PPOs Still Dominate Health Insurance Market; CDHP Prevalence Growing

Preferred provider organizations (PPOs) remain the dominant plan type, with 61.7 percent of U.S. employee enrollment, according to recent research from United Benefit Advisors (UBA). However, the 2012 UBA Health Plan Survey found that nearly 60 percent of employers plan to offer a consumer-driven health plan (CDHP) in the next five years. In addition, most employers are finding that to achieve long-term savings, they must raise the deductible on traditional PPOs to high-deductible health plans (HDHPs).

UBA found that the greatest savings of a PPO over a CDHP was achieved with a deductible of $2,000 to $2,999, where PPO cost per employee was $7,811 and CDHP was $8,859, a savings of $1,000 per employee. The key to savings, UBA’s survey finds, is placing a deductible greater than $1,000, on any plan type, in order to positively impact consumer behavior, lower consumption, and decrease cost. When employers implement HDHPs, along with a health savings account (HSA) or health reimbursement arrangement (HRA), employers remove employee risk by funding the HSA or HRA, UBA noted. Studies show that 80 percent of all employees will not have more than $700 in annual health care costs, so by funding the first $1,000 of an insurance plan, most employees will never see the cost of their health care, and therefore, not make better decisions.

“Employers are turning to CDHPs as a cost-cutting solution against the relentless upward spiral of health care costs,” says Thom Mangan, chief executive officer of UBA. “However, our research shows that small-to midsize businesses in particular, who may be considering these plans may first want to consider increasing the deductible on the plans they already have to achieve the same initial savings. Or, prior to implementing a CDHP plan, employers should build a culture of health and wellness in their workplace that drives employee behavior towards quality, low cost medical care, and prescription drugs.”

CDHP cost savings. The UBA study found that savings created by CDHPs over the plans they were replacing averaged only 1.75 percent in 2012. Enrollment also decreased to 15.6 percent (a 1.8 percent decrease from 2011), and nationwide enrollment among employers with 1,000 or more employees dropped substantially from 15.9 percent in 2011 to 11.3 percent in 2012.

While these statistics indicate CDHP enrollment growth is slowing on the national level, there are areas around the country where the percentage of employees enrolled continues to increase. UBA found that the area of the country that has seen the biggest increase in CDHP growth is Minnesota, which saw the percent of employees enrolled in CDHPs increase from 15.5 percent in 2010 to 37.1 percent in 2012, a rate 18.4 percent higher than the national average in those same years. Other areas with rapid CDHP growth include: Indiana, Virginia, and the Northeast region.

The survey contains responses from 11,711 employers. For more information, visit http://www.ubabenefits.com.

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