Message From An Actuary
Diane Luedtke, FSA

Consumer-driven health plans (CDHPs) are increasingly prevalent in terms of both benefit offerings and participation. As actuaries, we are often asked whether CDHPs bring about lower utilization and health care costs. And further, even if these plans can successfully lower costs, is it at the expense of foregoing necessary care? Now that CDHPs have been available in some form for almost ten years, enough data has emerged to draw some conclusions.

Questions regarding cost and care are important ones for employers considering introduction of CDHPs. We have attempted to answer some of these questions in an independent and unbiased fashion by conducting a review of existing studies and publications.



Tim Luedtke, FSA, MAAA, CFA
Principal & Consulting Actuary

Diane Luedtke, FSA
Principal & Consulting Actuary







  Cutting Costs, Not Care
Success of Consumer-Driven Health Plans
Diane Luedtke, FSA

he growing popularity of consumer-driven health plans (CDHPs) indicates greater acceptance of these programs as a health care cost management strategy. Employers are increasingly turning to CDHPs to lower benefit costs by actively engaging consumers to help control unnecessary utilization. The premise of consumer-driven health is that participants will become better health care consumers if given the proper financial incentives and information tools. CDHPs are high-deductible health plans paired with an account, in the form of a health savings account (HSA) or health reimbursement arrangement (HRA), which can be used to help offset out-of-pocket expenses.

The Results Are In!

Numerous studies tout the positive results of CDHP experience. While it's easy to find published and advertised results cited in the media and elsewhere, deciphering which studies are credible and reliable can be complicated. Many market participant studies may be biased toward illustrating success of the plans. To address this issue, an American Academy of Actuaries work group performed a comprehensive review of several experience studies. From their independent analysis, the group selected those studies they considered best in terms of study design, methodology, detail and relevance. The selected studies examined actual multiyear experience covering hundreds of thousands of plan members. The studies meeting the selection criteria include national studies performed in 2008 by Aetna, CIGNA, and UnitedHealth - three of the largest health care providers in the country.1 The full report can be found through the American Academy of Actuaries at http://www.actuary.org/pdf/health/cdhp_may09.pdf

Key Findings:

First Year Costs Fall. . . All studies showed a favorable effect on first year costs under a CDHP. Plan trends ranged from -4% to -15%. When compared to trend rates of 8% to 9% experienced under traditional plans, total first year savings could be as high as 12% to 20%.

Future Cost Increases Are Lower Too . . . Subsequent year savings showed trend rates 3% to 5% lower than traditional PPO plans.

Employees Seek Necessary Care . . . All studies demonstrated CDHP participants did not forego necessary care. In fact, they received the same or higher levels of care as those in traditional plans.

Fears of CDHP as a Cost-Shifting Method Prove to be Without Merit . . . Most employers choose CDHPs for their potential utilization savings rather than cost-shifting potential. CIGNA's study showed that the cost share for members with HRA plan designs was about the same as for the traditional plan designs from which the members migrated. Both CIGNA and Aetna demonstrated that regardless of member claim level (low, medium or high), members fare the same or better than when enrolled in traditional plans.

Consumer Behavior Changing. . .
  • Preventive Care - All of the studies showed significantly higher use of preventive services for CDHP participants. Reasons for this included the practice of most plans providing preventive care at no charge and increased messaging to participants.
  • Recommended Chronic Care - The three studies reported participants received the same (Aetna) or higher (CIGNA, UnitedHealth) levels of care compared to traditional plan participants for chronic conditions such as diabetes and hypertension.
  • Prescription Drug Utilization - Generally the studies showed greater generic substitution under consumer-driven plans than under traditional plans, helping to drive down costs.

  • Consumerism Works . . . Why Wait, Learn More

    Many perceive consumer-driven plans simply as high-deductible plans which shift cost to the employees. This overlooks the intrinsic value of the account feature and its ability to induce greater employee financial responsibility. The studies reviewed demonstrate that CDHPs have a positive effect on first-year and ongoing costs. Savings were achieved without sacrificing health. And, employees' share of total cost was comparable to that under traditional plans. Recently released updates to the Aetna and CIGNA studies reinforce these findings.2,3

    The success of any individual plan depends upon overall plan design and suitability for the group, employer objectives and employee communication. Employers considering introduction of a consumer-driven option should contact us at Navigator Benefit Solutions LLC to ensure proper plan design and employee communication.

    1 Making an Impact - Aetna Health Fund (Aetna - 2008); CIGNA Choice Fund: Two Year Experience Study, 2005-2006 (CIGNA - March 2008); Uniprise - 2008 CDHP Results Discussion (UnitedHealth - March 2008)
    2 http://www.aetna.com/news/newsReleases/2009/0310_AHF_Results.html.
    3 http://newsroom.cigna.com/images/56/825638_ChoiceFund_Study.pdf.


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