CDHPs surpass HMOs as second most common health plan

PPOs still most popular

Move over, HMOs. A new study by Aon Hewitt shows consumer-driven health plans have surpassed health maintenance organizations to become the second most common plan design offered by U.S. employers.

Preferred provider organizations, or PPOs, are still the most popular health plans offered by employers, as 79 percent of employers offered those plans in 2011.

Aon Hewitt’s survey shows 58 percent of nearly 2,000 U.S. employers offered a CDHP in 2011, compared to 41 percent in 2010. Meanwhile, 38 percent offered an HMO in 2011 compared to 41 percent in 2010.

The employers represent more than 20 million employees and their dependents.

Consumer-directed plans are popular for employers because they are a way to address unsustainable increases in health care spending. Instead of shelling out more money for their employees each year, more of the risk and decisions fall on the workers.

Other surveys show consumers like them, too. Satisfaction levels are up among enrollees in consumer-driven health insurance plans while they’re declining among those in traditional health plans, according to an August report by the Employee Benefit Research Institute. The group’s online survey of enrollees reported that 71 percent of enrollees in both types of plans were either “extremely satisfied” or “very satisfied” with their plans.

“Employers are beginning to explore innovative solutions that focus on both the short-term need to manage health care costs and the longer-term requirement to change underlying behavior patterns, shifting the focus from ‘caring for the sick’ to ‘actively managing the health of their employees,’” says Maureen Fay, senior vice president and head of Aon Hewitt’s CDHP working group.

“[CDHP] designs are becoming increasingly popular among employers because they provide them with a vehicle for promoting consumerism and a framework for educating and motivating employees to actively engage in understanding and managing their health,” she says.

Among employers that offer CDHPs, health savings accounts outpace health reimbursement arrangements by two to one (34 percent versus 18 percent). But the Aon Hewitt survey shows a higher number of employees enrolling in HRAs, with 43 percent of employees enrolling in HRAs compared with 28 percent in HSAs. This reflects the fact that HRA plan designs are popular among large employers embarking on full replacement CDHP strategies, as they offer more design flexibility to the employer than HSA designs, the consulting company notes.

HSAs, on the other hand, are typically offered as one of several plan options available for employees to choose between and therefore generate lower enrollments.

Despite an increase in prevalence, Aon Hewitt’s survey found that enrollment in CDHPs lags behind PPO and POS plans. The average enrollment in a PPO plan was 69 percent in 2011 followed by POS plans (49 percent). Forty-three percent enrolled in a high-deductible CDHP with an HRA and 28 percent enrolled in a high-deductible CDHP with an HSA.

To encourage employees to enroll in these plans, employers are using a variety of tactics, including subsidizing premiums at a higher level than other plan options (36 percent), covering preventive medications before the deductible (34 percent) and contributing employer funds to the HSA (30 percent) and HRA (22 percent).

A growing number of employers are also considering using voluntary/elective benefits to supplement these plans, such as critical illness, hospital indemnity and accident insurance policies, Aon Hewitt says.

Of those currently using this tactic, more than a quarter (26 percent) can attribute a significant-to-moderate increase in CDHP enrollment due to the availability of voluntary or supplemental medical benefits. While just 6 percent of employers use voluntary/elective benefits today to complement the CDHP and encourage enrollment, 42 percent report they are considering this approach in the next few years. 

Despite an obvious soar in popularity, CDHPs show even more potential. According to a separate survey of 3,000 employees and their dependents by Aon Hewitt, The Futures Co. and the National Business Group on Health, employees find them challenging to understand and use. More effective communication by employers about the plans likely will help increase enrollment.

[Read "Four ways employers can encourage CDHP enrollment"]

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