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Iowa Number$ on Consumer-Driven Health Plans

Consumer-Driven Health Care in IowaConsumer-Driven Health Plans (CDHP) — a trend, fad or an anomaly in Iowa?

Unsure? So am I.

Let me briefly explain using a few results from past studies.

A CDHP is considered by many to be the next generation of medical coverage that employers will offer to their employees. Under this approach, an employer will allocate a sum of money annually to offset the employees’ portion of a high-deductible plan. By doing this, employers continue to support their employees’ health care needs, while allowing employees to more directly control their own health coverage. The whole concept of CDHPs is to put the patient back into the health care cost equation, where they now have ‘skin in the game’ and should be capable of assessing the true value of health care. 

There are various hybrid arrangements of CDHP’s. The two most common funding vehicles for CDHP’s are Health Reimbursement Arrangements and Health Savings Accounts.

  • Health Reimbursement Arrangement (HRA) – The HRA is an employer-provided fund that must be used by the employee for qualified medical expenses. HRAs allow the employer flexibility in plan design, such as permitting employees to roll over any unused balance into the following year. Typically, employees do not “own” such an account, and any balances are usually forfeited back to the Plan should the employee terminate employment.
  • Health Savings Account (HSA) – HSAs may be funded by the employee, employer or both. HSAs are permanent, portable, tax-favored savings accounts available to anyone with a qualified high-deductible health insurance plan. Because the HSA is owned by the employee, the employee retains control of their HSA even when changing employers.

In 2005, 4.5 percent of Iowa employers (regardless of size) reported they offered some type of a CDHP to their employees. In 2008, over 17 percent of Iowa employers reported offering a CDHP – whether it was a full replacement of other traditional health plans or offered as an option to traditional coverage. Our data was telling us that each year more Iowa employers were jumping on the CDHP bandwagon. This was beginning to look like a big trend in Iowa – not unlike what was being observed in other parts of the country. However, in 2012, something very strange happened. The number of employers reporting CDHP dropped to 13.3 percent.

David P. Lind Benchmark

In addition to observing this supposed-trend reversal, a large number of employers in our 2012 survey (over three-quarters) indicated they were ‘very unlikely’ to offer CDHPs within the next 12 months. This was also a big change from 2005 when only 41.5 percent of employers reported to be ‘very unlikely’ to offer CDHP coverage.

David P. Lind Benchmark

What happened? Not sure, but do have my suspicions.

CDHPs sound great in theory. In fact, I have been on a qualified, high-deductible health plan for at least seven years. Can they reduce unnecessary spending by the employee without undermining the preventive care aspects of coverage? Does the current marketplace offer the appropriate tools that are necessary for the health care ‘consumer’ to become more of an astute purchaser of health care? Frankly, there are national studies that show mixed results regarding these questions. My advice is to carefully review such reports and pay close attention to who commissioned these reports. It can make a difference on how the above questions are addressed.

So are CDHPs a trend, fad or an anomaly in Iowa?

Stay tuned to see what our 2013 Study reveals within the next two months.

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Iowa Number$ – Size DOES Matter

Data from Iowa Employer Benefits StudyIt appears that employer size really DOES matter – especially for employees with family health coverage who work at the largest organizations here in Iowa. A great example can be found in the two graphs below.

In 2012, Iowa employers with fewer than 250 employees (over 99 percent of employers in Iowa fall into this category) asked their workers with single health coverage to contribute $1,108 annually for their health insurance. This amount has increased by 53 percent since 2005. Employees who are employed in organizations with 250 or more employees contributed $135 less annually for health coverage (a 48 percent increase during this same period).

 David P. Lind Benchmark

To compound matters, employees at larger organizations receive dramatically lower deductibles (and lower out-of-pocket maximums). At large firms, the average employee with single health coverage receives an average deductible of $895, versus a $1,654 single deductible at organizations smaller than 250 employees.  In addition, the out-of-pocket maximum at smaller employers is $3,320 while the large organizations average $2,439. These are BIG discrepancies!

The differential for employees with family coverage is even more pronounced. Employees in the larger organizations contribute $3,831 annually for their health coverage. Likewise, employees in smaller organizations contribute $1,318 MORE annually, or $5,149.

 David P. Lind Benchmark

As you may have guessed, employees in larger organizations have, on average, a lower family deductible than employees who work for smaller employers. The average family deductible for large employers is $1,880 while the average deductible for smaller organizations is $3,559 (a variance of $1,679!). The family out-of-pocket maximums for the larger and smaller organizations are $4,699 and $6,948, respectively.

In the late 19th Century, British Prime Minister Benjamin Disraeli said, “There are three kinds of lies:  lies, damn lies, and statistics!”

Why is there such a great variance between large and small employers? Frankly, it has more to do with economics than with employer generosity. For example, to help mitigate health costs, larger organizations are more likely to self-insure their health plan(s), which allows for greater flexibility with plan design and risk management. About 97 percent of employers in Iowa employ less than 50 employees, and many such employers do not have the luxuries afforded to the very large organizations.

Therein lies the rub – that fine line between ‘lies’ and ‘statistics!’

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Number$ in Iowa

Lindex StatisticsPeriodically, I like to share some interesting results from previous Iowa Employer Benefits Studies© that may possibly reflect trends on what Iowa employers are doing regarding various benefit offerings.

The first chart relates to the prevalence of vision coverage offered by employer size. As is the case with most benefits monitored, the larger organizations are more likely to offer benefits – and, vision coverage is certainly no exception. Urban organizations are more likely to offer vision coverage in 2012 (49 percent) when compared to their rural counterparts (28 percent).

David P. Lind Benchmark

Most of the large employers tend to offer pre-tax premium plans for their employees, with about 70 percent of all Iowa employers offering such a ‘benefit.’ Considerably fewer employers offer medical spending and dependent care spending accounts (53 percent overall). This particular chart reflects results from the 2012 Study.

David P. Lind Benchmark

This last chart shows the percentage of organizations offering dental plans during 2009, 2010 and 2012. Interestingly, the largest of employers (1000+) reported a decrease in dental coverage offerings. Our 2013 Study (to be released this Fall) will either confirm this as a trend or an anomaly. One great thing about performing studies, is having the ability to detect (or not) emerging trends over time. However, prematurely announcing new trends can be dangerous, unless new data can conclusively confirm emerging changes that ultimately become trends.

David P. Lind Benchmark

“The common facts of today are the products of yesterday’s research.” – Duncan MacDonald.

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