Risk selection into consumer-directed health plans: an analysis of family choices within large employers

To identify the degree of selection into consumer-directed health plans (CDHPs) versus traditional plans over time, and factors that influence choice and temper risk selection.

Sixteen large employers offering both CDHP and traditional plans during the 2004–2007 period, more than 200,000 families.

We model CDHP choice with logistic regression; predictors include risk scores, in addition to family, choice setting, and plan characteristics. Additional models stratify by account type or single enrollee versus family.

Risk scores, family characteristics, and enrollment decisions are derived from medical claims and enrollment files. Interviews with human resources executives provide additional data.

CDHP risk scores were 74 percent of traditional plan scores in the first year, and this difference declined over time. Employer contributions to accounts and employee premium savings fostered CDHP enrollment and reduced risk selection. Having to make an active choice of plan increased CDHP enrollment but also increased risk selection. Risk selection was greater for singles than families and did not differ between HRA and HSA-based CDHPs.

Risk selection was not severe and it was well managed. Employers have effective methods to encourage CDHP enrollment and temper selection against traditional plans.