Consumer-directed health plans

Consumer-directed health plans (CDHPs) are high deductible health plans (HDHP) paired with medical expense accounts that are funded with pre-tax dollars and include information tools for consumers (Bundorf 2016*). Medical expense accounts may be Health Reimbursement Arrangements (HRAs) or Health Savings Accounts (HSAs). Employers fund HRAs and permit employees to use them for medical costs up to a stated limit, and retain control of funds if an employee leaves the organization. Employers may also help fund HSAs, but employees manage funds and retain them when changing jobs. Federal law requires minimum deductibles for HSAs, but not HRAs (Haviland 2011). HSA HDHPs have legal maximum out-of-pocket costs, capped at $6,550 for single coverage and $13,100 for family coverage in 2017, and almost all HRA HDHPs do as well (KFF-Employer health benefits 2017).

Expected Beneficial Outcomes (Rated)

  • Reduced health care costs

Evidence of Effectiveness

There is mixed evidence about the effects of consumer-directed health plans (CDHPs). CDHPs reduce short-term health care costs by inducing participants to seek less health care (Agarwal 2017*, Brot-Goldberg 2017*, Bundorf 2016*, EBRI-Fronstin 2016, EBRI-Fronstin 2010, Haviland 2011).

Enrollment in CDHPs appears to reduce both appropriate and inappropriate care (Agarwal 2017*, Brot-Goldberg 2017*). Overall, CDHP participation has been shown to reduce office visits (Agarwal 2017*, EBRI-Fronstin 2016, Reddy 2014, Fronstin 2013*, Haviland 2011), preventive care and recommended screenings (Agarwal 2017*, EBRI-Fronstin 2016, Fronstin 2013*, Haviland 2011), specialist visits (EBRI-Fronstin 2016), and procedures (Haviland 2011), particularly among individuals with lower incomes and chronic conditions (EBRI-Fronstin 2016, Reddy 2014). CDHP participants are more likely to reduce prescription drug use and, in some cases, can be less likely to adhere to medication regimens than peers with traditional health insurance (Agarwal 2017*, EBRI-Fronstin 2016, NBER-Huckfeldt 2015, Fronstin 2013*, Fronstin 2013a*, Haviland 2011, EBRI-Fronstin 2010).  A three year study suggests little to no effect on cancer screening rates following CDHP enrollment, despite increases in screening before enrollment (Eisenberg 2017).

CDHPs cover preventive services; however, participants often do not realize this (EBRI-Fronstin 2010) and forgo preventive care (Haviland 2011). In some cases CDHPs may increase hospitalizations, likely due to participants deferring needed care (Agarwal 2017*). Recent studies have found little evidence that CDHP participation reduces the use of low value services (Reid 2017, Bundorf 2016*).

The effect of CDHPs on emergency room use is unclear. Some studies suggest CDHPs reduce non-emergency ER visits. Other studies suggest CDHPs increase visits to the ER (Agarwal 2017*). A six year study indicates ER visits and hospital admissions among low income individuals increase in their first year of CDHP enrollment, though not the second year (EBRI-Fronstin 2016).  

Overall, switching to a CDHP can decrease outpatient spending compared to traditional plans (Reid 2017, EBRI-Fronstin 2016, Haviland 2012), though decreases in spending may erode over time (Haviland 2016*). In one study, for example, only spending on laboratory services and prescription drugs remained lower over four years (Fronstin 2013a*). CDHPs with HSAs appear to reduce spending more than CDHPs with HRAs, especially on outpatient services and prescription drugs (Haviland 2011). However, one recent study suggests that enrollment in CDHPs may increase out-of-pocket spending and the likelihood of financial burden, particularly among enrollees with lower incomes or chronic conditions (Zhang 2018). Another study suggests increased spending on procedures (Ellis 2016*).

A majority of cost savings and spending reductions associated with CDHPs are the result of forgone care (Brot-Goldberg 2017*, RAND-Haviland 2012), including reduced use of outpatient services (Bundorf 2016*, EBRI-Fronstin 2016, Haviland 2016*) and prescriptions (Fronstin 2013a*, Bundorf 2016*, EBRI-Fronstin 2016, Haviland 2016*). Cost savings can also result from choosing generic drugs, avoiding hospital stays, and visiting fewer specialists (RAND-Haviland 2012).  

Healthier individuals are more likely to enroll in CDHPs than less healthy individuals (McDevitt 2014), and the spending reductions from CDHPs appear concentrated among the healthiest enrollees (Bundorf 2016*). There is little evidence available on provision, use, or effectiveness of tools to assist decision making in CDHPs (Bundorf 2016*). A study of a large self-insured firm found no evidence of price shopping, despite the availability of a comprehensive price shopping tool, among enrollees who have had a CDHP for two years (Brot-Goldberg 2017*).

CDHPs are a type of high deductible health plan (HDHP). Individuals enrolled in HDHPs are more likely to face problems paying medical bills or to delay or forgo medical care than peers with traditional plans (NCHS-Cohen 2017). The higher the deductible on HDHPs, the higher the burden on enrollees with lower incomes (Abdus 2016*).

Impact on Disparities

Likely to increase disparities

Implementation Examples

As of 2017, 24% of US firms that offer health benefits offer high deductible health plans (HDHP) with savings options. Large firms are more likely to offer the option than small firms; 53% of firms with 200 or more employees offer high deductible plans with a savings option. Deductibles vary but, as of 2017, 24% of HDHP-covered workers were in a plan with a deductible of $3,000 or more (KFF-Employer health benefits 2017).

In 2016, 35% of privately insured adults were enrolled in an employment-based HDHP and 6% in a directly purchased HDHP (NCHS-Cohen 2017).

The Affordable Care Act (ACA) allows HDHPs; all plans must offer preventive care at no cost to the patient (PBS-Kane 2012).

Implementation Resources

NCSL-HSAs and CDHPs - National Conference of State Legislatures (NCSL). State actions on health savings accounts (HSAs) and consumer-directed health plans, 2004-2017.

ABIM-Choosing Wisely - Choosing Wisely. American Board of Internal Medicine (ABIM) Foundation.

Citations - Evidence

* Journal subscription may be required for access.

Agarwal 2017* - Agarwal R, Mazurenko O, Menachemi N. High-deductible health plans reduce health care cost and utilization, including use of needed preventive services. Health Affairs. 2017;36(10):1762-1768.

Brot-Goldberg 2017* - Brot-Goldberg ZC, Chandra A, Handel BR, Kolstad JT. What does a deductible do? The impact of cost-sharing on health care prices, quantities, and spending dynamics. The Quarterly Journal of Economics. 2017;132(3):1261-1318.

Bundorf 2016* - Bundorf MK. Consumer-directed health plans: A review of the evidence. The Journal of Risk and Insurance. 2016;83(1):9-41.

EBRI-Fronstin 2016 - Fronstin P, Roebuck MC. The impact of an HSA-eligible health plan on health care services use and spending by worker income. Washington, DC: Employee Benefit Research Institute (EBRI); 2016: Issue Brief #425.

EBRI-Fronstin 2010 - Fronstin P. What do we really know about consumer-driven health plans? Washington, DC: Employee Benefit Research Institute (EBRI); 2010:Issue Brief No. 345.

Haviland 2011 - Haviland AM, Sood N, Mcdevitt R, Marquis MS. How do consumer-directed health plans affect vulnerable populations? Forum for Health Economics & Policy. 2011;14(2).

Reddy 2014 - Reddy SR, Ross-Degnan D, Zaslavsky AM, Soumerai SB, Wharam JF. Impact of a high-deductible health plan on outpatient visits and associated diagnostic tests. Medical Care. 2014;52(1):86-92.

Fronstin 2013* - Fronstin P, Sepúlveda MJ, Roebuck MC. Consumer-directed health plans reduce the long-term use of outpatient physician visits and prescription drugs. Health Affairs. 2013;32(6):1126–34.

NBER-Huckfeldt 2015 - Huckfeldt PJ, Haviland A, Mehrotra A, Wagner Z, Sood N. Patient responses to incentives in consumer-directed health plans: Evidence from pharmaceuticals. National Bureau of Economic Research (NBER). 2015: Working Paper 20927.

Fronstin 2013a* - Fronstin P, Sepulveda MJ, Roebuck MC. Medication utilization and adherence in a health savings account-eligible plan. American Journal of Managed Care. 2013;19(12):e400-e407.

Eisenberg 2017 - Eisenberg MD, Haviland AM, Mehrotra A, Huckfeldt PJ, Sood N. The long term effects of “consumer-directed” health plans on preventive care use. Journal of Health Economics. 2017;55:61-75.

Reid 2017 - Reid RO, Rabideau B, Sood N. Impact of consumer-directed health plans on low-value healthcare. American Journal of Managed Care. 2017;23(12):741-748.

Haviland 2012 - Haviland AM, Marquis MS, McDevitt RD, Sood N. Growth of consumer-directed health plans to one-half of all employer-sponsored insurance could save $57 billion annually. Health Affairs. 2012;31(5):1009–15.

Haviland 2016* - Haviland AM, Eisenberg MD, Mehrotra A, Huckfeldt PJ, Sood N. Do “consumer-directed” health plans bend the cost curve over time? Journal of Health Economics. 2016;46:33-51.

Zhang 2018 - Zhang X, Trish E, Sood N. Financial burden of healthcare utilization in consumer-directed health plans. American Journal of Managed Care. 2018;24(4):e115-e121.

Ellis 2016* - Ellis RP, Zhu W. Health plan type variations in spells of health-care treatment. American Journal of Health Economics. 2016;2(4):399-430.

RAND-Haviland 2012 - Haviland AM, McDevitt R, Marquis MS, Sood N, Beeuwkes Buntin M. Skin in the game: How consumer-directed plans affect the cost and use of health care. Santa Monica: RAND Corporation; 2012: Research Brief 9672.

McDevitt 2014 - McDevitt RD, Haviland AM, Lore R, et al. Risk selection into consumer-directed health plans: An analysis of family choices within large employers. Health Services Research. 2014;49(2):609-627.

NCHS-Cohen 2017 - Cohen RA, Zammitti EP. High-deductible health plans and financial barriers to medical care: Early release of estimates from the National Health Interview Survey, 2016. Hyattsville, MD: National Center for Health Statistics (NCHS); 2017.

Abdus 2016* - Abdus S, Selden TM, Keenan P. The financial burdens of high-deductible plans. Health Affairs. 2016;35(12):2297-2301.

Citations - Implementation Examples

* Journal subscription may be required for access.

KFF-Employer health benefits 2017 - Employer health benefits: 2017 annual survey. Menlo Park: Henry J. Kaiser Family Foundation (KFF) and Health Research Educational Trust; 2017.

NCHS-Cohen 2017 - Cohen RA, Zammitti EP. High-deductible health plans and financial barriers to medical care: Early release of estimates from the National Health Interview Survey, 2016. Hyattsville, MD: National Center for Health Statistics (NCHS); 2017.

PBS-Kane 2012 - Kane J. High-deductible health plans: Your questions answered. PBS NewsHour. 2012.

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