What behavioral economics taught me about enrolling in a CDHP
August 28, 2018
Thinking about offering CDHPs? Read my story first.
Looking back on open enrollment last year, I can see that my choice to enroll in a high-deductible health plan – also known as a Consumer-Directed Health Plan (CDHP)- fits squarely within a standard behavioral economics framework: The Today Me of November 2017 wanted to save money on the monthly premiums and was convinced that Future Me of 2018 would be healthy and wouldn’t have any health care costs anyway. So, along with 28% of Americans in employee-sponsored health insurance, I’m experiencing what it’s like to pay for my health expenditures out-of-pocket (until I reach my deductible).
While – knock on wood – I do find myself in good health, I personally wouldn’t make the same choice again. The burden of having to pay for costs out-of-pocket has been a consistent source of frustration, despite the fact that this is what I signed up for, and makes me feel distrustful of my health care providers. Despite my best efforts to avoid spending money for health care, I have incurred several big bills and have spent hours on my health plan’s website or talking to customer service representatives trying to decipher the claim numbers on my explanation of benefits. I think back to what health policy expert Lynn Quincy said on CPR’s podcast, that if consumers are going to have skin in the game for their health care decisions, they need actionable information to make informed choices. So far, I haven’t had access to that actionable information at all, and, according to March 2018 research in JAMA, many other patients who have tried to be discerning consumers face similar obstacles.
A growing body of research highlights the potential shortcomings of CDHPs. A study published in AJMC using a difference-in-difference methodology found that enrolling in a CDHP increased out-of-pocket spending by 41% and increased the probability of individuals facing excessive financial burden by more than 4% compared to those who maintained enrollment in a traditional plan. These trends were more pronounced for low-income enrollees and those with chronic conditions. Another quasi-experimental study highlighted recently in the New York Times found that HDHP enrollees diagnosed with breast cancer delayed seeking chemotherapy treatment by an average of seven months. As reported in the New York Times coverage, many physicians must feel dismayed when their patients avoid or delay necessary treatments due to a cost avoidance mindset. This mindset is powerful; behavioral economics insists that nothing is more painful than losing something you already own, like a few hundred or thousand bucks from your bank account.
Luckily, these trends can be mitigated through value-based insurance design and the availability of low-cost generic drugs. Additionally, employers interested in offering CDHPs can look into pairing them with a Health Reimbursement Account strategy that can be customized to reduce or eliminate member barriers to high-value care. Many employers wanting to ensure their population has actionable information to make informed choices are pursuing health care navigation support strategies as well, something we’ve highlighted in a recent case study.
Offering CDHPs is just one option in the employer’s playbook for high-value health care purchasing. I remain optimistic that CDHPs will continue evolving to optimize success, especially as more evidence streams in. Purchasers can play a role in spurring this evolution, and I’m proud to work at CPR where we continue to arm purchasers with the tools to make the most of their strategies and steward the collective purchaser voice in pursuit of a more efficient health care marketplace.
Ale Vargas-Johnson, CPR’s Project & Research Manager, wrote this blog.