Module 4 - Consumer Directed Health Plans: A Review of the Evidence

Question 1

(A) Introduction

Answer 1

• Consumer Directed Health Plans (CDHP) emerged in the late 1990s and were intended to control costs by shifting responsibility for health care decision making from insurers to consumers
• Vision that consumers, exposed to financial consequences of their decisions and armed with sophisticated information tools, would drive value based innovation in health care delivery
• CDHP enrollment has grown rapidly over the last 10 years, rising from 4% to 20% of covered workers between 2016 and 2014

Question 2

(A1) Introduction

3 Features of Consumer Directed Health Plans (CDHP)

Answer 2

1 - A relatively high deductible
2 - A personal spending account
3 - The availability of information tools for employees to assist with making informed decisions

Question 3

(A2) Introduction

3 Types of Concerns of Consumer Directed Health Plans (CDHP)

Answer 3

1 - While consumers respond to HDHP by using less medical care, they may not differentiate effectively between more and less valuable care when making those reductions, ultimately reducing qualify of care and greater cost sharing places an excessive financial burden on low income or less healthy enrollees.
2 - Potential for greater risk segmentation in health insurance markets if CDHP’s disproportionately attract favorable risks due to their lower premiums and higher cost sharing
3 - Doubts exist over whether CDHP’s reduce health care spending

Question 4

(B) Background of Consumer Directed Health Plans (CDHP)

Answer 4

• The development of federal tax policies played an important role in the evolution of CDHP’s.
• Employer payments for health insurance are treated as a business expense for employers and not include in the taxable income of workers, creating a subsidy for employer-sponsored coverage.

Question 5

(B) Background of Consumer Directed Health Plans (CDHP)

The Medicare Prescription Drug Improvement and Modernization Act of 2003 (MMA)

Answer 5

-Established HSA’s, creating an alternative type of tax favored spending accounts that addressed the lack of portability of HRA’s.

Question 6

(B1) Background of Consumer Directed Health Plans (CDHP)

Impact of the Affordable Care Act (ACA)

Question 7

(C) Literature Review Methods

Answer 7

-CDHP is high deductible health plan that either is accompanied by an HRA or is eligible for an HSA

Question 8

(D) Study Settings and Methods

Methodological Issues

Answer 8

-

Question 9

(E) Enrollment Trends and Plan Characteristics

Answer 9

• Potential reasons for the continued prominence of HRAs, despite their less attractive savings features, they allow employers more flexibility in product design due to the less stringent regulation of the characteristics of the associated plan and that employers may retain accumulated savings account funds should employees switch plans or leave the firm
• Larger firms are more likely to offer a CDHP than small or medium sized firms, but a larger proportion of covered workers are enrolled in CDHP’s in small firms than in large firms.

Question 10

(E1) Enrollment Trends and Plan Characteristics

CDHP premiums are generally lower that other types of plans

3 Types of Factors Contribute to Differences in Premium Across All Plan Types

Answer 10

1 - The extent to which services are financed by out of pocket payments

2 - Differences in health status amongst plan enrollees

3 - Differences in the quantity and price of services used by enrollees, conditional on health status

*HDHP / HSA’s tend to have lower total premiums, lower employee contributions, and higher annual deductibles than HDHP / HRA’s.

Question 11

(F1) CDHP Enrollment - Economic Implications of Risk Selection

Answer 11

• The existence of risk selection signals the presence of inefficiency due to asymmetric information between insurers and enrollees.
• Insurers have incentives to design policies which will cause consumers to self select into coverage based on their risk, therefore, favorable selection into CDHP’s may reflect the existence of inefficiency due to asymmetric information.
• Risk selection may arise if low and high risks tend to have different preferences for coverage.

Question 12

(F 1A) CDHP Enrollment - Economic Implications of Risk Selection

Employer Sponsored Market

Answer 12

• CDHP’s can be offered alone or alongside other plans
• Risk selection is primarily an issue amount larger rather than smaller firms; smaller firms generally use CDHP as a full replacement where larger firms offer CDHP alongside other plans

Question 13

(F2) CDHP Enrollment

Empirical Evidence of the Effects of Individual Health Status on CDHP Enrollment

Answer 13

-

Question 14

(F3) CDHP Enrollment

Empirical Evidence of the Effects of Other Individual Characteristics of CHDP Enrollment

Answer 14

• Enrollees tend to have higher levels of income or education than enrollees in other types of plans
• Enrollees may be more knowledgable about and more skillful in managing their own health

Question 15

(G) Employee and Employer Participation in the HSA’s

Answer 15

• High income and older tax filers are more likely to contribute to an HSA
• HSA penetration is higher and increasing more quickly among people employed in large than in small firms

Question 16

(H) Effects on CDHP’s on Health Care Use

Answer 16

• Reduce health care spending by 5% and 15% on average although the experience on individual firms varies
• Spending was 14% lower for families enrolled in HDHP than for families remaining in a traditional plan
• Appear to reduce spending primarily among low or medium risks among more healthy enrollees
• Savings associate with CDHP’s are driven primarily by reductions in RX and outpatient expenditures
• CDHP’s do not have a consistent effective on inpatient utilization

Question 17

(H1) Effects on CDHP’s on Use of Preventive Services

Answer 17

• Generate modest to no reductions in the use of preventive services when they are exempted from the deductible and greater reductions when they are not

Question 18

(H2) Effects on CDHP’s on Use of Prescription Drugs

Answer 18

• generate modest reductions in continuation or adherence in RX use amount patients with chronic conditions
• the negative effects of utilization tend to be concentrated on drugs for asymptomatic conditions such as hypertension and high cholesterol
• small shift towards the use of generic drugs and increase in the use of mail order pharmacy

Question 19

(H3) Effects on CDHP’s on Use of Appropriate and Inappropriate Services

Answer 19

• led to reductions physical visits for both acute and chronic conditions
• maternity services were not affected by CDHP enrollment

Question 20

(I) Types of CDHP’s and Their Effects on Health Care Use

3 Key Differences Between CDHP’s in the market

Answer 20

1 - Cost Sharing Provisions;
(1) Level of Deductible (2) Level of the OOP Max (3) Cost share structure between the deductible and OOP max such as copayment, coinsurance, etc.
2 - Form of the Personal Savings Account
3 - Extent to which the plan uses care management techniques