Consumer-driven health plans took a leap forward last year when, for the first time, more companies offered such plans than offer HMOs, according to a survey of nearly 2,000 companies by Aon Hewitt. Meanwhile, in a possible sighting of the next big trend in corporate health coverage, the survey shows that more than a quarter of companies say they may take a defined-contribution approach to healthcare within the next few years by giving employees a set amount of money to buy insurance on a private healthcare exchange.
Fifty-eight percent of the companies surveyed by Aon Hewitt offered some type of consumer-driven health plan (CDHP) last year, up from 41% the previous year, while just 38% offered an HMO, down from 41%. Preferred provider organizations (PPOs) are still more common than either CDHPs or HMOS and were offered by 79% of employers.
Maureen Fay, senior vice president and head of Aon Hewitt’s CDHP working group, says the change in part reflects employers’ paring back the number of their HMO offerings. “Over the past several years, employers have been doing a lot of consolidation of their HMOs,” she says, citing companies that have gone from offering 50 to 100 local HMOs down to just two national carriers.
Meanwhile, companies are making a bigger effort to enroll employees in CDHPs, in part because of concerns about healthcare costs, Fay says, noting that the trend of cost increases on CDHPs is two percentage points lower than that on PPOs.
“For many employers, they put it out there as an option; they did some communication and education, but they weren’t forcing employees to go into these options,” she says. “With everything that’s going on with the economy and healthcare reform, and cost issues, [they’re saying], ‘We need to move to a full-replacement basis, or if not full replacement, we need to move a significant number of lives into these plans so they can be an effective vehicle for reducing healthcare costs.’”
The Aon survey shows that 34% of companies offer a CDHP with a health savings account (HSA), 18% provide a CDHP with a health reimbursement account (HRA), and 6% offer a CDHP without a company-sponsored savings account.
Companies that decide to offer a consumer-driven plan as their only option tend to select an HRA, Fay says. “With an HRA, an employer has a lot more flexibility with plan design,” she says. Finance departments prefer HRAs, she adds, because the money put in the account is only drawn down as the employee spends it, while money put into a health savings account becomes the employee’s money.
Meanwhile, to alleviate concerns that employees might have about CDHPs, more companies are offering employees voluntary benefits, such as a critical illness plan or hospital indemnification. According to the survey, 6% of companies currently offer such voluntary benefits and 42% say they’re considering doing so over the next few years.
“They want employees to be comfortable if they have catastrophic issues,” Fay says, and notes that providing voluntary benefits is more common at companies that offer only a CDHP to employees. But she questions whether the extra coverage is necessary, arguing that consumer driven plans provide “a fair amount of protection.
“Based on survey data we have, the annual out-of-pocket max for an individual for consumer-driven plans is running between $2,000 and $4,000,” Fay says, noting that that range is consistent with the out-of-pocket maximums for traditional PPOs.
As healthcare costs continue to outpace inflation and as companies contend with the requirements of healthcare reform, the survey shows considerable interest in the new option of private healthcare exchanges. Such exchanges, which are separate from the exchanges the states are setting up, offer a number of health plans of different types from various insurers. Companies that use them give employees a set amount of money to select their own health coverage from the exchange.
While just 2% of the companies surveyed currently provide employees with access to an exchange, 26% say they are considering doing so within the next three to five year.
Fay says employers have been talking about the possibility of a defined-contribution approach to healthcare coverage even before healthcare reform was enacted, in response to not only the pace at which healthcare costs have been rising but also, for companies that are self-insured, the variability in claims from year to year.
“Many employers had been looking at trying to find a way where they can define the level of their support and employees can go out and use that money to purchase healthcare that’s right for them,” she says.
Aon Hewitt is launching its own multicarrier healthcare exchange and announced this week that more than 100,000 U.S. employees will be selecting their healthcare coverage this fall through its exchange. The Wall Street Journal reported that Sears and Darden Restaurants will be using Aon Hewitt’s exchange.