Consumer-Driven Health Plans Reduce Health Spending One-Eighth

The Health Care Cost Institute has released its analysis of claims data for the years 2010 through 2014, comparing consumer-driven health plans (CDHPs, which HCCI defines as High-Deductible Health Plans coupled with Health Savings Accounts or Health Reimbursement Arrangements). HCCI examines a database of claims submitted by Aetna, Humana, Kaiser Permanente, and UnitedHealthcare for their employer-sponsored group plans.

CDHPs shift payment from third-party bureaucracies (that is, insurers) back to patients directly. The results continue to impress:

• In every year studied, the non-CDHP population had total per capita spending higher than the CDHP population.
• The CDHP population had rates of utilization nine percent to 13 percent lower than the non -CDHP population for all categories of health services outside of brand prescriptions, which was 21 percent lower.
• The CDHP population spent an average annual $343 per capita more out of pocket than did the non-CDHP population.
• The non-CDHP population was responsible for an average of 14% of their medical costs out of pocket, whereas the CDHP population paid for 24% of their medical costs.

In 2014, per capita spending for the non-CDHP population was $659 greater than that for the CDHP population: $5,140 and $4,481, a reduction of one-eighth.

Critics of CDHPs challenge these claims in two ways. First, they assert the savings are a false economy, because the CDHP beneficiaries defer timely care because of its cost, so they end up needing more expensive care. Second, they assert selection bias: Healthier people gravitate towards CDHPs.

Although the HCCI study does not look directly at health outcomes, it does indicate these fears are ungrounded. First, CDHP beneficiaries are less likely to show up at emergency rooms than beneficiaries on traditional employer-based plans (page 8, Figure 4). This suggests the traditional beneficiaries do not do a better job at getting timely care, despite lower out-of-pocket costs. Second, 75 percent of CDHP beneficiaries submitted a claim in 2014, versus just 72 percent of traditional beneficiaries (page 20, Table 12). This close similarity suggests CDHP beneficiaries are about the same health status as traditional beneficiaries, or maybe even slightly sicker.

The cost-saving benefits of CDHPs have only begun to be achieved. Only 27 percent of the study population was covered by a CDHP. Why so few? That will be the topic of the next post.

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For more on health insurance, please see the Independent Institute’s widely acclaimed book: Priceless: Curing the Healthcare Crisis, by John C. Goodman.