June 24, 2004
Study: Popularity of 'consumer-driven' health plans grows among upstate employers
More than a third of employees in Upstate New York may be offered a new type of "consumer- driven" health plan (CDHP) by their employers within the next few years, according to a new survey released today by Excellus BlueCross BlueShield.
"Consumer-driven health plans, defined as high-deductible health plans paired with health savings accounts (HSAs), are attracting the attention of many upstate employers," a press release from Excellus said.
“Under most health plans now, consumers only know their co-payments because that is all they pay out of pocket,” the release said. “This shields consumers from the real or full cost of their care. The premise behind CDHPs is that consumers who are required to manage their own health care dollars would make wiser, more cost-effective purchases with that money.”
Excellus based its study on a larger, nation-wide study on employered-sponsored health benefits. The Excellus study represents 589 randomly selected public and private firms in Upstate New York.
The study, Employer Perceptions and the Future of Consumer-Driven Health Plans: Upstate New York, 2003, found that businesses employing more than 36 percent of Upstate’s workforce are interested in the high-deductible CDHP.
The study also found that 58 percent of Upstate businesses agree that CDHP, lined with employee health savings accounts, will lower health care use and expenditures.
“An even higher proportion – 67 percent – believes that this type of plan will result in wiser health care purchasing by employees,” the study said.
“Core to the CDHP concept are broad consumer choices of benefit structures, providers and individual services, coupled with greater exposure to the price of health services and financial liability for the services consumed,” the study said. The consumer driven plan is targeted at employees who want to minimize their personal financial risk, consume health services more efficiently, and become more aware of “wellness and preventive practices,” the study added.
The new plans would most likely be coupled with an employee’s medical savings account. Most CDHPs allow employers and employees to make tax deductible contributions to employee health savings accounts to cover health services and expenses not covered by the CDHP.
“HSAs grow tax-free, much like an IRA,” the study said. “Funds can accumulate year to year, and they’re portable for when a change of employment occurs.”
The study also noted that larger firms in the upstate area are more likely to switch to CDHPs first.
“Forty-five percent of those employed in large firms [can expect] to have access to this type of plan in the next two years,” the study said. “This compares to 13 percent of those employed in small firms.”
Excellus also found that some firms have concerns about CDHPs.
“Seventy percent of upstate employers are concerned that CDHPs would attract relatively young, healthy employees, while those with health risks or chronic conditions would choose other types of plans, ultimately driving up the cost of those plans,” the study said.
However, most employers agree that CDHPs will improve health care.
“When asked to consider factors such as cost, quality, employee satisfaction and enhanced choice, 61 percent of upstate firms said CDHPs have the potential to improve employer-sponsored health insurance,” the study said.
In a legislative effort to help businesses cope with health-insurance costs, The Business Council is strongly supporting a bill passed by the state Senate that would create a health insurance tax credit to help many businesses with 50 or fewer employees provide health insurance for their employees.
The bill (S.6332-Seward/A.0251-Morelle) would create a 43 percent tax credit that, when combined with the existing health insurance tax deduction, would result in an effective tax credit of 50 percent for health insurance costs. The new credit would be available only to businesses with 50 or fewer employees and with earned net income of $290,000 or less. The credit would be phased in over 10 years and, when fully implemented, would result in an investment of almost $1.6 billion to provide health insurance coverage for hundreds of thousands of uninsured New Yorkers, the Senate has estimated.