CDHP savings modest, enrollment low

May 1, 2008

Recent Milliman analysis of employer programs that offer employees a choice of consumer-directed health plans or non-CDHPs, shows that when offered as a new choice, CDHPs deliver a modest 1.5% in savings beyond non-CDHPs based on typical risk- and benefit-adjustment factors.

Recent Milliman analysis of employer programs that offer employees a choice of CDHPs or non-CDHPs, shows that when offered as a new choice, CDHPs deliver a modest 1.5% in savings beyond non-CDHPs based on typical risk- and benefit-adjustment factors. This contrasts with the more dramatic savings that CDHPs appear to bring if certain adjustments are not taken into account.

When offered in a multi-option environment, the apparent savings that CDHPs options show are really from selection of healthier lives and cost-shifting, Pyenson explains. "Aggregate costs, including cost-sharing, taken across all options, could easily increase," he says. "In the short-term, a significant challenge for managed care executives is to make sure the sales people are correctly setting buyers' expectations.

"Of course, in a multi-option environment, inertia and risk aversity and uncertainty play an important role-many consumers do not immediately pick the option that benefits them the most," Pyenson continues. "Chaotic consumer behavior is not unique to health insurance. The relatively slow uptake of CDHPs has frustrated some insurers but has reassured others."

Managed care executives should compare the potential value of various investments, including CDHPs, Pyenson advises. "CDHPs are another insurance policy option that will be attractive to some buyers. However, CDHPs will not replace effective utilization management and network management as cost-control mechanisms-CDHPs will emerge as a tool that sometimes complements and sometimes complicates those core techniques."