How much could shifting to consumer directed health plans save? A great deal, according to this new study by RAND researchers, published in Health Affairs:
Enrollment is increasing in consumer-directed health insurance plans, which feature high deductibles and a personal health care savings account. We project that an increase in market share of these plans–from the current level of 13 percent of employer-sponsored insurance to 50 percent–could reduce annual health care spending by about $57 billion. That decrease would be the equivalent of a 4 percent decline in total health care spending for the nonelderly. However, such growth in consumer-directed plan enrollment also has the potential to reduce the use of recommended health care services, as well as to increase premiums for traditional health insurance plans, as healthier individuals drop traditional coverage and enroll in consumer-directed plans. In this article we explore options that policy makers and employers facing these challenges should consider, including more refined plan designs and decision support systems to promote recommended services.
Greg Scandlen says he believes the benefits could actually be much higher than $57 billion. billion. He writes at the National Center for Policy Analysis’s blog.
First year savings are the least of it. The real value of consumer driven approaches is that trend is reduced and the savings mount up over time. The 2009 study by the American Academy of Actuaries, for one, found that the trend over time for CDHPs ranged from 12% to 17% lower than for traditional plans. (By the way, this new RAND study is one of the very few, if any, to cite the AAA study as a source.)
This difference in the experience of HRAs and HSAs is particularly important because this study relies on data from 59 large employers from 2003 to 2007. HSAs were signed into law in December 2003, and didn’t really go into effect until 2005. So the HSA experience studied here must have been very limited.
Importantly these savings do not accrue solely to employers. The study looks at out-of-pocket costs as well as premiums, and concludes that families themselves reduced their costs by over 20%.
Scandlen theorizes that people would navigate such a system with far greater ability than experts have previously expected. But placing this study in a larger context, I wonder if the appeal of these plans will ultimately lead to how Republicans will attempt to “fix” Obamacare should the Senate not end up in their hands. Allowing for plans such as these to be sold within the Obamacare exchanges, subsidized by taxpayers of course, might be a way to help middle-income households, which are going to be in a difficult position given their status, as the NCPA notes.
Under the Obama plan, however, many of these families could instead find themselves buying their health insurance on the new state-based exchanges that get started in January 2014.
For a family of four, premiums on even one of the lower priced “silver” options could still cost more than $15,000 annually on the exchanges. Even those with only modest incomes could find they make too much money to be eligible for premium assistance tax credits–the tool the Obama administration created to defray the costs of the expensive exchanges.
Additionally, even though people aren’t forced to carry health coverage on the exchanges if the cost of these policies exceeds 8 percent of their pretax income, the point may be moot: the exchanges will crowd out other low cost insurance options. The end result of giving the middle class the runaround is that they’ll be paying higher premiums for the same coverage (or broader coverage that they didn’t want in the first place).
If repeal is not a realistic political option, consider something like this likely to be part of the discussion.
