CDHP myths hinder implementation

NEW YORK--Health insurers and benefit consultants face the same challenges as their customers when implementing consumer-driven health plans, including alleviating concerns and dispelling myths, benefit managers say.

Numerous myths are associated with consumer-driven health plans, including that they are much less generous than traditional plans offered by employers, Roland McDevitt, director of health research for Watson Wyatt Worldwide in Arlington, Va., told attendees of the New York Business Group on Health's May 14 Consumerism in Healthcare Conference in New York.

Employer premium contributions and account contributions are substantial when compared to other plans, he said. The contributions for individuals average about $4,192 for health reimbursement account plans, $3,840 for health savings account plans and $3,810 for all other plans, according to a Kaiser Family Foundation survey.

"I don't think you can characterize this as cost shifting," Mr. McDevitt said.

The perception that CDHPs are not gaining traction with employers is another myth, he said. Although only 5% of employees with employer coverage are in CDHPs, a National Business Group on Health/Watson Wyatt study found that 47% of large employers offered a CDHP this year while 54% will offer a CDHP next year.

One criticism of account-based plans is that enrollees will forgo preventive care, but several major health insurers have reported that preventive service usage in the plans is generally comparable to preferred provider organization plans, Mr. McDevitt said.

In addition, a RAND Corp./Watson Wyatt study found that all but one of the 46 account-based plans offered by large employers in the study provided at least some coverage for preventive services before the deductible is satisfied, while 89% paid for the full cost of preventive services.

When UnitedHealth Group Inc. replaced its traditional plans in 2005, its employees wanted to "cherry pick" what they viewed as the best features of their clients' benefit plans, said Craig Mitchell, director of total compensation for UnitedHealth in Minnetonka, Minn.

"Worst of all for our company, our employees thought because we were a health care company, we should give away health care free," Mr. Mitchell said. "This is health care. This is serious cost."

The insurer had to share information on the cost pressures associated with providing a health care benefit to help employees understand the need for change, Mr. Mitchell said. "They assume the worst and that becomes a barrier for us," he said.

Getting employees to accurately compare the costs of the old and new plans was an issue for both UnitedHealth and Watson Wyatt, their benefit managers said.

When UnitedHealth employees calculated the costs of the new HSA and HRA options, they focused on the out-of-pocket maximums or deductible levels and overlooked costs such as copayments under the old plans. "You have to have them think about the total package," Mr. Mitchell said.

Watson Wyatt replaced its traditional plans with an HSA-linked plan on Jan. 1, 2007. When a company transitions from a health care plan that features a $15 copayment to a plan with a $3,000 family deductible, "that's all the population sees," said John Bowe, director of benefits for Watson Wyatt in Arlington, Va. "Take the focus off of the deductible."

The first year of the full replacement process is the toughest, as employees experience "a lot of anxiety," but the transition to a CDHP is a long-term strategy and not a short-term fix, Mr. Bowe said. "There's a lot of education that needs to take place in that first year," he said.

Watson Wyatt provides its employer contributions at the beginning of the year, so employees who manage their accounts are more comfortable about the plans, Mr. Bowe said. "While it's not great for everyone, particularly for the high utilizers--they still have some anxiety--the majority of people are in a much better" position, he said.

Despite the perception that employees will forgo necessary care, UnitedHealth found that usage of preventive services increased because it provides preventive care free to its employees, Mr. Mitchell said. "We're more than willing to assume that cost."

Benefit managers considering a transition to CDHPs need to spend a great deal of time communicating a large amount of information, so they should release information in a staggered manner, Mr. Bowe said.

"You cannot over-communicate these plans," Mr. Bowe said. "Everybody's different and I think it's better to err on the over-communication side because there are a lot of different components to these plans. There are a lot of tricky things, particularly if you introduce a health savings account."

UnitedHealth decided late in the process to proceed with a full replacement. It had 10 weeks to get all employees educated and had to use all of its resources to meet the challenge. Mr. Mitchell advised benefit managers at the conference to make such a decision as early as possible to ease the process. "Don't underestimate it," he said.

Companies implementing CDHPs must have strong partnerships with their vendors, which will be responsible for implementing a substantial portion of the new benefits program, Mr. Bowe said. "If they fail to deliver, it will appear as if the plan has failed," he said.

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