DISCLAIMER:  I work for a health care company (doing Software Product Development – not Sales!).  See my bio for details.  I am not advocating anything to do with my employer.  I just have knowledge of this subject area that I believe is worth sharing.

There has been much discussion of the GIC as an alternative to lower health benefit costs.  I wanted to take the opportunity to expand the discourse in this area.  Since Newton is self-insured, we enjoy the luxury of proposing multiple health care options.  Yes, there are collective bargaining constraints, but we need an accurate view of the health benefit landscape.  The plans offered by the GIC are all traditional HMO or PPO plans.

I wanted to introduce a relatively new option called the High-Deductible, Consumer Directed Health Plan (HDCDHP).  I have recently had my own experience with this type of plan (which saved my family $3200 over a PPO) as our employee health coverage is moving aggressively in this direction.  In fact, this is a trend that is more widespread than most of us realize.  Could Newton get out in front on an issue like this?

The information below (text and charts) is excerpted from a survey of employers conducted by Mercerhealth.

The new plan model’s appeal to employers seems clear: CDHPs delivered substantially lower cost per employee than either PPOs or HMOs in 2008. CDHP cost averaged $6,207 per employee, compared to $7,815 for PPOs and $7,768 for HMOs (Fig. 5). Of the two types of CDHPs, HSA-based plans were less expensive than HRA-based plans ($6,027 compared to $6,420). 

The most obvious explanation for the difference in cost between CDHPs and the other medical plan types is the higher deductible. But even compared to the average cost of PPOs with deductibles of $1,000 or higher ($6,661 per employee), CDHPs still cost less by over $400, even though CDHP enrollees are not significantly younger than enrollees in PPOs with high deductibles and are more likely to elect dependent coverage (which drives up cost per employee). The 2008 cost increase for CDHPs was 4.0 percent, compared to 6.3 percent for PPOs and 9.1 percent for HMOs. 

 “With deductibles in traditional PPOs rising, the CDHP is becoming a more attractive option for employees who have a choice,” said Mr. Bos. “If your employer puts money in the account and you don’t use many services, you can end up ahead.  But it all depends on how you use health care.”