Consumer-driven health plans on the rise

HMO, PPO enrollment on the decline

Enrollment in consumer-driven health plans (CDHPs) continues to grow, while HMO and PPO enrollment is on the decline, according to a survey from consulting firm Mercer.

Among those covered by employer-sponsored health plans, 23 percent are now enrolled in a CDHP, BenefitsPro reported. That's an increase from 18 percent in 2013. Meanwhile, PPO enrollment dropped to 61 percent and HMO enrollment fell to just 16 percent--the lowest level since Mercer began its survey in 1993, BenefitsPro noted.

Three factors explain the rise in CDHP enrollment, Mercer found:

  • Under the Affordable Care Act, employers must offer coverage to employers working 30 or more hours per week as of next year. More than a third of large employers were affected by this rule, according to the survey. "While some have already taken steps to comply, the majority will do so in 2015."

  • The minimum tax penalty for not getting health insurance will rise to $325 in 2015 from $95 this year.

  • CDHP coverage costs up to 20 percent less than traditional HMO or PPO coverage. With the so-called "Cadillac tax" going into effect in 2018, employers look to avoid paying a 40 percent excise tax on health plans that cost more than $10,200 for an individual or $27,500 for a family, Mercer said, adding that one-third of employers risk paying this tax if they don't so something.

Rising interest in CDHP coverage suggests that insurers need to prepare for a wave of consumerism, Mercer said. What's more, employees are getting more comfortable with the new reality of consumer-driven healthcare, partly because employers are doing their part to help employees manage their deductibles and "shop" for services.

To learn more:
- read Mercer's report on its survey results
- read the BenefitsPro article

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