The Truven Health Blog

The latest healthcare topics from a trusted, proven, and unbiased source.

Consumer Engagement Grows as CDHPs Gain Popularity

By Chris Justice/Wednesday, October 8, 2014

Consumer-Driven Health Plans (CDHPs) are one of the fastest growing benefit options offered to employees – and soon may become the dominant plan type. In fact, a recent Kaiser/HRET survey found that CDHP enrollment has gone from just 4 percent of all employees who were given that option in 2006 to 20 percent in 2013. 

In order to ensure CDHP members can effectively engage in their healthcare, employers must provide participants with timely access to consumer information tools to help them understand the range and cost of treatments available through plan providers and also information about provider quality. In the absence of this kind of help, CDHP participants are faced with a daunting task to make effective care decisions.

In addition to employees becoming more educated about their own healthcare, the companies they work for are offering new options that provide incentives and potential savings for the enrollees, as well as the employer itself. As part of a recent survey of Truven Health MarketScan™ data contributors, 64 percent of companies stated that they currently offer one or more CDHP options, and 76 percent stated that they will offer one or more in the future. The majority of these options consist of CDHP or high-deductible health plan (HDHP) with a health savings account (HSA) feature. 

This type of growth is leading to a new paradigm in which more patients are taking on a greater role in treatment decision-making. For instance, under a traditional PPO plan in the past, it was very likely that a breast cancer diagnosis would result in a set course of action. However under a well constructed CDHP, the patient can make assessments based on the price she is willing or able to pay, the quality of treatment and providers, and even the best locations to receive the necessary treatment. With the help of her doctors and advisors, she can decide what’s best for her. She is engaged in her own plan for her health and treatment. 

As this substantial shift continues, employers have the ability to empower their employees by providing the opportunity for them to be engaged in their own healthcare decisions, leading to cost-savings for the employee — and the organization.   

To learn more about achieving year-round engagement with your employees, please access this complimentary insights brief from Truven Health Analytics.

Chris Justice
Senior Director of Practice Leadership

Modeling ABHP Designs is Critical for Employers

By Chris Justice/Tuesday, September 30, 2014
Account-based health plans, or ABHPs, have taken on increasing importance with employers trying to manage cost trends and position their plans to have minimal exposure to the “Cadillac” tax beginning in 2018.

Roughly 75 percent of large employers currently offer an ABHP option, and one third of employers are planning to go to a total replacement approach next year, according to a recent survey by the National Business Group on Health. ABHPs are also a prevalent design on both public and private health insurance exchanges. So understanding their cost impact — for both the plan sponsor and the employee — is of great interest to organizations evaluating their exchange options.  

In recent years, ABHPs have evolved to have more complex provisions. One area of particular interest is the design of pharmacy benefits, which has often been an afterthought. Pharmacy benefit design is an important component in encouraging efficient medication use and better compliance with therapies. Now, with advanced modeling, it becomes easier to see the specific outcomes of even highly complicated changes in pharmacy benefit design.

For example, some sponsors choose to maintain a carve-out pharmacy design, not subject to the plan medical deductibles and out-of-pocket cost-sharing. With this approach, the sponsor can employ a first-dollar, multi-tier cost-share approach including tiers for specialty drugs. Other sponsors choose to impose this type of tiered cost-sharing arrangements in a plan only after participants satisfy a combined medical and pharmacy deductible.

To understand the cost impact of this range of complex design approaches, modeling alternatives with actual employee population claims data, using an actuarially effective evaluation approach, becomes key.

Beyond pharmacy and medical benefit design, modeling can take a look at the implications of different health reimbursement and saving account funding levels and the impact on account balance accumulation. And viewing different scenarios of enrollee treatment compliance and their effects on population health can have tremendous value, too.

Going forward, employers have a lot to gain by honing their approach for ABHP design. In combination with a thoughtful measurement approach, using the data that’s already available on enrollees’ health risks, costs, and usage patterns, a sponsor can ensure the plans continue to contribute to lowered cost trends and improved employee health.

And frankly, without the insights that modeling can bring to those pre-design discussions, employers will likely leave money on the table and lose a chance to make a noticeable difference in population health over time.

The Time is Now for Employers to Minimize Their “Cadillac” Tax Exposure

By Chris Justice/Tuesday, November 5, 2013
Chris Justice imageAlthough the employer mandate included in the Patient Protection and Affordable Care Act (PPACA) has been delayed until January 1, 2015, there isn’t time for employers to take a breather. In fact, employers need to use this time to put their PPACA impact analysis and planning into high gear.

In a newly released insights brief from Truven Health Analytics, The Time is Now: Immediate Actions for Employers Around Health Reform, we provide some key insights into what employers should be doing this year. One of the most important is to minimize exposure to the 40 percent “Cadillac” excise tax.

Most of us know that employers with self-funded arrangements will pay the tax on their high-cost plans; carriers will pay the tax on insured plans, presumably passing on costs in the form of higher premiums. Employers need to understand what cost-trend rates they need to maintain to minimize or avoid exposure to the tax. In addition, they will need to consider the impact of high-deductible and consumer-driven health plan designs on population health and health risk.

This means that organizations should be focused today on creating comprehensive healthcare cost projections using various trend and plan design assumptions to inform decisions on cost control measures and cost sharing approaches. Modeling “what-if” plans can help employers assess the viability of different benefit plan and premium contribution scenarios, including high-deductible and consumer-driven health plan designs.

Other items on the smart employer’s to-do list right now should be: determining if their plans meet the minimum value and affordability requirements, assessing the impact of the Patient-Centered Outcomes Research Trust Fund and Transitional Reinsurance fees, and determining the financial impact of exchange migration.

Download our recent insights brief, The Time is Now: Immediate Actions for Employers Around Health Reform.

Chris Justice
Senior Director, Practice Leadership

Employers Need to "Do the PPACA Math"

By Chris Justice/Thursday, June 27, 2013
Chris Justice imageIn the June 16, 2013 issue, The Wall Street Journal asked,Will Companies Stop Offering Health Insurance Because of the Affordable Care Act?” Truven Health Analytics has worked with a number of employers to analyze this question using it’s proprietary Patient Protection and Affordable Care Act (PPACA) impact model and the employer companies’ premium and premium contribution rates, benefit design data, and employee-level wage, demographic, and cost detail.

For employers in low-wage industries (retail, hospitality, etc.), our modeling has shown that there can be a purely economic argument for an employer to walk away from existing group health arrangements. In this situation, the employer would pay penalties and perhaps provide some sort of after-tax, defined dollar contribution to help defray at least a portion of the employees’ cost to purchase health insurance exchange coverage. For these low-wage employees, the premium and out-of-pocket subsidies available through an exchange can be significant, they may currently pay relatively high contribution rates for relatively meager benefit designs. So the PPACA can offer a win-win for both the employer and the low-wage employees. More generously compensated individuals may, however, lose out in this scenario as they will not be eligible for much, if any, subsidy and they stand to lose proportionally more in payroll/income tax savings if group health benefits are eliminated.


For Company ABC, with 261 employees, with an average 2014 wage of $17,522, the federal premium subsidies available are estimated to be worth roughly $6,700 per employee per year in 2014, and the low-wage employees are additionally eligible to have their out-of-pocket costs capped — thus eliminating what would otherwise be an unfavorable cost shift to go from richer group health benefits to a “silver” exchange plan. It is therefore possible to develop several “Pay” scenarios that provide a “win-win” for employees and employers in 2014. However, depending on trend assumptions for exchange-based benefits relative to group health, this picture may or may not hold in 2015 and beyond …

For employers in higher-wage industries, the picture is typically quite different. In our example below, Company XYZ has 825 employees and average 2014 wages of $46,369 per employee.

This company’s relatively higher-earning employees lose more in tax savings and are projected to enjoy much less favorable federal subsidy and out of pocket limitations compared to Company ABC. There are no obvious “win-win” scenarios for Company XYZ using the model; there are just different ways of allocating the costlier provision of benefits through an exchange.

Employers need to “do the PPACA math,” because the combination of corporate tax rates, wages, benefit design and employee contribution strategies make for a very dynamic cost environment and the PPACA regulations and emerging exchange environment have created both opportunity and hazard. Utilizing a tested and proven model is essential as employers make their decisions. Employers choosing to “stay the course” with group health for the foreseeable future still need to evaluate the potential for their lower-wage employees to access subsidized care in the case their group health plans are not deemed “affordable.” Market changes will also dramatically impact the math, 2014 is just the beginning…

Chris Justice
Senior Director, Practice Leadership