 10 years from now?

  1. I expect we’ll see more prevalent usage of information about the cost and quality of medical care they seek.
  2. We can assume that the income gap will grow, as those with high incomes take advantage of their greater disposable income and tax vulnerability to use HSAs, while lower income groups are unable to fund an account or realize significant tax savings.
  3. I think more CDHP owners will be looking to invest their account funds in the years ahead.

There are many challenges ahead and much progress is needed if CDHPs are going to truly fulfill their promise. But in the first ten years at least, there are reasons for both promoters and detractors to feel vindicated.



Careers Greenwald & Associates