Although evidence is limited, early indications are that consumerdirected plans are having a moderating effect on costs and cost increases.by Melinda Beeuwkes Buntin, Cheryl Damberg, Amelia Haviland, Kanika Kapur, Nicole Lurie, Roland McDevitt, and M. Susan Marquis ABSTRACT: Demand for consumer-directed health care (CDHC) is growing among purchasers of care, and early evidence about its effects is beginning to emerge. Studies to date are consistent with effects predicted by earlier literature: There is evidence of modest favorable health selection and early reports that consumer-directed plans are associated with both lower costs and lower cost increases. The early effects of CDHC on quality are mixed, with evidence of both appropriate and inappropriate changes in care use. Greater information about prices, quality, and treatment choices will be critical if CDHC is to achieve its goals. Co n s u m e r-d i r e c t e d h e a lt h c a r e (CDHC) has emerged in recent years as one of the most potent ideas in health care reform. In the eyes of its champions, health care costs are high and quality is low because our current system of insurance fails to provide consumers with incentives to use care wisely and shop for high-value services. CDHC advocates argue that giving consumers incentives to be prudent managers of their own health and health care will engage market forces in controlling costs and improving quality and outcomes.A number of policy changes have already been implemented to facilitate a shift toward CDHC. Legislation enacted in 2003 paved the way for tax-free health savings accounts (HSAs) to be paired with high-deductible insurance policies, an arrangement intended to make consumers cost-sensitive without subjecting them to the financial risk of a catastrophic illness.w 5 1 6 2 4 O c t o b e r 2 0 0 6 C o n s u m e r -D i r e c t e d C a r1 The Bush administration has proposed making premiums tax-deductible for individuals purchasing HSA plans to bolster the nongroup market for consumer-directed policies and to expand coverage. Further, some policy experts have called for making all health spending taxdeductible, to reduce incentives to elect traditional employer-provided health insurance with generous up-front coverage.2 In addition, advocates of CDHC are seeking to apply its principles to Medicare and Medicaid beneficiaries with chronic diseases. 3Demand for CDHC is growing, and early evidence about its effects is beginning to emerge. In this paper we first examine recent trends in CDHC enrollment and then review the literature about the potential threat posed by adverse selection between consumer-directed and comprehensive plans. We also review the literature on CDHC's effects on health care use, costs, and quality. Finally, we present supplementary data on the role of information under consumer-directed plan designs. We conclude with recommendations for policy and future research.

This paper reports national and state findings on the generosity or actuarial value of U.S. employer-based plans and adjusted premiums in 2002. The basis for our calculations is simulated bill paying for a large standardized population. After adjusting for the quality of benefits, we find from regression analysis that adjusted premiums are 18 percent higher in the nation's smallest firms than in firms with 1,000 or more workers. They are 25 percent higher in indemnity plans and 18 percent higher in preferred provider organizations than in health maintenance organizations. The generosity of coverage increased from 1997 to 2002.

The Affordable Care Act creates state-based health exchanges that will begin acting as a market place for health insurance plans and consumers in 2014. This paper compares the financial protection offered by today's group and individual plans with the standards that will apply to insurance sold in state-based exchanges. Some states may apply these standards to all health insurance sold within the state. More than half of Americans who had individual insurance in 2010 were enrolled in plans that would not qualify as providing essential coverage under the rules of the exchanges in 2014. These people were enrolled in plans with an actuarial value below 60 percent, which means that the plans covered less than that proportion of the enrollees' health expenses. Many of today's individual health plans are below the "bronze" level, the lowest level of plan that can be sold through exchanges. In contrast, most group plans in 2010 had an actuarial benefit of 80-89 percent and would qualify as highly rated "gold" plans in the exchanges. To sell to ten million new buyers on the exchanges, insurers will need to redesign benefit packages. Combined with a ban on medical underwriting, the individual insurance market in a post-health reform world will sharply contrast with the market of past decades.

We use health care claims data from 59 large employers to estimate how consumer-directed health plans (CDHPs)—plans that combine a high deductible with personal accounts—affect health care costs and the use of preventive services by vulnerable populations. The vulnerable populations studied are those that will have increased access to health insurance under health care reform: families with high health care needs and low income families. A difference-in-difference framework is used with costs and use available for a full year before and after enrolling in a CDHP and for controls. Our key finding is that in almost all cases, CDHP benefit designs affect lower income populations and the chronically ill to the same extent as non-vulnerable populations. These effects include significant reductions in overall spending that increase with the level of the deductible and greater reductions for high deductible plans when paired with health savings accounts (HSAs) in comparison to health reimbursement arrangements (HRAs). However, enrollment in CDHPs also leads to reductions in care that is considered beneficial for all groups, and this may have greater health consequences for lower income and chronically ill people than for others.