Is Your Company CDH Ready?


Over the course of the last several years, Consumer Driven Health (CDH) has grown in popularity, and effectiveness, as a way for employers to reduce their health insurance and health care related costs.  CDH’s evolution has not come easy or without its detractors.  However, both the empirical and anecdotal data collected over the last ten years point to CDH as a proven and effective method of true – “health care reform”!  According to the Kaiser Family Foundation (KFF), the number of employers offering CDH plans has jumped from 4% in 2005 to 31% in 2012.  KFF also released data indicating the average cost of family coverage is $1,500 less per employee on a CDH plan than a traditional PPO plan.  And benefits consulting firm Aon Hewitt’s health care survey revealed that CDH plans had a 2 percent lower cost trend in 2012, versus all other health plan types (i.e., PPO, HMO, EPO).

Today’s post provides a list of “CDH Readiness Considerations” for employers who are contemplating implementing some form/level of CDH into their organization.  Employers that presently offer a CDH plan(s) might also benefit from a review of these considerations…

1.      Company/Organizational Readiness


a.     The executive management of the company/organization is supportive and committed to CDH.


b.     Company/Organization is willing to offer a plan(s) that may change over time due to government regulation.


c.      To ensure effective plan use, the company/organization would be in favor of increasing funds or resources allocated to health plan education and communication.


d.     Company/Organization is willing to invest in wellness programs (health risk assessments, health screenings, smoking cessation, weight management, etc.) to keep employees healthy and reduce, if not avoid, high cost claims in the future.


2.      Employee Readiness


a.     Employees have a solid understanding of the fundamentals of health care benefits and plan designs (e.g., copays, deductibles, coinsurance, out of pocket expenses).


b.     Employees are comfortable using, and have access to, the Internet.


c.      A majority of employees would prefer health insurance plan option(s) with lower premiums in exchange for higher deductibles. This means employees would pay less premium, yet possibly have more “out of pocket” exposure if they got sick or needed health care benefits.


3.      Financial Considerations


a.     Company/Organization believes it’s important to improve cash flow related to health care spending.


b.     Company/Organization would be willing to contribute to an account based health plan, and in so doing, would realize tax savings relating to such contributions.


c.      Company/Organization believes that a plan with first dollar (i.e., 100%) coverage for preventive care is important to help drive utilization savings and increase enrollment in a CDH plan. (Note: The Affordable Care Act (ACA) requires virtually all health insurance plans to cover specified preventive care at 100%.)


4.      Benefits Philosophy


a.     Company/Organization believes members should be more engaged in decisions about and expenses for discretionary services, such as outpatient or scheduled procedures, where they have time and information to make choices.


b.     It’s important to help employees save long term (i.e., 5-10 years) for medical expenses.


c.      Health plan might consider covering more discretionary benefits, such as in-vitro fertilization and gastric bypass surgery.


5.      Plan Design


a.     In the recent past, the company/organization has made plan design changes to increase member out of pocket expenses (e.g.., copays, deductibles, coinsurance).


b.     A large percentage of employees participate in the 401(k) plan, if available.


c.      Company/Organization would consider replacing the tiered, copay drug plan with a plan that covers drugs under the applicable deductible/coinsurance  to help drive better utilization and reduce pharmacy costs.


d.     It’s very important for the company/organization to offer health plan(s) that is/are easy to understand and use.