HOW EMPLOYEE EARNINGS ARE ASSOCIATED WITH CDHP PLAN CHOICE by David William Jordan

Health Reimbursement Accounts (HRA) and Health Savings Account (HSA) eligible High Deductible Health Plans (HDHP)s emerged as new health care insurance models referred to as Consumer Directed Health Plans (CDHPs) in the early 2000s. The purpose of this study is to examine the association between enrollees’ level of earnings and plan choice when a Managed Care PPO, HRA, and HSA eligible HDHP are offered concurrently in an ESI program. It is important to examine new health insurance structures, such as CDHPs, to better understand their impact on why enrollees’ choose one health plan over another. Factors that determine enrollees’ plan choice can influence the distribution of socio-economic, health risk, and behavioral characteristics across plans. These factors in turn can affect the financial costs, risk pools, and long-term solvency of such plans. Furthermore, an employer’s ability to structure a benefits plan that accommodates the satisfaction, well-being, retention of present employees and ability to attract qualified future employees is key to their long term viability. Findings suggest enrollees select a plan that minimizes their future financial exposure based on past ESI experiences and the association between CDHP choice and enrollee earnings may not have a simple linear relationship as suggested by prior research. List of Abbreviations CDHC = Consumer Directed Health Care CDHP = Consumer Directed Health Plan ESI = Employer Sponsored Insurance (group health plan(s) offered to employees by their employer) HDHP = High Deductible Health Plan (plan associated with CDHPs) HRA = Health Reimbursement Account (type of CDHP with employer funded Personal Care Account) HSA = Health Savings Account (type of Personal Care Account associated with CDHPs) FSA = Flexible Spending Account (pre-tax savings account for out of pocket medical costs)