CDHP Design Where Everybody Wins

As industry stakeholders, we understand the end game of consumer-directed healthcare (CDH) – educated, engaged and empowered consumers, lower costs system-wide and improved health outcomes. Adoption of consumer-directed health plans (CDHPs) has grown by leaps and bounds over the last 15 years and with that growth has come growing pains. The haste of employers to implement money-saving CDHPs has, in some cases, lead to tactically-driven versus strategically-driven implementations that have resulted in consumer disengagement and ultimately low adoption. While the push toward CDHPs continues, there is tremendous opportunity for those who have a solid plan to offer win-win solutions for both employers and consumers. Continue reading to learn about plan design that leads to better adoption of CDHPs.

Adoption challenges stem from a lack of strategy
As you know, the industry is still in its infancy with regard to mainstreaming CDHPs as compared to traditional employer-provided health plans. As such, there are a number of challenges to be expected – chiefly around consumer education and comfort – but there are a number of others that result from hasty, non-strategic implementations that focus only on tactical plan aspects. In order to successfully implement a CDHP, employers must carefully consider their objectives and then understand which levers to pull in order to influence the adoption behaviors they seek. Effective plan design will migrate consumers from a passive role where they are least invested in outcomes and the cost of care, to the other end of the spectrum where full partnership among all stakeholders is achieved and all share in cost-saving benefits and better health outcomes.

The industry is at a tipping point. Adoption of CDHPs and funding of CDH accounts continues to increase; however, we are at-risk for losing sight of a fundamental mandate of CDH – that plans offer a win-win for all stakeholders – not just employers, but for individual consumers, low-use consumers, the sick and those who are non-technically savvy. Continuing to design and implement plans without a strong strategy could ultimately lead to failure of the entire CDH movement. In comparison, strategically-designed plans with solid objectives and ongoing performance measures that allow for nimble adjustments based on trends can realistically lead to universal adoption of CDHPs.

Top tips to follow for good plan design
Before we can discuss strategies for designing a solid plan, we must look at what makes a plan design good. According to industry constultant, John Young, CEO of Consumerdriven, LLC, there are a number of elements that lead to a solid plan design that ensures a win-win across the board:

  • Higher deductibles and larger accounts result in a greater degree of consumerism. In other words, the more stake the consumer owns, the better they respond.
  • Employer funding of CDH accounts is a must. According to Consumerdriven, among large employers, there is a 37% adoption rate of HSAs when the employer contributes $800 or more, versus only 22% among employers offering no contribution.
  • At a minimum, the CDHP should be “benefit neutral” for consumers. While the designation of out-of-pocket expenses and the ways in which they are paid may vary, a CDHP plan should represent equivalent value for the employee in terms of benefits and expenses – not just cost-savings for employers.
  • Prescriptions should be part of the deductible in HRA plans. Many employers choose to exclude prescriptions since they can present ethical conundrums.
  • Change prescriptions plans from a co-pay model to a co-insurance model.
  • Treat HRAs more like HSAs when it comes to claim payments. Instead of paying claims directly and transparently out of HRA accounts, consumers should have transparency into billing and power over when and how to make payments.

Plan design starts with an objective
To simplify, there are one of three potential objectives employers should seek to obtain by implementing a CDHP: implementation of a benefit neutral plan that presents the same benefits to the employee but saves the employer money; a cost neutral plan that offers a richer plan for the same employer spend; or a specific financial target based on desired cost per employee. According to Young, the best plan design falls between benefit neutral and cost neutral where employers offer a richer plan for the same spend.

Once the objective has been identified, there are really only a few variables to adjust in order to design a plan that meets the objective. Employers can consider adjusting account types, individual responsibility level, deductible amount, prescription coverage, preventive care and out-of-pocket maximums in an effort to balance costs and benefits for all stakeholders.

Another important component of strategic plan design that must be in balance are features that incentivize consumer behavior either through a reward or a penalty. According to Young, there is an alarming trend presently taking shape against employees where employers are contributing too little money, making deductibles too high and shifting too many costs to employees. The potential risks to the CDH movement include avoidance of care by consumers which derails potential long-term improvements in health outcomes that ultimately lead to reduced costs to deliver care.

Strategies and best practices for successful plan design

  • Recognize that employees value choice, but be sure to take current, popular plans off the table. Taking away the path of least resistance is an inertia buster.
  • Require mandatory re-enrollment annually to reinforce consumer engagement and investment in the process.
  • Approach consumerism as a family affair or you risk alienating two-thirds of the population whose costs you’re subsidizing.
  • Make the plan attractive for all types of consumers – healthy, chronically ill, young, old, technical, non-technically savvy, etc. Everybody has to win.
  • Make strategic CDH account contributions that are tied to and conditional upon employee contribution levels.
  • Partner the plan with a wellness offering and tie wellness incentives to hard dollar contributions to CDH accounts.
  • Position the CDHP as equal or an improvement on the traditional plan offering. The rollout of a CDHP requires executive sponsorship and excitement from all levels of the organization in order to gain adoption.
  • Communication is as important as plan design. You can design the most attractive offering that benefits everyone, but if employees do not know about it, don’t understand it or aren’t comfortable with it, they will never participate. A successful communication strategy is reinforced all year and covers multiple channels, includes human, print and digital media touch points, and is relevant and personal to individual consumers.

Tie it all together: strategic plan design leads to better outcomes
Consumers have been conditioned to accept the word of healthcare providers over all others in the healthcare ecosystem. Yet, the third leading cause of death in the U.S. is due to medical mistakes. Stakeholders in the CDH movement must ensure consumer engagement and empowerment in order to drive higher quality and better outcomes at rationalized pricing levels. Research shows that consumers take more responsibility for healthcare actions after adoption of a CDHP, including routine preventive care, seeking lower cost options and making healthier lifestyle choices. Additionally, according to Cigna (Choice Fund vs. Traditional Plans, 2012), CDHP plan participants increase compliance with recommended care and show improved health risk profiles year over year.

Strategic plan design plays a pivotal role in determining outcomes. The CDH industry must take on a leadership role driving the right plan models. If plan design is not sound, adoption and satisfaction will suffer, and impactful tools and resources will go underused, threatening the potential gains of the CDH movement.

For more information on this topic, fill out the form on the right to watch our on-demand webinar, “The consumerism imperative: The strategic importance of leading the way on plan design.”

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