Healthy savings Featured

10:48am EDT February 24, 2005
Like most new developments in employee benefits, the rollout of consumer-directed health plans a few years ago was greeted with a certain wait-and-see posture among many employers.

This was understandable. The new plans were built upon the reasonable, but as yet unproven, premise that employees who had in-depth health information and greater decision-making authority would ultimately make more effective and efficient health care choices.

Now that these plans have performed in the marketplace for a while, the validity of this powerful premise is clear -- consumer-directed health plans (CDHPs) can reduce a company's medical costs and improve employee access to wellness benefits.

CDHPs typically have two parts -- high-deductible insurance and some kind of fund or account. The insurance generally pays for preventive care and, after a deductible, handles big-ticket health expenses that limit what an employee might pay out of pocket in a given year.

The tax-advantaged fund or account, which may be funded by the employer or worker, is used for typical medical expenses such as office visits and prescriptions. The employee is in charge of how this money is spent and may, for example, opt for less expensive generic drugs or select the most cost-effective treatment suggested by a doctor.

But perhaps more important is that, through a combination of incentives, these plans encourage employees to adopt healthy behaviors and seek out early treatment for potentially serious conditions, both of which benefit their health and the company's claim experience.

Solid savings

As the first national health insurer to establish consumer-directed plan offerings across the country, Aetna has collected preliminary data that underscore the performance of these plans. In 2003, for example, the insurer's Aetna HealthFund product delivered significant savings for employers adopting the plan. While every company's results will be different, these results give an indication of what an employer may realize from a well-crafted and executed benefits strategy and plan.

The employers who adopted Aetna's consumer-directed plan experienced:

* Nearly flat medical costs. Monthly medical costs per member in the plan increased only 3.7 percent. Meanwhile, by comparison, medical costs per member in Aetna-administered Preferred Provider Organization (PPO) plans rose 16.2 percent over the same period.

* Lower utilization. Members in the consumer-directed plan visited primary care physicians 11 percent less than they had in the prior year. By comparison, PPO member visits increased 2.2 percent. Those in the CDHP also reduced their use of facility-based services, with 3 percent fewer emergency room visits and 14 percent fewer outpatient cases; this compared to respective increases of 4 percent and 6.6 percent for PPO members.

* Positive pharmacy results. Members in the CDHP experienced a 5.5 percent decrease in pharmacy costs, driven by a 13 percent reduction in overall prescriptions. This is compared with an aggregate increase of 3 percent for enrollees in all of Aetna's plans. Members in the consumer-directed plans increased their use of generic drugs by 7 percent, compared with 4 percent for all enrollees.

* Sufficient fund dollars. CDHP members, on average, used 69 percent of their fund dollars. In fact, 51 percent rolled over some of their 2003 fund dollars into 2004. Such rollovers are possible in these plans, unlike the flexible spending accounts with their use it or lose it restrictions.

Healthy behaviors

While these results are impressive, a greater benefit of consumer-directed plans may lie in their ability to improve employee wellness in the long term. The equation is simple -- employees who have a greater financial stake in their health will seek out ways to stay healthy.

For example, a smoker who now is spending his own money on treatments and medications for chronic congestion may finally join a smoking-cessation program. A borderline diabetic who is sharing more in the cost of drugs and treatments may finally take the doctor's advice and adhere to a beneficial exercise-and-diet plan.

Do the math

There are a variety of consumer-directed plans available, with a broad range of features and plan designs. So it's a good idea to seek the help of your insurance broker or consultant to find a plan that suits your benefits strategy and employee needs.

Taking the step into consumer-directed health plans may deliver both the cost management you need today and encourage a healthier work force in the future.

Thomas J. Scurfield is vice president of sales and service for the Aetna's north central east region and is based in Cleveland. He has more then 25 years of experience working in employee benefits and holds both the Chartered Life Underwriter and Certified Employee Benefit Specialist designations. Reach him at (330) 659-8020 or