full text:
CDH plans continue to grow in popularity among employers and employees
Employees who fear high out-of-pocket costs aren't blocking the growth of consumer-driven health (CDH) plans, as more individuals and employers take advantage of money-saving options as healthcare costs rise, according to a survey conducted by Aon Consulting Worldwide, the global human capital consulting organization of Aon Corporation (NYSE:AOC) and the International Society of Certified Employee Benefit Specialists.
The nationwide study of 470 employers found the number of employers offering CDH plans is on the rise, with 37 percent offering this plan type to employees, up from 28 percent of employers in 2006 and 22 percent in 2005, the first year this study was conducted.
"This finding shows that the CDH movement continues to grow," said Bill Sharon, senior vice president with Aon Consulting and co-author of the survey. "Early CDH results have been very positive. Employers like them because they are seeing a reduction in healthcare cost increases. Our analysis shows that a company can achieve first year savings of 8 percent of their premium if they implement an effective consumer-driven healthcare strategy."
More employees this year than last are enrolling in a CDH plan. Sixty percent of employers have more than 10 percent of their employees participating in a CDH plan, up from 53 percent of employers in 2006. Additionally, employee fears about enrolling in this new plan type have decreased. Of those employers offering a CDH plan, 54 percent cited concerns among employees about high out-of-pocket costs as the principal reason for not enrolling in a CDH plan. That figure is down from 66 percent in 2006.
"There is a growing recognition that most employees do not want a medical plan with high out-of-pocket costs," Sharon said. "Therefore, most companies with CDH enrollments of 40 percent or more have designed CDH plans with out-of-pocket maximums comparable to their more-traditional HMO and PPO plans. In addition, employers have used out-of-pocket cost comparisons to show employees the relative cost advantages of the CDH plan." (See health plan out-of-pocket cost comparison chart, page 5).
Employers offering CDH plans
The survey found that 83 percent of employers offer a CDH plan in addition to other healthcare plans, with the remaining 17 percent offering CDH plans in lieu of more traditional health plans.
"This finding has held pretty steady over the past five years," Sharon said. "The majority of employers offer CDH as an optional plan, since these plans operate very differently from an HMO or PPO, and it takes time for employees to become comfortable with a new plan type." The main drivers behind employers offering CDH plans are similar to the reasons stated in the 2006 survey: To introduce consumerism into the purchasing of health care for long-term change (47 percent) and to control rising healthcare costs (33 percent).
The survey found the CDH plan models and contribution levels to be consistent with 2006 as well. Forty-two percent of employers are using health reimbursement arrangements (HRA)(1), 48 percent are using health savings accounts (HSA)(2) and 10 percent are offering both. Of the employers offering an HSA, 67 percent contribute either a flat dollar amount of less than $500 per person (17 percent), $500 or more (40 percent) or match employee contributions (10 percent).
Employers without a CDH plan
Similar to 2006, 42 percent of employers without a CDH plan are planning to offer one in the future. Eleven percent are planning to offer one this year or next, while 31 percent are undecided on an effective date. The remaining 58 percent of these employers are not seriously considering a CDH plan as a future plan offering.

  The survey also reported the following results from employers:

  -- 83 percent of employers began offering a CDH plan in 2005, 2006 or 2007.
  -- 77 percent of employers believe employee meetings are the most
     effective method of communicating about CDH plans to employees.
  -- 49 percent believe CDH plans make employees better, more efficient
     consumers of health care;  27 percent believe they lead employees to
     forego needed health care to save money; and 5 percent believe they
     have no effect on employee healthcare purchasing.
  -- 39 percent believe CDH plans will be successful in controlling
     employers' healthcare costs in five years; 27 percent do not believe
     they will; and 33 percent don't know.

About Aon
Aon Corporation (http://www.aon.com/) is a leading provider of risk management services, insurance and reinsurance brokerage, human capital and management consulting, and specialty insurance underwriting.
About Aon Consulting Worldwide
Aon Consulting Worldwide (http://www.aon.com/hcc) is among the top global human capital consulting firms, with 2006 revenues of $1.282 billion and 6,500 professionals in 117 offices worldwide.
About ISCEBS
The International Society of Certified Employee Benefit Specialists is a nonprofit educational association providing continuing education opportunities for those who hold the Certified Employee Benefit Specialist (CEBS), Compensation Management Specialist (CMS), Group Benefits Associate (GBA) or Retirement Plans Associate (RPA) designations offered through the CEBS(R) program. Visit the Society Web site at http://www.iscebs.org/.
Summary - Consumer Driven Health Survey
Survey Background: Aon Consulting and the International Society of Certified Employee Benefit Specialists have conducted the consumer-driven health (CDH) survey since 2005 to evaluate employers' views on these plans and its present and future impact on delivering health care. This year 470 employers participated.
Definitions: CDH plans are account-based plans designed to better engage the consumer in the purchase of healthcare services. This health plan is a combination of employer contributions through a health reimbursement arrangement or health savings account, out-of-pocket purchases paid by the employee, and preventative healthcare coverage.

  -- Health reimbursement arrangements are plans with accounts owned and
     funded by the employer.
  -- Health savings accounts are plans that are owned by the employee and
     are funded either by the employee or with contributions from the
     employer.

Survey results: More employers are offering CDH plans and more employees are enrolling in CDH plans. Compared to last year, fewer employers who offer a CDH plan cite fears of high out-of-pocket costs among employees as the main reason they are not enrolled in the plan.

  -- 37 percent of employers are offering a CDH plan to employees, up from
     28 percent of employers in 2006 and 22 percent in 2005.
  -- 60 percent of employers have more than 10 percent of their employees
     participating in a CDH plan, up from 53 percent of employers in 2006.
  -- Of employers offering a CDH plan, 54 percent cited concerns among
     employees about high out-of-pocket costs as the principal reason for
     not enrolling in a CDH plan.  That figure is down from 66 percent in
     2006.

Impact on employers: Employers are offering CDH plans to employees as a way to introduce consumerism to healthcare purchasing and to reduce healthcare costs, which continue to increase by double-digit percentages. The philosophy behind CDH is that informed employees will spend their own money more conservatively than they would spend employer or health plan funds.

  -- Aon Consulting's analysis (independent from the CDH survey) shows
     employers can achieve first year savings of 8 percent of their premium
     if they implement an effective consumer-driven healthcare strategy.

Impact on employees: More employees are becoming comfortable with CDH plans as enrollment has increased and fewer employers cite fears of high out- of-pocket costs among employees. This increase can be attributed to employers providing CDH plans that are comparable to out-of-pocket costs of traditional health plans (HMO and PPO), and implementing a strong communication plan to explain this plan type. For an employee out-of-pocket cost comparison of CDH versus PPO and HMO plans (see the chart below).

  -- Aon Consulting consistently sees 90 percent satisfaction rates among
     employees who are enrolled in CDH plans (based on client analysis).



               Health Care Plan Out-of-Pocket Cost Comparison:
                               Single Coverage
                                 Cost of        CDH
           Services              Service       Plan*       HMO         PPO
  Office visit for cold             $50          $0        $15         $20
  Chest x-ray and lab              $200          $0        $15        $200
  Rx - brand formulary              $68          $0        $20         $20
  Well woman exam
   (preventive)                     $75          $0        $15         $15
  Pap smear
   (preventive)                     $15          $0        $15         $15
  Mammogram
   (preventive)                     $95          $0        $25         $25
  Mail Rx - non-
   formulary (2)                   $360          $0        $70         $70
  Total out-of-pocket
   expenses                        $863          $0       $175        $365
  Annual premium paid
   by EE                                       $720       $960        $360
  Total annual cost to
   EE                                          $720     $1,135        $725

* An employee enrolled in this example CDH plan first has a $1,000 employer-provided fund to cover medical expenses. Once that fund is depleted, the employee is responsible for the next $1,000 of expenses. Once those expenses are paid by the employee any additional expenses are covered 100 percent by the plan for the remainder of the year. Preventative services are covered 100 percent. The monthly premium is $60, or $720 per year. The employee in the example above didn't incur any out-of-pocket expenses because she did not deplete the $1,000 employer-provided fund. This example also included co-insurance of 100 percent. CDH plan designs will differ in their co-insurance and out-of-pocket maximum.

  1. Health reimbursement arrangements are plans with accounts owned and
     funded by the employer.
  2. Health savings accounts are owned by the employee and are funded either
     by the employee or with contributions from the employer.

For more information:
http://www.aon.com/
http://www.aon.com/hcc
http://www.iscebs.org/

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