Rising health care costs. The Affordable Care Act. The way employers and employees offer and pay for health care is in a constant state of flux. As health care costs continue to rise beyond the rate of inflation, more and more employers are shifting the costs onto their employees through consumer-driven health plans. In 2002, just 2% of companies with 1,000 or more employees offered CDHPs. That rose to more than 54% in 2010, according to a Towers Watson and National Business Group on Health survey.

Back in 2005, CDHC was a "very small spot on the landscape." It has experienced steady growth over the years, says George Lane, a principal at Mercer in Washington and EBA Advisory Board Member.

But even as the concept becomes more popular, it is still not well known. A large majority of the workforce - 72% - have not heard of the phrase "consumer-driven health care," according to the 2013 Aflac WorkForces Report.

Consumer-driven plans began in earnest way before it was a widely recognized term. In the 1960s, for example, most people paid health expenses out of pocket, explains Devon Herrick, a health economist at the National Center for Policy Analysis, in Dallas. And if you had insurance, it was a casualty model, where you had insurance for events you didn't expect to happen. Yet, as time went by, employees continued to pay more and more for their health care expenses. By the 1990s, Herrick explains, HMOs entered the scene, which then led to health savings accounts, and then health reimbursement accounts in the early 2000s.

Consumer-driven care is "increasing now as deductibles rise for well over a decade," he says. "... Health care [costs are] rising double-digits, and health prices are three times the rate of inflation. So employers are saying, 'We need to try something. Why don't we try this new program about letting workers [determine] how to spend their money?'"

But, cost concerns remain a huge worry for employers. In a United Benefit Advisors survey, 93% of top decision makers at firms said the cost of health care benefits was of critical or significant concern to corporate costs, while 67% were concerned about the impact on employees.

Consumers are now being exposed to it because of the shift in the paradigm of insurance, says Robin Gelburd, president of New York City-based FAIR Health. "I think in order to really have [consumers] proactively manage their health care in effective ways, it's incumbent upon plans and providers to create valuable tools that allow them to be a participant in their own health care."


Employees don't get it

According to the aforementioned Aflac report, not only have consumers not heard of the phrase, they also don't want more control of their health care. More than half (54%) of workers said they would prefer not to have greater control over their insurance options because they don't have the time or knowledge to effectively manage it, according to the report.

In fact, they think they would be worse managers of their health care overall. Sixty-two percent said medical costs they would be responsible for would increase, while only 23% were saving money for potential increases. And 53% fear they may not adequately manage their coverage, leaving their families less protected than they are now.

"It may be referred to as 'consumer-driven health care,' but in actuality, consumers aren't the ones driving these changes. So it's no surprise they feel unprepared," said Audrey Boone Tillman, executive vice president of corporate services at Aflac, in a statement. "The bottom line is if consumers aren't educated about the full scope of their options, they risk making costly mistakes without a financial back-up plan."

Part of the problem may be that employers may not realize the cost differentials - or care about it. A PriceWaterhouseCoopers survey of 6,000 consumers found that consumers are picking health care providers not for cost, but more for convenience.

In the PwC survey, price was the top influencer in buying for industries, including hotels, airlines and retail - except for health care, where personal experience ranked first, and just 8% of consumers ranked price as their main purchase driver.

Instead, people "trust their past experiences and rely on personal networks to make health care decisions, particularly in provider selection," PwC found. Seventy-two percent of consumers ranked reputation and personal experience as the top choice drivers of health care provider selection.

Herrick, the health economist, believes that if consumers really understand it's their money, they would make an effort to save money for their employer and insurer, but that is not to say they will always go to the cheapest brand, i.e. a clinic versus an emergency room. Some people drive a Mercedes while some drive a Chevy, he says.

"Their priorities and preferences are different, so they may say, 'I will be willing to pay for that doctor, they are fast and convenient,'" he adds. "There are all these tradeoffs, but I think that if they see that they have a choice and [how it] affects them, in many cases they will try to save money and not waste it."


Overcoming challenges

To overcome these challenges, health care experts say it is all about education. Herrick says that if workers are told that they have two health plans and one requires them to be more prudent, they wouldn't pick it. But, once someone figures out that their wage really pays for it indirectly, they make a change.

"I've always said that if employees understand it was their money, they would demand to control that because [they would realize], 'My health plan is costing my company $15,000 [a year]. I only pay $5,000, but the other $10,000 is through take-home pay,'" he says. "You could see the average employee saying, 'Our health care is costing $10,000. Let us have that money.'

"People like things that are free if they don't know any better," he adds. Employer-paid health care "isn't free. Your employer does their best to pass [on the] coverage. ... Most economists agree for the most part that employees in aggregate tend to bear the cost. If they realized that they would want to control it."

Mercer's Lane says that he helps his clients overcome that by encouraging them to nurture the plans. "You can't just stick it in and expect employees to navigate it. Oftentimes they need to provide incentives," he says. "Bottom line is you need to engage an effective communication strategy. Give them advance notice that you are putting a plan like that in; repeat messaging of how these work."

Advisers need to help employees, he says, and if an employer wants the plans to work the way they are intended, advisers need to "educate, educate, educate, and eliminate the fear factor. They may look different, but it's not that scary. The more employers can educate employees about how the plans work and why they work the way they do" they will be successful.

In the end, consumers don't need to know what a consumer-driven plan is, but rather just know how it works. "They need to know that it is their money," says Thom Mangan, CEO of United Benefit Advisors in Chicago and an EBA Advisory Board Member.

Like Lane, Mangan suggests rolling the plan out over time. "You roll it out over nine months. If you don't have nine months, you do an intense three-month campaign and you get to the decision maker in the family - namely the female," he says.

"The female is typically the one that decides on care and where to go. They are also the most conservative when it comes to choosing a plan. ... If you can get the spouse in the room if you have a male workforce, that's critical to getting this whole thing working."

You also need to be clear and contextual when educating, says FAIR Health's Gelburd. "We can't just be giving buckets of data to consumers without the appropriate context because [they will] become more anxious and frustrated," she says. "We need to make a real effort to make sure there is clarity as well as information. ... [Allowing consumers] to compare apples-to-apples so they don't make inappropriate judgments about costs."



Are they working?

Herrick says he believes CDHPs are working to lower overall health care costs in this country. "When people are put in charge of their own health care and benefits, they do tend to save. How much they save depends on the person and what conditions they have," he explains.

Data from a June 2013 EBRI study backs that up. In the study, which analyzed data from two large employers, one that adopted an HSA for all its employees and another with no CDHP, "found that after four years under the HSA plan, there were 0.26 fewer physician office visits per enrollee per year and 0.85 fewer prescriptions filled."

Similarly, a Cigna study of its plans found that those in a consumer-driven plan had a medical cost trend 13% lower than traditional plans during the first year. They were also twice as likely to complete a health risk assessment. Such plan participants also compared cost, with 59% of them more likely to use a directory to access cost and procedure and information to help them review potential medical costs, according to a Cigna statement.

Herrick believes if more people had these plans, and education on what questions to ask increased, CDHC would be even more effective. For example, when someone finds out the same MRI costs $3,000 less at another facility down the road, they are floored, he says.

In the end, says Gelburd, CDHC is a story "where the final chapters have not been written."

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