Human Capital & Careers

Most Workers Shun High Deductible Plans

"Despite the buzz, consumer-directed health plans have barely gained a toehold among Americans with employer-sponsored insurance."
Stephen TaubDecember 1, 2006

Most workers are not sold on consumer-directed health plans (CDHPs), also known as high-deductible plans. According to a new study from the Center for Studying Health System Change (HSC), just 19 percent of employees who had a choice of plans selected CDHPs when offered another type of health-care plan, such as preferred provider organizations (PPOs) or health-maintenance organizations (HMOs).

The study points out that when employees had a choice of another type of plan, comparable take-up rates (or participation) for PPO and HMO plans were 55 percent and 40 percent, respectively. Of course, many people don’t have this luxury: the study found that 39 percent of the estimated 2.7 million workers enrolled in employer-sponsored CDHPs had no choice of another type of health plan in 2006 — 53 percent of employees enrolled in a health savings account (HSA)-eligible plan were not offered a choice of plans, while 24 percent of enrollees in a health reimbursement arrangement (HRA) plan had no choice of plans.

“Despite the buzz, consumer-directed health plans have barely gained a toehold among Americans with employer-sponsored insurance,” says Jon Gabel, lead author of the study and vice president of HSC. The study is based on the 2006 Kaiser Family Foundation/Health Research and Educational Trust Employer Health Benefits Survey — a random sample of 2,112 private and nonfederal public firms with three or more workers. A CDHP is defined as a high-deductible health plan combined with a tax-advantaged savings account — usually either an HRA or an HSA. HRAs are owned and funded solely by employers, while HSAs are employee-owned.

Both employees and employers can contribute to HSAs, but employer contributions are optional. For both types of accounts, the plan deductible typically exceeds the employer contribution to the spending account, leaving the employee at risk for higher out-of-pocket costs. Of the roughly 70 million American workers who obtain health benefits from their employer, about 2.7 million, or 4 percent, were enrolled in a high-deductible health plan with a savings account in 2006: an estimated 1.4 million in HSAs and an estimated 1.3 million in HRAs, according to the study. Firms covering 14 percent of insured workers offered a CDHP in 2006.

Furthermore, the researcher noted that once employer contributions to the savings account were included in the calculation, there were no statistically significant cost differences. This was true regardless of whether the employer offered a choice of health plans or not, the study found. For example, when enrollees had a choice of plans, the average monthly employer contribution for CDHPs was $297 for single coverage, including the savings account contribution, while the employer contributions for HMO, PPO, and POS (point of service) coverage were $288, $303, and $307, respectively.

However, the study stressed that employee cost-sharing is significantly greater in CDHPs than in traditional plans. For example, in 2006, the average annual in-network deductible for CDHPs — when offered as a choice to workers — was $1,459 for single coverage, considerably greater than for HMO plans ($30), PPO plans ($261), and POS plans ($94).

What’s more, CDHPs largely use co-insurance for physician office visits, and only 15 percent of people were enrolled in a plan using co-payments for office visits. However, traditional plans overwhelmingly rely on co-payments for office visits. With co-payments, employees pay a fixed amount for an office visit, while with co-insurance, employees pay a percentage of the total negotiated bill. That said, 79 percent of workers in PPOs were enrolled in plans that use co-payments for office visits, as were 95 percent of workers in HMO plans and 98 percent of workers in POS plans.