CDHPs officially became mainstream last year when they enrolled as many employees as HMOs did —18% of all covered employees. In the Midwest, CDHP enrollment is now more than double that of HMOs: 27% compared to 10%. Nearly a fourth of all employers (23%) and nearly two-thirds of the largest employers (63% of those with 20,000 or more employees) offered one in 2013.
CDHP growth has accelerated under health reform. They are an important option for employers looking for a low-cost plan to make extending coverage to additional employees more affordable. They will also be a key strategy for employers that need to find a way to lower cost in 2018, when employers will be required to pay a 40% excise tax on health coverage that costs more than $10,200 for an individual or $27,500 for a family. Mercer estimates that about a third of employers are currently at risk for triggering the excise tax in 2018 if they make no changes to their most costly plan. Nearly two-thirds of all large employers and about one-third of small employers say they expect to offer a CDHP within three years.
It’s clear why employers are turning to CDHPs as a response to health reform. While the typical HSA-eligible CDHP easily meets the ACA’s minimum actuarial plan value requirement, it costs about 20% less, on average, than either PPO or HMO coverage. Of course, how much an individual employer saves by offering a CDHP depends on how many employees enroll. Among employers that have offered an HSA-eligible CDHP for the past three years alongside other medical plan choices, we see steady growth in the percentage of employees choosing the CDHP — from 21% in 2011 to 29% in 2013.
Not surprisingly, employers that make significant contributions to an HSA are seeing higher enrollment than those that do not. On average, 28% of employees enrolled in an HSA plan when their employers made a contribution of $800 or more, compared to just 20 percent when employers did not contribute. Another important enrollment driver is the level of communication. Among sponsors that characterize the level of employee communication about the HSA as extensive, an average of 30% of eligible employees enrolled in the HSA. Among those that say communication is limited, only 21% enrolled.
The rise of private exchanges will also help foster growth in CDHPs. For employers that are reluctant to offer a CDHP as their only plan — or to take on the administrative burden of offering multiple plans — private exchanges allow employers to offer a CDHP alongside more costly plan options without increasing administrative complexity.
To achieve their full potential, CDHPs must be paired with reliable, easy-to-access data on provider cost and quality so that consumers can make fully informed decisions. With transparency tools making major progress in recent days, CDHPs can only become a still more attractive option.