When offered a choice of plans, relatively few employees (19%) select Consumer Directed Health Plans CDHPs (a combination of a high-deductible PPO health plan and a Health Savings Plan). This is a major reason why CDHP enrollment has not accelerated rapidly in the group insurance market. In comparison, based on a member survey, the industry trade group America’s Health Insurance Plans estimates that 23 percent of all new polices in the individual market were HSA-eligible plans.

From the employee’s vantage point, employee cost sharing is much higher in CDHPs. Not only are average annual deductibles more than a thousand dollars more than in PPO plans, but CDHPs also typically use coinsurance for physician office visits while traditional plans primarily rely on copayments.

On the other hand, if an employee does not expect to use many health care services, higher cost sharing is not so serious a consideration, and the employer’s contribution to the savings account makes a CDHP a savings vehicle.

Lacking historical experience, health plans and employers initially may have priced CDHPs too high to guard against favorable selection—where healthier-than-average people enroll. Employers also may have set similar monthly contributions for employees in CDHPs. If plans and employers did overprice CDHPs, then subsequent increases in premiums in the next few years are likely to be more modest in CDHPs than traditional plans, thereby increasing the appeal of CDHPs.

In the employer-based market CDHP enrollment may ultimately take off in a manner similar to the early experience of PPOs. For the moment, however, CDHPs have gained only a toehold in the employer-based market, and health plans appear to be more enthusiastic about consumer-directed health care than are employers, who in turn are more enthusiastic than employees.

See full article in Health System Change, Behind the Slow Growth of Employer-Based Consumer-Driven Health Plans