Several sources indicate health care cost inflation is now running about 7%, with the latest coming from Towers Perrin. This jibes with other reports, and is consistent with last year’s final figures.
As always, the data underlying the overall result paint a more complete picture.
Towers looked at inflation rates for different types of plans: HMOs trended at 9%, a point higher than indemnity plans, and fully 5 points higher than CDHPs. Yes, Towers’ data does indicate CDHP trend rates are lower than any other type of plan, but it is important to remember that CDHPs are a funding mechanism and not a plan type per se.
CDHPs can utilize PPO or POS structures, and there are even HMOs with consumer-directed features.
Here’s why CDHPs may be looking so good.
First, Towers’ study is based on employer-sponsored plans. People who sign up for CDHPs are more likely to think they will not need care, and probably like the idea of saving premium dollars and perhaps socking away a few bucks in their HSA accounts. Thus the lower trend may (in part) reflect a healthier population. I know, I need to investigate further…
Second, most employer-based CDHP programs are very new; 90% of employer CDHP programs have been in place less than two years. From an underwriting/actuarial perspective, it is just way too early to know what the trend rates will be; the members have not been on the plans long enough to incur much in the way of claims. As the ‘block’ ages, we’ll know a lot more about their utilization trends.
What does this mean for you?
Before you chuck your ‘regular’ health plan and jump on the CDHP train, make sure you know which direction its heading.
The lower trend just means that they are overpriced. They are over priced because they get the Better risks. That’s also what the carriers want, or they would allow Preventive meds to be included.
I was able to check HSA rates and compare plans at http://www.HSAforAmerica.com
They also have extensive information on HSAs that helped me make an informed decision. I would recommend them to anyone looking for an HSA.
Not sure how you even calculate a “trend” number when the base is so unclear. Not only do they get better risks but when people get sick they’ll undoubtedly jump back to the normal PPO plan. The only meaningful trend would be based exclusively on full replacement plans – where all employees are stuck in the CDHP plan and can’t jump back into the normal PPO plan when they get sick.