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More Companies Are Offering Consumer-Directed Health Insurance Plans

Employee Health Insurance

The number of employers offering consumer-directed health insurance plans continues to grow. However, those companies that are most effective at controlling health care costs are combining these plans with other health-related tactics. Those are among the major findings in an annual survey conducted by Watson Wyatt Worldwide and the National Business Group on Health.

In the survey of 573 large companies, the portion of companies offering a consumer-directed health plan (CDHP) increased from 33 percent to 38 percent in the last year. As of five years ago, only a handful of companies offered such plans, which generally include a high-deductible plan coupled with a personal savings account such as a health savings or health reimbursement account (HSA or HRA). Forty percent of employers now offer or plan to offer an HSA, and 26 percent offer or plan to offer an HRA.

"Curbing health care cost increases is a puzzle for employers, and consumer-directed health plans are only one piece," said Ted Nussbaum, Watson Wyatt's director of group and health care consulting in North America. "Employers can offer these plans, but it takes more than that to get employees to enroll. Filling in the missing pieces of quality, health management and education will not only help employers solve the puzzle, but also make these plans more attractive to employees."

"The experience of companies successfully implementing CDHPs offers hope for improving our health care system," said Helen Darling, president of the National Business Group on Health. "Focusing on prevention, early intervention, disease management and quality outcomes not only can help employers control health care costs, it can make employees healthier and more productive. It is truly a win-win situation."

However, employee enrollment in CDHPs remains low at 8 percent, an increase of only one percentage point from 2006. This comes despite the fact that CDHPs usually involve lower health insurance premiums for employees. Nonetheless, broader participation in CDHPs is linked to lower health care cost increases. Employers with 10 percent or more of their covered population in a CDHP are holding health care cost increases to a lower level '6.5 percent' average than other employers. Some employers are also driving enrollment by offering CDHPs as their only option. Currently, 5 percent of employers are offering CDHPs on a total replacement basis, and another 4 percent will do so in 2008.

In addition, employers that implement CDHPs as part of a broader health improvement strategy have made greater inroads into controlling health cost increases. One-fourth of respondents experienced median health care cost increases of 2.5 percent in the last two years, compared with an 11 percent average for the poorest performers and an overall average of 8 percent.

Companies that are best at controlling costs are more focused on adopting approaches that involve quality, health improvement and productivity, data and evidence, and the appropriate use of health care services. For instance, best performers are 17 percent more likely to offer compelling financial incentives to encourage employee education and participation and 11 percent more likely to effectively deliver health care information.

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