Consumer-Directed Health Plans

Question 1

List 3 features associated with CDHPs

Answer 1

1. High Deductible
2. Personal Spending Account
3. Information tools for enrollees

Question 2

Objective of High Deductible

Answer 2

To encourage enrollees to be wise consumers of health care services by exposing them to the financial consequences of their choices.

Question 3

What are the motivations for developing CDHPs

Answer 3

To control costs and promote greater value in health care spending by shifting responsibility for health care decision making from insurers to consumers.

Accommodate diverse consumer preferences

Question 4

Three main critics of CDHPs

Answer 4

1. Consumers may not differentiate effectively between more and less valuable care when making choices
2. Potential for greater risk segmentation in health insurance markets if CDHPs disproportionately attract favorable risks due to their lower premiums and higher cost sharing
3. Doubts exist whether or not CDHPs will reduce health care spending

Question 5

What aspects of cost sharing are relevant to CDHPs?

Answer 5

1. Annual deductible is the amount the enrollee pays out of pocket before expenditures
2. After deductible is met, services are subject to cost-sharing requirements (20% coinsurance rate)
3. Annual out-of-pocket maximum

Question 6

HRA requirements

Answer 6

• May be funded only by the employer
• No federal limit on contributions
• Employers may choose whether to allow funds to accumulate from year to year
• Non medical use is not allowed

Question 7

HSA requirements

Answer 7

• May be funded by employee, employer or both
• Maximum allowable annual contribution
• Accumulate over time and are nonforfeitable
• Withdrawals are allowed for nonmedical use but subject to income tax and penalties if participant is under 65.

Question 8

Describe the effect of firm size on CDHPs

Answer 8

Large firms are more likely to offer a CDHP than small or medium-sized firms. However, a larger proportion of covered workers are enrolled in CDHPs in small firms.

Question 9

Have CDHPs increased more rapidly in individual or group markets

Answer 9

Group Market

Question 10

CDHP premiums are generally lower than those for other types of plans, describe the 3 types of factors that contribute to this:

Answer 10

1. The extent to which services are financed by out-of-pocket payments
2. Differences in the quantity and prices of services used by enrollees
3. Conditional on health status

Question 11

Compare the Premiums, Contributions and Deductibles of HDHP/HRAs versus HDHP/HSAs

Answer 11

1. HDHP/HSAs tend to have lower premiums, lower employee contributions and high annual deductibles then HDHP/HRAs.
2. Employers have significant control over the contributions they make to the HRAs and may decide both whether the funds may accumulate over time and whether they can be used by the employee after the employment relationship has termed.
3. HSA balances, are owned by the employee and keeps and unused funds if he or she changes plans or leaves

Question 12

True/False

Is there a concern that the development of CDHPs might generate greater risk selection in insurance markets?

Answer 12

True

These products may be more attractive to low-risk healthier enrollees who expect to use less care.

Question 13

Two ways which favorable risk selection with CDHP enrollees may occur

Answer 13

1. Presence of inefficient asymmetric information between insurer and enrollees.
2. Low and High risk participants tend to have different preferences for coverage

Question 14

What are the drivers of the health care spending reductions

Answer 14

Driven primarily by reductions in pharmaceutical and outpatient expenditures.

Question 15

Describe the effects of CDHPs on the use of preventive services

Answer 15

Generate few or no reductions in the use of preventive services when they are exempted from the deductible and greater reductions when they are not

Question 16

Does CDHP enrollment negatively effect low-income and less healthy enrollees?

Answer 16

Critics believe these plans have negative impact however very few studies have explicitly examined these issues.

Question 17

What is the impact on health care use of employer contributions to–and in the form of–personal savings accounts in CDHPs?

Answer 17

Plans with highers deductibles and less generous HRAs generate large reductions in CDHP spending.

Significant cost savings documented by research are concentrated among enrollees in plans with higher deductibles.

Savings generated by plans with higher deductibles were smaller when employers made generous contributions to spending accounts.

Longer term reductions in spending associated with CDHPs are greater for firms making smaller contributions to spending accounts and for plans with higher deductibles as well as firms offering HSAs rather HRAs.

Question 18

Why are information tools essential to CDHP movement?

Answer 18

CDHPs were intended to control costs by shifting responsibility for health care decision making from insurers to consumers. The vision was that consumers who were exposed to financial consequences of their decisions, would make good decisions if they has sophisticated info tools.

Question 19

What are the specific shortcomings of the information tools for CDHP enrollees?

Answer 19

Few info tools allow enrollees to compare costs and quality across hospitals, and even fewer provide this type of info about individual physicians.

Cost data are often based on provider averages, rather than being specific to a particular provider

Estimates are often procedure-based rather than episode-based.

Question 20

Which enrollees are more likely to use information tools?

Answer 20

Enrollees with chronic illnesses

Question 21

What kind of barriers do CDHP enrollees face in controlling their heath care costs?

Answer 21

1. Inability to assess potential costs when seeking care for urgent problems
2. Inaccurate knowledge about what services the CDHP covered
3. Reluctance to discuss costs with doctors
4. Enrollees feel they have little control over costs once a clinical encounter has begun.