Scott MacStravic, PhD
The current popularity of “Consumer-Directed Health Plans”, with high deductibles and spending accounts may be due simply to their clear cost-shifting effects and demonstrated effects on reducing health care/insurance spending. The idea is simple enough to be simplistic – give consumers more skin in the game, and they will not demand unnecessary or wasteful medical or hospital care, and they will take better care of their own health. Given the fact, well known to marketers for decades, that consumers do not rely on rationality for their behavior and purchase choices, the idea that that is all it takes is surely optimistic at best.
But there may also be a hidden agenda at work. Arguably, it has always been the case that prudent employers should want to recruit and hire the healthiest employees possible, even when the only hope was that such a practice would reduce sickness care costs. The problem has always been at least in two complications: 1) employees tend to get older, with their health declining, as they also become wiser and more valuable with experience and development; and 2) there are laws against discrimination based on age, for example, and even health conditions that qualify as disabilities.
Hundreds of employers already refuse to hire smokers, for example, though refusing to hire people who are overweight/obese, have sleep problems, low levels of physical activity, etc. is more problematic. But CDHPs may actually help employers promote what amounts to “pro-selection” by healthier prospects, both in terms of who applies for employment and who accepts offers made.
It is commonly argued that CDHPs favor the younger and healthier, for example, since they are likely to see the high deductibles and “donut holes” common in HSA arrangements as of little concern to them, and like the idea of tax-free, interest-bearing savings accounts for future use, while figuring to have lots of time to save up before their account will have to be tapped. By contrast, people who know themselves to be at high risk, and certainly those with risk conditions and chronic diseases that already cause high health care spending, will certainly not like these elements of the CDHP approach.
Most current employers that offer CDHPs offer a more traditional health insurance plan as well, given the fact that consumers are still a bit skeptical about CDHPs. Moreover, about half of those who choose them seem to wish to switch back. But employers who choose to offer nothing but a CDHP plan, switching all coverage to that in one step, or gradually switching to a single option over time, can expect to see at least some effect on “anti-selection”, i.e. on risky and unhealthy prospects seeking and accepting employment with them.
Employers who went “smoke-free” usually gave their employees who smoked a set period of time in which to quit, while offering them free smoking cessation support to help. But once the time limit was reached, they terminated those who had not quit. The gradual adoption of CDHPs might have a similar effect. Just as the prospect of losing one’s job can be a strong motivation for smokers to quit, so the prospect of CDHP-type coverage may motivate current employees who are at high risk or have unmanaged chronic conditions to either reform their lifestyles or leave.
If it serves as an effective motivation for lifestyle reform, there may be no objections to the idea. But if a widespread movement toward exclusive CDHP coverage results in large numbers of unhealthy people being added to the unemployment rolls, it may also add to lawsuits for discrimination. Moreover, employers have the strongest motivation to promote the health and well-being of their employees, far more than do government programs such as Medicare and Medicaid, which logically do not consider the far greater impact that employee unhealth has on employers’ performance than members’ unhealth has on their healthcare expenditures.
Even simultaneous offering of CDHPs and traditional health insurance may have “pro-selection” effects that employers desire or would welcome. Should CDHPs become far more popular among the young and healthy, this will mean traditional plans will suffer from “anti-selection” by those who are neither. This will raise the premiums of the traditional plans, thereby pricing them beyond affordability for many unhealthy employees, which may also either force them to become healthy or leave.
It is probably impossible to tell which employers might be looking at CDHPs and which ways, but the potential for using it as a tool to switch costs to other employers and to taxpayers should be something every employer and citizen might want to think about.
