Federal Employees Health Benefits Program: First-Year Experience
with High-Deductible Health Plans and Health Savings Accounts
(31-JAN-06, GAO-06-271).
The Federal Employees Health Benefits Program (FEHBP) recently
began offering high-deductible health plans (HDHP) coupled with
tax-advantaged health savings accounts (HSA) that enrollees use
to pay for health care. Unused HSA balances may accumulate for
future use, providing enrollees an incentive to purchase health
care prudently. The plans also provide decision support tools to
help enrollees make purchase decisions, including health care
quality and cost information. Concerns have been expressed that
HDHPs coupled with HSAs may attract younger, healthier, or
wealthier enrollees, leaving older, less healthy enrollees to
drive up costs in traditional plans. Because the plans are new,
there is also interest in the plan features and the decision
support tools they provide to enrollees. GAO was asked to
evaluate the experience of the 14 HDHPs coupled with an HSA that
were first offered under the FEHBP in January 2005. GAO compared
the characteristics of enrollees in the 14 HDHPs to those of
enrollees in another recently introduced (new) plan without a
high deductible and to all FEHBP plans. GAO also compared
characteristics of the three largest HDHPs to traditional FEHBP
plans offered by the same insurance carriers, and summarized the
information contained in the decision support tools made
available to enrollees by these three plans.
-------------------------Indexing Terms-------------------------
REPORTNUM: GAO-06-271
ACCNO: A46077
TITLE: Federal Employees Health Benefits Program: First-Year
Experience with High-Deductible Health Plans and Health Savings
Accounts
DATE: 01/31/2006
SUBJECT: Comparative analysis
Deductibles and Coinsurance
Employee benefit plans
Federal employees
Health care costs
Health care programs
Health care services
Health insurance
Program evaluation
Federal Employees Health Benefits
Program
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GAO-06-271
* Results in Brief
* Background
* The Consumer-Directed Health Plan Concept
* FEHBP and Consumer-Directed Health Plans
* FEHBP HDHP Enrollees Were Generally Younger and Earned Highe
* HDHP Enrollees Were Younger and Included Fewer Retirees Than
* HDHP Enrollees Had Higher Federal Salaries and Were More Lik
* FEHBP HDHPs Generally Covered the Same Services as Tradition
* FEHBP HDHPs Generally Covered the Same Services as Tradition
* Enrollees' Financial Responsibilities Usually Differed betwe
* FEHBP HDHPs Provided Online Access to Decision Support Tools
* FEHBP HDHPs Provided Access to Online Account Management Too
* The Extent to Which FEHBP HDHPs Provided Online Access to Pr
* Concluding Observations
* Agency Comments
* GAO's Mission
* Obtaining Copies of GAO Reports and Testimony
* Order by Mail or Phone
* To Report Fraud, Waste, and Abuse in Federal Programs
* Congressional Relations
* Public Affairs
Report to Congressional Requesters
United States Government Accountability Office
GAO
January 2006
FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM
First-Year Experience with High-Deductible Health Plans and Health Savings
Accounts
FEHBP High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts FEHBP
High-Deductible Health Plans and Health Savings Accounts
GAO-06-271
Contents
Letter 1
Results in Brief 4
Background 6
FEHBP HDHP Enrollees Were Generally Younger and Earned Higher Federal
Salaries Than Other FEHBP Enrollees 10
FEHBP HDHPs Generally Covered the Same Services as Traditional Plans, but
Enrollees' Financial Responsibilities Usually Differed 14
FEHBP HDHPs Provided Online Access to Decision Support Tools, but Did Not
Always Include Health Care Quality and Cost Information 17
Concluding Observations 21
Agency Comments 22
Appendix I Comments from the Office of Personnel Management 23
Tables
Table 1: Average Age of HDHP and Other FEHBP Enrollees 11
Table 2: Gender and Plan Selection for HDHP and Other FEHBP Enrollees 14
Table 3: Key Plan Features of the Multistate HDHPs in the FEHBP Compared
to Their Traditional Plan Counterparts, 2005 16
Table 4: Information Available through Online Decision Support Tools of
the Three Multistate HDHPs, 2005 19
Figures
Figure 1: Age Distribution of HDHP and Other FEHBP Enrollees 12
Figure 2: Actively Employed FEHBP Enrollees Earning Annual Federal
Salaries of $75,000 or More, 2005 13
Abbreviations
CDHP consumer-directed health plan FEHBP Federal Employees Health Benefits
Program HDHP high-deductible health plan HMO health maintenance
organization HRA health reimbursement arrangement HSA health savings
account OPM Office of Personnel Management PPO preferred provider
organization
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separately.
United States Government Accountability Office
Washington, DC 20548
January 31, 2006
The Honorable Henry A. Waxman Ranking Minority Member Committee on
Government Reform House of Representatives
The Honorable Pete Stark Ranking Minority Member Subcommittee on Health
Committee on Ways and Means House of Representatives
The federal government provides health insurance coverage for over 8
million federal employees, retirees, and their family members through
health plans participating in the Federal Employees Health Benefits
Program (FEHBP), the largest employer-based health insurance program in
the country. Similar to many large employers, the FEHBP has recently begun
offering a type of "consumer-directed health plan" (CDHP) that combines a
high-deductible health plan (HDHP) with a tax-advantaged health savings
account (HSA) that enrollees use to pay for a portion of their health
expenses.1 (Throughout this report we refer to the FEHBP plans that are
coupled with HSAs as HDHPs.) The higher deductibles typically result in
lower premiums because the enrollee bears a greater share of the initial
costs of care. The HDHPs provide decision support tools to help enrollees
become more actively involved in making health care purchase decisions,
such as information about the quality of health care providers and the
cost of health care services.
1Many health plans require enrollees to pay a portion of their health care
costs up to a certain threshold, known as the deductible. Once the
deductible has been met, the plan pays most of the costs. A CDHP is a
health plan with a higher-than-average deductible that is coupled with a
spending account to pay for health care, such as an HSA. HSA-related tax
advantages were authorized by the Medicare Prescription Drug, Improvement
and Modernization Act of 2003 for individuals covered by health plans that
meet minimum deductibles and maximum out-of-pocket spending limits,
including spending on deductibles and cost sharing for covered services.
Pub. L. No. 108-173, S:1201, 117 Stat. 2066, 2469. The minimum deductible
in 2005 was $1,000 for individual coverage and $2,000 for family coverage.
The maximum out-of-pocket spending in 2005 was $5,100 for individual
coverage and $10,200 for family coverage.
Proponents believe that HDHPs coupled with HSAs can help restrain health
care spending. They believe enrollees have an incentive to seek lower-cost
health care services, and to only obtain care when necessary because
account funds can accrue from year to year. Enrollees may use these funds
to pay for health care in subsequent years or for other purposes, such as
retirement. However, some believe that these plans will attract a
disproportionate share of wealthier enrollees who seek to use the HSA as a
tax-advantaged savings vehicle. Some also express concern that HDHPs may
disproportionately attract younger and healthier enrollees. If this
occurred to a large extent, premiums for traditional plans could rise due
to a disproportionate share of older and less healthy enrollees with
higher health care expenses remaining in the traditional plans. Because
HDHPs coupled with HSAs are a relatively new concept in health care
benefits plan design, there is also interest in how the plans' features
compare to traditional plans and the extent to which the plans provide
decision support tools, such as provider quality and cost data, to help
enrollees make informed and prudent health care purchase decisions.
You asked us to evaluate the experience of the HDHPs coupled with HSAs
that were offered under the FEHBP beginning in January 2005.2 Because
there is limited experience to date with these plans, we limited our
review to the demographic characteristics of the enrollees and key
features of the HDHPs.3 In particular, we examined (1) characteristics of
HDHP enrollees compared to all FEHBP plan enrollees, (2) features of the
HDHPs compared to traditional FEHBP health plans, and (3) the extent to
which FEHBP HDHPs provide information to enrollees to assist them in
making health care purchase decisions.
To identify the demographic characteristics of HDHP enrollees, we analyzed
FEHBP enrollment data provided by the Office of Personnel Management
(OPM), the federal agency responsible for administering the FEHBP.4 We
obtained data for each of the 14 HDHPs coupled with HSAs that was
introduced in 2005. To determine how the enrollees in these plans compared
to other FEHBP enrollees, we compared their demographic characteristics to
two groups. First, we compared them to the characteristics of all FEHBP
plan enrollees.5 Second, because characteristics of the HDHP enrollees may
differ from the typical FEHBP enrollee primarily because these plans are
new, we also compared HDHP enrollee characteristics to the characteristics
of first-year enrollees of another FEHBP national preferred provider
organization (PPO) plan that was recently introduced.6 For each group we
examined enrollee age, income, gender, and whether the plan was for an
individual or a family. Because our preliminary analysis found that
retirees were much less likely to enroll in the FEHBP HDHPs and the other
new plan, we excluded retirees from most comparisons to help ensure that
differences were related to the plan design and not to the absence of
retirees among the new plans. Our assessment of the demographic
characteristics of HDHP enrollees reflects only the first year of plan
enrollment and thus may not reflect future enrollment trends. We did not
independently verify the data provided by OPM; however, we performed
certain quality checks, such as determining consistency among the various
data sets provided. We also evaluated information from OPM concerning how
data are collected, stored, and maintained. We determined that the data
were adequate for this report.
2We recently reported on the early experience with another type of CDHP
first offered under the FEHBP in 2003. See GAO, Federal Employees Health
Benefits Program: Early Experience with a Consumer-Directed Health Plan,
GAO-06-143 (Washington, D.C.: Nov. 21, 2005).
3Data to examine the first year of health care utilization and spending
under the plans for 2005 will not be available before August of 2006.
Health policy analysts believe that 2 or more years of such data are
necessary to assess the cost savings potential of these plans.
To evaluate the features of the HDHPs, we reviewed plan brochures for the
three HDHPs that operated in most or all states and comprised about 96
percent of all FEHBP HDHP enrollment in 2005. Throughout this report we
refer to these plans as multistate HDHPs. We compared key features of
these plans to the features of other plans offered by the same insurance
carrier, which we refer to as the HDHPs' traditional plan counterparts. We
compared two of the HDHPs to two national PPO plans offered by the same
carriers, and we compared the third HDHP to 22 regional health maintenance
organization (HMO) plans offered by the same carrier. The features we
examined included covered services, coverage of out-of-network providers,
deductibles, cost-sharing arrangements, out-of-pocket spending limits, and
premiums.7
4In administering the FEHBP, OPM contracts with and regulates health
insurance carriers and negotiates benefits and premium rates. OPM also
receives and deposits health insurance premium withholdings and
contributions from federal employees, and pays premiums to carriers.
5Because comprehensive demographic data for all FEHBP enrollees in 2005
were not yet available, we reviewed enrollment data from 2004.
6FEHBP offers national plans to all enrollees who may work anywhere in the
country and local plans that are offered in certain local markets.
National plans are typically PPO plans that allow enrollees to choose
their own health care providers, and reimburse either the provider or the
enrollee for the cost of covered services. Enrollees' costs are generally
lower if they obtain care from the plan's network of preferred providers
rather than from providers not in the plan's network, referred to as
"out-of-network" providers. Local plans are typically health maintenance
organization plans that provide or arrange for comprehensive health care
services on a prepaid basis, and require that care be coordinated through
a primary care physician.
To evaluate the decision support tools that plans make available to
enrollees, we reviewed the literature and interviewed experts to identify
the information that experts believe is most helpful to consumers in
assessing the quality of health care providers and the costs of health
care services. We then reviewed the decision support tools that the three
multistate HDHPs made available to enrollees on the plan Web sites to
determine whether the information was present, but did not independently
verify the accuracy of the information.
We conducted our work according to generally accepted government auditing
standards from July 2005 through January 2006.
Results in Brief
FEHBP HDHP enrollees were generally younger, earned higher federal
salaries, and were more likely to select individual rather than family
plans than other FEHBP enrollees. The average age of HDHP enrollees was
46, compared to 47 for the other new plan enrollees and 59 for all FEHBP
enrollees. The age difference was largely due to a smaller share of
retirees enrolling in the HDHPs compared to the other plans. Excluding
retirees, the range in average ages narrowed to 44 for both the HDHPs and
the other new plan and 47 for all FEHBP plans. HDHP enrollees also earned
higher federal salaries compared to other FEHBP enrollees. Forty-three
percent of actively employed HDHP enrollees earned federal salaries of
$75,000 or more compared to 14 percent of the other new plan enrollees and
23 percent of all FEHBP plan enrollees. Finally, HDHP enrollees were more
likely to be male and were more likely to select individual rather than
family plans. Sixty-nine percent of HDHP enrollees were male, compared to
59 percent of enrollees in both the other new plan and all FEHBP plans.
Forty-seven percent of HDHP enrollees had individual coverage, compared to
35 and 37 percent of enrollees in the other new plan and all FEHBP plans,
respectively.
7Cost-sharing arrangements refer to the enrollee's share of payments for
covered services, such as co-payments-a fixed charge-and coinsurance-a
percentage of the charges. We define out-of-pocket spending limits as the
maximum amount enrollees may pay out of pocket under the plan, including
the deductibles and cost sharing. Our analyses of deductibles, cost
sharing, and out-of-pocket spending limits were limited to in-network
care.
Each of the three multistate HDHPs generally covered the same range of
health care services-including preventive care services-as its traditional
plan counterparts; however, enrollees' financial responsibilities usually
differed. Each of the HDHPs had higher annual deductibles for in-network
care, ranging from $1,100 to $2,500 for individual plans and from $2,200
to $5,000 for family plans. This compared to deductibles among the
traditional PPO counterparts of from $450 to $950 and from $900 to $1,900
for individual and family plans, respectively. Regarding cost sharing for
preventive care services, HDHP enrollees paid the same or less than the
traditional plan enrollees and always covered certain preventive care
services before the deductible was met, whereas these same services were
not always covered before the deductible by their traditional plan
counterparts. For prescription drugs, all three HDHPs required that the
deductible be met before prescription drug coverage began, whereas two of
the traditional plans covered all prescription drugs before the deductible
and the third covered generic drugs before the deductible. After the
deductible, all three HDHPs had comparable or lower cost sharing for
prescription drugs than their traditional plans. Cost sharing for
physician office visits and hospital stays for the three HDHPs was mixed
relative to the traditional plan counterparts-HDHP enrollees paid more in
some instances, the same or less in others. Two of the HDHPs had higher
out-of-pocket spending limits for in-network providers compared to their
traditional plans: for individual coverage $4,000 and $5,000 compared to
$1,500 and $4,450; for family coverage $8,000 and $10,000 compared to
$3,000 and $5,400. Finally, the HDHPs typically had lower monthly
premiums-the average employee premium was $91 for individual coverage and
$208 for family coverage, compared to $99 and $243, respectively, for the
traditional plans.
Each of the three multistate HDHPs provided online access to account
management tools and health education information, but the extent to which
they made available provider quality and health care cost information was
limited and varied. Regarding quality data, two of the three plans
provided several measures on their Web sites to assess hospital quality,
including the volume of procedures provided by the hospitals and the
outcomes of those procedures, and the other plan provided links to other
Web sites containing such information. None of the three plans provided
similar measures to assess individual physician quality, although one plan
provided information on physicians' medical board certifications. Experts
we interviewed believed that physician-specific quality data were not yet
widely available for most health insurance carriers to provide to their
enrollees.8 Regarding cost data, one of the three HDHPs provided average
hospital cost estimates and two provided average physician cost estimates
for selected services, but none provided the actual negotiated payment
rates enrollees would be charged by a specific provider.9 All three plans
provided actual prescription drug prices available through their
mail-order pharmacies, and two of the plans provided average retail
pharmacy drug costs, but none provided the actual negotiated rates an
individual would pay at a particular pharmacy.
In commenting on a draft of this report, OPM said that it would monitor
enrollment trends over time to assess whether certain individuals-such as
younger or healthier individuals-disproportionately enroll in HDHPs. OPM
also said it would continue to encourage plans to expand the decision
support information they provide to enrollees, including the pricing of
health care services.
Background
CDHPs are relatively new health care benefits plan designs that are
offered in various forms, including that of an HDHP coupled with an HSA.
The FEHBP began to offer CDHPs in 2003 and first offered HDHPs coupled
with HSAs in January 2005.
The Consumer-Directed Health Plan Concept
While insurers and employers offer several variants of CDHPs, these plans
generally include three basic precepts-an insurance plan with a high
deductible, a savings account to pay for services under the deductible,
and enrollee decision support tools.
o An insurance plan with a high deductible. CDHP deductibles are
about $1,900 on average nationwide for individual coverage and
about $3,900 for family coverage, compared to about $320 and $680,
respectively, on average, for a traditional PPO plan.10
o A savings account to pay for services under the deductible.
These savings accounts encompass different models, the most
prominent being health reimbursement arrangements (HRA) and HSAs.
Both HRAs and HSAs are tax advantaged, and funds from these
accounts may be spent on qualified medical expenses-such as the
plan deductible and payments for covered and noncovered
services.11 Funds that are used for qualified medical expenses
that are not covered by the health plan do not count toward
meeting the plan's deductible or out-of-pocket spending limits.
Important distinctions exist between HRAs and HSAs. HRAs are
funded solely by the employer and are generally not portable once
the employee leaves. These funds may accumulate up to any
employer-specified maximums and may only be spent on qualified
medical expenses. Although HRAs are generally coupled with health
plans that include a high deductible, this is not a requirement
for favorable tax treatment.
An HSA is a new type of tax-advantaged savings account that,
unlike HRAs, must be coupled with an HDHP that meets statutorily
defined minimum deductibles and limits on out-of-pocket
expenditures for enrollees. Contributions to an HSA may be made by
both the employer and employee. The HSA account holder essentially
owns the account and can transfer funds from one HSA account to
another. Funds in these accounts may earn interest, are allowed to
roll over from year to year, and may accumulate subject only to
annual limits on contributions. HSA funds may also be withdrawn
for purposes other than qualified medical expenses subject to
regular taxes and an additional tax penalty, and may be used as
retirement income subject to regular taxes.12 Certain individuals
are not eligible for HSAs, including those eligible for Medicare
or covered by another health plan in addition to the HDHP.
o Decision support tools. CDHPs may provide decision support
tools for consumers to help them become actively engaged in making
health care purchase decisions. These tools may provide enrollees
online access to their savings accounts to help them manage their
spending. They may also provide enrollees with information to
assess the quality of health care providers and the prices for
health care services.
While health insurance carriers may provide decision support tools
to all enrollees, these tools may be more important to CDHP
enrollees who have a greater financial incentive to take a more
active role in their health care purchase decisions. To help
enrollees choose a doctor or a hospital, experts suggest they need
data to assess the quality of those providers. Such data may
include the volume of procedures provided; the outcomes of those
procedures, such as mortality and complication rates; as well as
certain process indicators, such as the percentage of cases in
which a provider followed established clinical practice guidelines
for a particular procedure. To help enrollees manage their HSA
account funds and evaluate the price competitiveness of various
providers, some experts believe enrollees need information about
the expected costs of services-such as an average or expected
range of costs for a procedure, or the actual price a provider
will charge based on the payment rates negotiated between the
provider and the health insurance carrier.
Insurance carriers have faced challenges in obtaining or
presenting quality and cost data. For example, experts believe
that it may be difficult for carriers to provide hospital- or
physician-specific quality measures because such measures are not
always readily available, particularly for physicians. They also
believe that certain measures can be difficult for consumers to
interpret, such as outcomes measures, and may not appropriately
account for the poorer patient outcomes that may occur among
providers who tend to treat sicker patients.13 Experts also
believe that insurers have been reluctant to make negotiated
provider payment rates available to consumers due to concerns over
future provider contract negotiations. Therefore, the cost
information insurers are willing to provide is more likely to
reflect average rates or a range of costs within a geographic
region rather than the actual negotiated rates.
Federal employees have a choice of multiple health plans offered
by private health insurance carriers participating in the FEHBP,
with 19 national plans and more than 200 local plans offered in
2005.14 Plans vary in terms of benefit design and premiums.15 In
2004, nearly 75 percent of those covered under the FEHBP were
enrolled in national plans, with the remainder in regional or
local HMOs. Mirroring the private sector, FEHBP carriers began
offering CDHP options in 2003.
The FEHBP offers two types of CDHPs-high-deductible plans coupled
with an HRA or an HSA. The American Postal Workers Union offered
the first HRA-based option under the FEHBP in 2003.16 This was
followed by HRA-based plans offered by Aetna and Humana in 2004.
In 2005, 14 HDHPs coupled with HSAs were first offered.17 As of
March 2005, 3,900 individuals were enrolled in these 14 HDHPs.
Including retirees and family members, about 7,500 individuals
were covered by the plans, with nearly all-about 96 percent-in the
three multistate plans.
All HDHPs offered by the FEHBP must include certain features. OPM
requires that the plans cover preventive health services before
the deductible has been met.18 In addition, because OPM is
prohibited from contracting with plans that deny enrollment based
on age, all must be offered with an HRA alternative of equivalent
value for those who are ineligible for an HSA, such as Medicare
enrollees. All HSAs and HRAs must be managed either by the
insurance carrier or a trustee-such as a bank-which has received
high ratings from a major financial rating service. OPM requires
all HDHP carriers to offer health care decision support tools to
enrollees.19 Finally, all HDHPs offered in the FEHBP must deposit
a monthly contribution to the enrollee's HSA, which is a portion
of the enrollee's premium payment, called the premium pass
through. The premium pass through can be thought of as a required
contribution to an employee's HSA, with the remainder of the
premium going to the insurance carrier to pay for the insurance
coverage.
HDHP enrollees were younger, earned higher federal incomes, were
more likely to be male, and were more likely to have individual
coverage than other FEHBP enrollees. The average age of HDHP
enrollees was similar to that of another new plan, but was 13
years younger than that of all FEHBP enrollees. The share of
actively employed enrollees earning federal incomes of $75,000 or
more was 43 percent for HDHPs, compared to 14 percent for the
other new plan, and 23 percent for all FEHBP plans. About 69
percent of HDHP enrollees were male, compared to 59 percent in
both the other new plan and all FEHBP plans, and about 47 percent
of HDHP enrollees had individual coverage, compared to 35 and 37
percent for the other new plan and all FEHBP enrollees,
respectively.
The average age of HDHP enrollees was younger than all FEHBP plan
enrollees, but was similar to that of enrollees in another new
FEHBP plan. The average age of HDHP enrollees was 46, compared to
47 for the other new plan, and 59 for all FEHBP plans. Differences
were largely due to fewer retirees selecting the HDHPs. Eleven and
18 percent of the HDHP and other new plan enrollees were retirees,
respectively, compared to 45 percent for all FEHBP plan enrollees.
Excluding the retirees, the average age narrowed to 44 for both
the HDHP and other new plan enrollees, and 47 for all FEHBP plan
enrollees. (See table 1.)
Table 1: Average Age of HDHP and Other FEHBP Enrollees
Source: GAO analysis of OPM data.
Notes: The average ages are based on 2005 enrollees in the HDHPs,
and are estimated for the first-year (2002) enrollees of the other
new plan and 2004 enrollees of all FEHBP plans. Dependents are not
included.
The distribution of enrollees by age group similarly illustrates
the relatively younger ages of HDHP enrollees and enrollees of the
other new plan. Relative to all FEHBP enrollees, the HDHP and
other new plan enrollees comprise a larger share of enrollees in
each age group under 55 years and a smaller share of enrollees in
each age group over 64. (See fig. 1.)
Figure 1: Age Distribution of HDHP and Other FEHBP Enrollees
Notes: The age distributions are based on 2005 enrollees in the
HDHPs, the first-year (2002) enrollees of the other new plan, and
2004 enrollees of all FEHBP plans. Retirees are included,
dependents are not.
HDHP enrollees who were actively employed by the federal
government earned higher federal salaries than other active
federal employees in the FEHBP. The share of enrollees earning
federal incomes of $75,000 or more in 2005 was 43 percent for
HDHPs, compared to 14 percent for the other new plan and 23
percent for all FEHBP plans. These differences existed across all
age groups. (See fig. 2.)
Figure 2: Actively Employed FEHBP Enrollees Earning Annual Federal
Salaries of $75,000 or More, 2005
Note: Dependents and retirees are excluded.
Excluding retirees, HDHP enrollees were more likely to be male and
to select individual rather than family plans than were enrollees
in other plans. Sixty-nine percent of HDHP enrollees were male,
compared to 59 percent of enrollees in both the other new plan and
all FEHBP plans. Forty-seven percent of HDHP enrollees selected
individual plans, compared to 35 and 37 percent of enrollees in
the other new plan and all FEHBP plans, respectively. (See table
2.)
Table 2: Gender and Plan Selection for HDHP and Other FEHBP
Enrollees
Source: GAO analysis of OPM data.
Notes: The table is based on 2005 enrollees in the HDHPs, the
first-year (2002) enrollees in the other new plan, and 2004
enrollees in all FEHBP plans. Dependents and retirees are not
included.
HDHPs generally covered the same services as those covered by
their traditional plan counterparts; however, enrollees' financial
responsibilities usually differed. The FEHBP HDHPs had higher
deductibles than their traditional plan counterparts. In addition,
relative to traditional plans, HDHP cost sharing after the
deductible was comparable or lower for preventive services and
prescription drugs. Cost sharing was mixed for physician office
visits and hospital stays-higher than the carriers' traditional
plans in some instances and the same or lower in others. Two of
the HDHPs had higher out-of-pocket spending limits than their
traditional plan counterparts, and in most cases the HDHPs had
lower premiums.
All three multistate HDHPs generally covered the same services as
those covered by their traditional plan counterparts. These plans
covered the same broad categories of services, such as preventive,
diagnostic, maternity, surgical, outpatient, and emergency care,
and all plans typically covered the same services within these
categories. While each HDHP defined preventive services slightly
differently, each plan covered certain core services:
o routine physical exam,
o routine immunizations,
o cholesterol screening,
o colorectal cancer screening,
o routine pap test,
o annual prostate-specific antigen test,
o routine mammogram, and
o well-child care.
These same services were also covered by the traditional plans.
The few instances where covered services differed typically
involved vision, dental, or chiropractic care benefits. For
example, one HDHP did not include glasses or contact lenses in its
vision care coverage, while its counterpart plan did.
While the same services were typically covered by the three
multistate HDHPs and their traditional plan counterparts, the
plans sometimes imposed different restrictions and stipulations on
the coverage of these services. For example, one HDHP allowed more
frequent vision exams, but covered fewer days in skilled nursing
facilities relative to the traditional plan. Another HDHP had no
time restrictions for receiving emergency services following an
accidental injury, while the traditional plan did. In addition,
the HDHP for which the traditional plan counterparts were HMOs
offered coverage for out-of-network providers for nonemergency
care, while the HMOs did not. The other two HDHPs had similar
restrictions as the traditional plans on obtaining coverage from
out-of-network providers.
The three multistate HDHPs often differed from their traditional
plan counterparts in terms of enrollees' financial
responsibilities. All three HDHPs had higher deductibles, ranging
from $1,100 to $2,500 for individual coverage and from $2,200 to
$5,000 for family coverage, compared to $450 to $950 and $900 to
$1,900 in their traditional PPO counterparts, respectively.20 Cost
sharing also differed between HDHPs and the traditional plan
counterparts. All HDHPs offered preventive care cost sharing for
in-network providers that was the same or lower than the
traditional plans. In addition, while all HDHPs covered preventive
services before the deductible, those services were not always
covered before the deductible by the traditional PPO plans. All
HDHPs required that the deductible be met before prescription drug
coverage began, whereas two of the traditional plans covered all
prescription drugs before the deductible was met, and the third
covered only generic drugs before the deductible was met.21 After
the deductible was met, all HDHPs had comparable or lower cost
sharing than the traditional plans for prescription drugs. Cost
sharing for physician office visits for nonpreventive care and for
hospital stays was mixed across plans-higher for the traditional
plan counterparts in some instances, but the same or lower in
others. Finally, two of the HDHPs had higher out-of-pocket
spending limits for in-network providers of $4,000 and $5,000 for
individual coverage and $8,000 and $10,000 for family coverage,
compared to $1,500 and $4,450 and $3,000 and $5,400 for their
traditional counterparts, respectively.
HDHPs more often had lower monthly premiums than their traditional
plan counterparts. One HDHP had lower premiums than both of its
traditional plan counterparts, another plan had lower premiums
than one of its two counterparts, and the third HDHP had lower
premiums than a majority of its 22 traditional plan counterparts.
On average, enrollees' monthly premiums for the three HDHPs were
$91 for individual coverage and $208 for family coverage, compared
to $99 and $243 for their traditional plan counterparts,
respectively. (See table 3.)
Table 3: Key Plan Features of the Multistate HDHPs in the FEHBP
Compared to Their Traditional Plan Counterparts, 2005
Source: GAO analysis of FEHBP plan brochures.
Key: 0M = Yes
0m = No
0L = Mixed
aBased on GAO analysis of the average retail, in-network pharmacy
prices published by two of the HDHP drug pricing tools for 20
generic drugs commonly prescribed to non-Medicare FEHBP enrollees
in 2004.
bBased on GAO analysis of the average retail, in-network pharmacy
prices published by two of the HDHP drug pricing tools for 20
brand-name drugs commonly prescribed to non-Medicare FEHBP
enrollees in 2004.
cBased on GAO analysis of the average charges of 10 nonspecialist
office visit services published by one of the HDHP pricing tools.
dBased on GAO analysis of the average charges of five specialist
office visit services published by one of the HDHP pricing tools.
eBased on the median costs and length of stay for hospital
patients covered by commercial insurers in 2003, published by the
Healthcare Cost & Utilization Project.
fOut-of-pocket spending limit for in-network providers includes
plan deductible and cost sharing for covered services.
Another difference between the HDHPs and their traditional plan
counterparts was the monthly contribution HDHPs made to the
enrollee's HSA-the premium pass through-which was not a feature of
the traditional plans. The average monthly pass through of the
three multistate HDHPs was $82 for individual coverage and $165
for family coverage, representing 93 percent and 81 percent of the
employee's share of the monthly premium on average, respectively.
The annual sum of the monthly contributions represented an average
of 53 percent of the annual deductible across the three plans.
Each HDHP provided online account management tools and access to
health education information on the plan's Web site. However, the
extent to which they also included provider quality and health
care cost data was more limited and varied across the plans.
Moreover, the quality and cost information provided on the HDHP
Web sites was available to both HDHP enrollees as well as to
traditional plan enrollees.
Each of the three multistate FEHBP HDHP Web sites provided online
access to account management tools and health education
information. The plans allowed enrollees to view their progress
toward meeting their deductibles and track their HSA balances
online. They also provided online access to certain health
education information, including information on general preventive
care, common medical procedures and conditions, various treatment
options for certain conditions, information concerning
prescription drug alternatives, and a disease management
program.22 Two plans also provided a health risk assessment tool,
and one offered access to a health advice line.23
The HDHPs provided varying degrees of provider quality data. Two
of the three plans provided data on their Web sites for several
measures to assess hospital quality, including outcomes data,
procedure volumes, and patient safety ratings, and the other plan
provided links to Web sites that contained this type of
information. None of the plans provided similar process or outcome
measures to assess individual physician quality, although one plan
provided information on physicians' medical board certifications.
Each of the plans provided certain general information about the
physicians in the plan networks, such as their hospital
affiliations, languages spoken, and gender.24
Cost information provided by the three multistate plans was
limited. One of the plans provided average hospital cost estimates
and two provided average physician cost estimates for a limited
number of services. For example, one plan provided average cost
estimates within certain geographic regions based on its own
claims data for certain physician services, such as diagnostic
tests and surgical procedures. It also provided estimated total
annual costs to treat certain conditions, such as diabetes and
heart disease. None of the plans provided the actual payment rates
that would be charged to enrollees that the plan had negotiated
with specific hospitals or physicians.25 Two of the three plans
provided access to average retail prescription drug prices and
estimates of out-of-pocket costs for drugs, and all three plans
provided actual prices for drugs purchased through the mail-order
pharmacy services offered by the plans. None of the plans provided
the actual payment rate the plan had negotiated with particular
retail pharmacies. (See table 4.)
Table 4: Information Available through Online Decision Support
Tools of the Three Multistate HDHPs, 2005
Source: GAO analysis of HDHP decision support tools.
Key: 0M = information provided
0m = information not provided
aA disease management program is a voluntary program offered by
health plans for those with certain high-risk conditions, such as
diabetes, asthma, and congestive heart failure. Patients generally
have access to a case manager who coordinates physician care and
educational materials to help them learn how to effectively manage
their disease and improve their quality of life.
bA health risk assessment generally includes a questionnaire about
health-related behaviors and risk factors that generates a report
that provides guidelines on ways to reduce the risk of disease.
cThe plan offers on-call clinicians to answer health-related
questions and provide medical advice.
dProcess data indicate whether providers follow certain guidelines
for care, such as the share of patients for whom recommended
treatment guidelines were followed.
eOutcomes data are collected by hospitals and physicians to track
patient outcomes following a treatment or procedure, such as
mortality rates, complication rates, and average length of
hospital stay.
fPatient safety ratings include data on compliance with safety
practices such as meeting certain staff-to-patient ratios.
gThe plan Web site did not specify a link to physician-specific
quality data, although it did provide a link to the American
Medical Association Web site, through which a physician's board
certifications may be identified.
hAverage payment rates were available for a limited list of
services.
iOne carrier had initiated a pilot project to provide
physician-specific actual negotiated rates for physicians in one
regional market for a limited list of procedures.
jEstimates included enrollees' costs after the deductible was met.
kNo out-of-pocket estimates were provided for retail drugs.
Mail-order drug pricing information was restricted to members, so
specific information provided could not be assessed.
The quality and cost information provided on each plan's Web site
was made available to the enrollees of both HDHP and traditional
plans. In some instances, information was tailored to the specific
plan in which an individual was enrolled. For example, one plan's
out-of-pocket cost estimates for prescription drugs took into
account plan-specific coverage and cost-sharing features.
Like many large employers, the FEHBP has expanded enrollee health
plan choices by offering HDHPs combined with HSAs. While
first-year enrollment is modest, the number of carriers offering
these products in 2005 and expected to offer them in 2006
indicates that OPM and health insurance carriers anticipate
continued interest in these new plans.
Although the first-year enrollment in FEHBP HDHPs may not predict
future trends, it does raise the possibility that individuals with
certain demographic characteristics may be disproportionately
attracted to these plans. For example, first-year HDHP enrollees
had consistently higher incomes across all age groups than
enrollees of another new plan and all FEHBP enrollees. This may
suggest that aspects of HDHPs-such as the greater financial
exposure coupled with the potential for tax-advantaged
savings-uniquely attract higher-income individuals with the means
to pay higher deductibles and the desire to accrue tax-free
savings. First-year enrollees were also younger on average than
all FEHBP enrollees; however, they were not younger than enrollees
in another new plan. Thus it is not clear whether younger
individuals were uniquely attracted to HDHPs, or if younger
enrollees are typical of recently introduced health plans in
general. Additional years of enrollment data will be necessary to
determine whether characteristics of first-year enrollees are
predictive of future trends; to identify other important
characteristics of HDHP enrollees, such as their health status;
and to assess the implications of these enrollment trends for the
FEHBP.
HDHPs, like other CDHPs, are premised on the notion that enrollees
will become more actively involved in making health care purchase
decisions than enrollees of traditional health plans. To do so,
enrollees need information to help them assess the cost and
quality trade-offs between different health care treatments and
providers. However, the extent to which FEHBP HDHPs made such
information available to enrollees was varied and limited, and
HDHP enrollees were not provided any more or different information
than was provided to traditional plan enrollees. Most notably
lacking was specific information to assess the quality of health
care provided by particular physicians and the actual prices plans
had negotiated with particular providers. Some of this information
may become available in the future. Two of the three largest HDHPs
were developing physician-specific patient satisfaction ratings to
help enrollees assess physician quality, and one had initiated a
pilot project to provide enrollees with the actual, negotiated
prices they would pay for certain services performed by a
particular provider. Until such provider-specific quality and cost
data become more widely available, the CDHP goal of having
enrollees make health care purchase decisions based on an informed
assessment of the quality/cost trade-offs may not be fully
realized.
We received comments on a draft of this report from OPM (see app.
I). OPM expressed interest in our findings on the differences in
characteristics of first-year HDHP enrollees compared to
traditional FEHBP plan enrollees, and said that it would monitor
enrollment trends over time to assess whether certain
individuals-such as younger or healthier
individuals-disproportionately enroll in HDHPs. OPM also said that
it would continue to encourage plans to expand the decision
support information they provide to enrollees, including the
pricing of health care services.
As agreed with your offices, unless you publicly announce the
contents of this report earlier, we plan no further distribution
of it until 30 days after its issue date. At that time, we will
send copies to the Director of OPM and other interested parties.
We will also make copies available to others upon request. This
report is also available at no charge on GAO's Web site at
http://www.gao.gov .
If you or your staffs have any questions about this report, please
contact me at (202) 512-7119 or at [email protected] . Contact
points for our Offices of Congressional Relations and Public
Affairs may be found on the last page of this report. Randy
DiRosa, Assistant Director; Gerardine Brennan; and Laura Brogan
made major contributions to this report.
John E. Dicken Director, Health Care
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8Two plans were in the process of developing physician-specific patient
satisfaction ratings.
9One plan has begun a pilot project to publish physician-specific
negotiated rates for certain services in one market.
10The Henry J. Kaiser Family foundation and Health Research and Education
Trust, Employer Health Benefits: 2005 Summary Findings (Menlo Park,
Calif.: 2005). This publication reports the results of a national survey
of both public and private employers.
11Both HRAs and HSAs were offered as tax-advantaged ways for employees to
pay for unreimbursed medical expenses. The Department of the Treasury
affirmed in 2002 the exclusion from taxable gross income of employer
contributions to employee HRAs (I.R.S. Rev. Rul. 02-41; I.R.S. Notice
02-45 (June 26, 2002)). Itemized tax deductions for individual
contributions to HSAs were authorized beginning in tax year 2004 by the
Medicare Prescription Drug, Improvement, and Modernization Act of 2003,
Pub. L. No. 108-173, S:1201, 117 Stat. 2066, 2469.
12Use of these funds as retirement income is restricted to account holders
who are eligible for Medicare.
13Outcomes measures are routinely adjusted for the risks associated with
each case. However, both providers and researchers have expressed concern
over the adequacy of risk-adjustment processes currently in use.
FEHBP and Consumer-Directed Health Plans
14Six of the 19 national plans were available only to certain groups of
federal employees, such as Federal Bureau of Investigation employees.
15All premiums include both employer and employee shares. Across the
FEHBP, the employee's share of the monthly premium averages about 28
percent of the total monthly premium paid to carriers.
16See GAO-06-143 .
17OPM has announced that all 14 of these HDHPs will continue to be offered
in 2006 along with 7 additional HDHPs.
18OPM does not specify the preventive health services to be covered.
FEHBP HDHP Enrollees Were Generally Younger and Earned Higher Federal Salaries
Than Other FEHBP Enrollees
HDHP Enrollees Were Younger and Included Fewer Retirees Than Enrollees in All
FEHBP Plans
19OPM did not specify the type of information that should be provided in
the decision support tools.
HDHP plans Other new plan All FEHBP plans
All enrollees 46 47 59
Excluding retirees 44 44 47
HDHP Enrollees Had Higher Federal Salaries and Were More Likely to Select
Individual Plans Than Other FEHBP Enrollees
HDHP plans Other new plan All FEHBP plans
Percentage male 69 59 59
Percentage enrolled in 47 35 37
individual plans
FEHBP HDHPs Generally Covered the Same Services as Traditional Plans, but
Enrollees' Financial Responsibilities Usually Differed
FEHBP HDHPs Generally Covered the Same Services as Traditional Plans
Enrollees' Financial Responsibilities Usually Differed between FEHBP HDHPs and
Traditional Plans
20For the HDHP for which the traditional plan counterparts were HMOs,
there was no deductible for comparison purposes.
21One traditional plan had a separate deductible for prescription drugs.
Compared to its traditional plans, the HDHP's HDHP 1 HDHP 2 HDHP 3
Preventive care cost sharing (in-network) was the 0M 0M 0M
same or lower
Generic drugs cost sharing was comparable or lower 0M 0M 0M
after meeting the deductiblea
Brand-name drugs cost sharing was comparable or lower 0M 0M 0M
after meeting the deductibleb
Primary care physician office visit cost sharing 0M 0L 0M
(in-network) was the same or lowerc
Specialist office visit cost sharing (in-network) was 0M 0L 0M
the same or lowerd
Hospital stay cost sharing (in-network) was the same 0m 0L 0M
or lowere
Out-of-pocket spending limits for in-network 0m 0m 0M
providers were the same or lowerf
Enrollee premiums were lower 0L 0L 0M
FEHBP HDHPs Provided Online Access to Decision Support Tools, but Did Not Always
Include Health Care Quality and Cost Information
FEHBP HDHPs Provided Access to Online Account Management Tools and Health
Education Information
The Extent to Which FEHBP HDHPs Provided Online Access to Provider-Specific
Quality and Cost Information Varied
22A disease management program is a voluntary program offered by health
plans for those with certain high-risk conditions, such as diabetes,
asthma, congestive heart failure, and coronary artery disease. Patients
generally have access to a case manager who coordinates physician care and
educational materials to help them learn how to effectively manage their
disease and improve their quality of life.
23A health risk assessment generally includes a questionnaire about
health-related behaviors and risk factors that generates a report that
provides guidelines on ways to reduce the risk of disease. A health advice
line is an on-call clinician who can answer health-related questions and
provide medical advice.
24Experts we interviewed believed that physician-specific quality
information, such as process and outcomes data or patient satisfaction
ratings, were generally not available to health plans. Physician-specific
patient satisfaction ratings were being developed for the online tools
provided by two of the three plans.
25One plan had begun a pilot project to publish physician-specific
negotiated rates for certain services in one market.
HDHP 1 HDHP 2 HDHP 3
Member account access
Progress toward deductible 0M 0M 0M
HSA account balance 0M 0M 0M
Health education information
General preventive care 0M 0M 0M
Common medical procedures and conditions 0M 0M 0M
Treatment options for certain conditions 0M 0M 0M
Disease management programa 0M 0M 0M
Health risk assessment toolb 0M 0m 0M
Health advice linec 0M 0m 0m
Hospital-specific quality data
Process indicatorsd 0M 0m 0M
Outcomes datae 0M 0m 0M
Procedure volumes 0M 0m 0M
Patient safety ratingsf 0M 0m 0M
Patient satisfaction ratings 0m 0m 0m
Links to other Web sites that contain hospital 0m 0M 0m
quality data
Physician-specific quality data
Board certifications 0M 0m 0m
Process indicatorsd 0m 0m 0m
Outcomes datae 0m 0m 0m
Patient volumes 0m 0m 0m
Patient satisfaction ratings 0m 0m 0m
Links to other Web sites that contain physician 0m 0mg 0m
quality data
General physician-specific information
Medical education information (e.g., school, year of 0M 0m 0m
graduation)
Hospital affiliations 0M 0M 0M
Personal characteristics (e.g., language, gender) 0M 0m 0M
Provider cost information on plan Web site
Actual negotiated, hospital-specific payment rates 0m 0m 0m
Average hospital payment ratesh 0M 0m 0m
Actual negotiated, physician-specific payment ratesi 0m 0m 0m
Average physician payment ratesh 0M 0m 0M
Actual pharmacy-specific prescription drug prices 0m 0m 0m
Average retail prescription drug prices 0M 0M 0m
Actual mail-order pharmacy prices 0M 0M 0M
Estimated out-of-pocket prescription drug costsj 0M 0M k
Concluding Observations
Agency Comments
APersonne Appendix I: Comments from the Office of Personnel Management
(290483)
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Highlights of GAO-06-271 , a report to congressional requesters
January 2006
FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM
First-Year Experience with High-Deductible Health Plans and Health Savings
Accounts
The Federal Employees Health Benefits Program (FEHBP) recently began
offering high-deductible health plans (HDHP) coupled with tax-advantaged
health savings accounts (HSA) that enrollees use to pay for health care.
Unused HSA balances may accumulate for future use, providing enrollees an
incentive to purchase health care prudently. The plans also provide
decision support tools to help enrollees make purchase decisions,
including health care quality and cost information. Concerns have been
expressed that HDHPs coupled with HSAs may attract younger, healthier, or
wealthier enrollees, leaving older, less healthy enrollees to drive up
costs in traditional plans. Because the plans are new, there is also
interest in the plan features and the decision support tools they provide
to enrollees.
GAO was asked to evaluate the experience of the 14 HDHPs coupled with an
HSA that were first offered under the FEHBP in January 2005. GAO compared
the characteristics of enrollees in the 14 HDHPs to those of enrollees in
another recently introduced (new) plan without a high deductible and to
all FEHBP plans. GAO also compared characteristics of the three largest
HDHPs to traditional FEHBP plans offered by the same insurance carriers,
and summarized the information contained in the decision support tools
made available to enrollees by these three plans.
FEHBP HDHP enrollees were younger and earned higher federal salaries than
other FEHBP enrollees. The average age of HDHP enrollees (46) was similar
to that of the other new plan (47) and younger than that of all FEHBP
enrollees (59). These differences were largely due to a smaller share of
retirees enrolling in the HDHPs and the other new plan. HDHP enrollees
earned higher federal salaries compared to other enrollees. Forty-three
percent of HDHP enrollees actively employed by the federal government
earned federal salaries of $75,000 or more, compared to 14 percent in the
other new plan and 23 percent among all FEHBP plans. In addition,
nonretired HDHP enrollees were more likely to be male and to select
individual rather than family plans.
The three largest FEHBP HDHPs generally covered the same range of
services-including preventive services-as their traditional plan
counterparts; however, enrollees' financial responsibilities usually
differed. Compared to the traditional plans, the HDHPs had higher
deductibles. HDHP cost sharing was the same or lower for preventive
services and prescription drugs, and all plans covered preventive services
before the deductible. Prescription drugs in the HDHPs were subject to the
deductible, while they were generally exempt from the deductible in the
traditional plans. HDHP cost sharing varied with respect to nonpreventive
physician office visits and inpatient hospital stays. Two of the three
HDHPs had higher out-of-pocket spending limits, and HDHP premiums were
lower on average than the traditional plans.
The extent to which the three largest FEHBP HDHPs made available provider
quality and health care cost information was limited and varied. Two of
the three plans provided several hospital-specific measures of quality on
their Web sites, including the volumes of procedures provided by the
hospitals and the outcomes of those procedures, and the other plan
provided links to other Web sites containing such information. Regarding
physician-specific quality data, one plan provided a single measure. One
of the plans provided average hospital cost estimates and two provided
average physician cost estimates for selected services, but none provided
the actual rates an enrollee would pay that the plan had negotiated with
providers. Regarding prescription drugs, two of the three plans provided
the average retail pharmacy drug costs, but none provided the actual
negotiated rates an individual would pay at a particular retail pharmacy.
In commenting on a draft of this report, the Office of Personnel
Management (OPM) said that it would monitor enrollment trends over time to
assess whether certain individuals-such as younger or healthier
individuals-disproportionately enroll in HDHPs. OPM also said it would
continue to encourage plans to expand the decision support information
they provide to enrollees, including the pricing of health care services.
*** End of document. ***