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entitled 'Federal Employees Health Benefits Program: Early Experience 
with a Consumer-Directed Health Plan' which was released on December 
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Report to the Ranking Minority Member, Committee on Finance, U.S. 
Senate: 

United States Government Accountability Office: 

GAO: 

November 2005: 

Federal Employees Health Benefits Program: 

Early Experience with a Consumer-Directed Health Plan: 

GAO-06-143: 

GAO Highlights: 

Highlights of GAO-06-143, a report to the Ranking Minority Member, 
Committee on Finance, U.S. Senate: 

Why GAO Did This Study: 

Since 2003, the Federal Employees Health Benefits Program (FEHBP) has 
offered “consumer-directed” health plans (CDHP) to federal employees. A 
CDHP is a high-deductible health plan coupled with a savings account 
enrollees use to pay for health care. Unused balances may accumulate 
for future use, providing enrollees the incentive to purchase health 
care prudently. However, some have expressed concern that CDHPs may 
attract younger and healthier enrollees, leaving older, less healthy 
enrollees to drive up costs in traditional plans. They also question 
whether enrollees are satisfied with the plans, and have sufficient 
access to health care providers and discounts on health care services. 

GAO was asked to study the first FEHBP CDHP, offered by the American 
Postal Workers Union (APWU). GAO compared the number, characteristics, 
and satisfaction of APWU enrollees to those of FEHBP enrollees in other 
recently introduced (new) non-CDHP plans, and national preferred 
provider organization (PPO) plans. GAO also compared the APWU CDHP 
provider networks and discounts to those of other FEHBP plans. 

What GAO Found: 

The APWU CDHP is a small but growing FEHBP health plan whose enrollees 
were younger than PPO plan enrollees, and healthier and better educated 
than other new plan and PPO enrollees. The average age of APWU CDHP and 
other new plan enrollees was the same (47 years), but younger than that 
of PPO plan enrollees (62 years), largely because fewer retirees and 
elderly people selected the new plans. Excluding retirees and the 
elderly, the average age of enrollees was more similar across the 
plans. A larger share of nonelderly enrollees in the APWU CDHP reported 
being in “excellent” or “very good” health status compared to the other 
new plan and PPO plan enrollees—73 percent versus 64 and 58 percent, 
respectively. Similarly, a larger share of nonelderly enrollees in the 
APWU CDHP reported having a 4-year or higher college degree compared to 
enrollees in the other new plans and PPO plans—49 percent versus 42 and 
36 percent, respectively. 

Enrollee satisfaction with the APWU CDHP was mixed compared to enrollee 
satisfaction with the other FEHBP plans. For overall plan performance, 
APWU enrollees were more satisfied than other new plan enrollees, but 
less satisfied than PPO plan enrollees. For four of five specific 
quality measures—access to health care, timeliness of health care, 
provider communication, and claims processing—APWU enrollees were as 
satisfied as other enrollees. On the fifth measure, customer service, 
APWU enrollees were more satisfied than other new plan enrollees, but 
less satisfied than PPO plan enrollees. In particular, a lower share of 
APWU enrollees were satisfied with their ability to find or understand 
written or online plan information, the help provided by customer 
service, and the amount of paperwork required by the plan. 

The APWU CDHP provider networks and discounts were comparable to other 
FEHBP PPO plans. In 21 states, the APWU CDHP used the same networks 
used by other national PPO plans. In the remaining states, the APWU 
CDHP networks were among the most commonly used networks nationwide, or 
were large, nationally accredited, or comparable in size to networks 
used by other FEHBP plans. Across all states the average hospital 
inpatient and physician discounts obtained by the APWU CDHP were within 
2 percentage points of the discounts obtained by another large national 
FEHBP PPO plan. 

GAO received comments on a draft of this report from the Office of 
Personnel Management (OPM) and APWU. Both generally concurred with our 
findings. Regarding the potential for CDHPs to disproportionately 
attract healthier enrollees, OPM said it would continue to monitor the 
enrollment trends and take appropriate action to eliminate or minimize 
any adverse effects. 

www.gao.gov/cgi-bin/getrpt?GAO-06-143. 

To view the full product, including the scope and methodology, click on 
the link above. For more information, contact John Dicken at (202) 512-
7119 dickenj@gao.gov. 

[End of section] 

Contents: 

Letter: 

Results in Brief: 

Background: 

APWU CDHP Enrollees Were Generally Younger, Healthier, Better Educated, 
and More Likely to Select an Individual Plan Than Other FEHBP 
Enrollees: 

APWU CDHP Enrollee Satisfaction Was Mixed Compared to Other FEHBP Plan 
Enrollees: 

APWU CDHP Enrollee Access to Provider Networks and Discounts Was 
Generally Comparable to Other FEHBP Plans: 

Agency Comments and Comments from APWU: 

Appendix I: Comments from the Office of Personnel Management: 

Tables: 

Table 1: Average FEHBP Enrollee Age: 

Table 2: Self-Reported Health Status and Education of FEHBP Enrollees: 

Table 3: Characteristics of APWU CDHP Provider Networks: 

Figures: 

Figure 1: Age of APWU CDHP and Other FEHBP Enrollees: 

Figure 2: FEHBP Enrollee Satisfaction with Overall Plan Performance: 

Figure 3: FEHBP Enrollee Satisfaction with Five Specific Performance 
Measures: 

Figure 4: FEHBP Enrollee Satisfaction with Components of Customer 
Service Quality: 

Abbreviations: 

APWU: American Postal Workers Union: 
CDHP: consumer-directed health plan: 
FEHBP: Federal Employees Health Benefits Program: 
HMO: health maintenance organization: 
HRA: health reimbursement arrangement: 
HSA: health savings account: 
NCQA: National Committee for Quality Assurance: 
OPM: Office of Personnel Management: 
PPO: preferred provider organization: 

United States Government Accountability Office: 

Washington, DC 20548: 

November 21, 2005: 

The Honorable Max Baucus: 
Ranking Minority Member: 
Committee on Finance: 
United States Senate: 

Dear Senator Baucus: 

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 "consumer-directed" health plans (CDHPs). A CDHP is a 
high-deductible health plan coupled with a savings or reimbursement 
account that enrollees use to pay for a portion of their health care 
expenses.[Footnote 1] The high deductibles typically result in lower 
premiums than for a traditional plan with similar benefits, because the 
enrollee bears a greater share of the initial costs of care. CDHPs may 
also provide enrollees decision-support tools to help them become more 
actively involved in making health care purchase decisions--such as 
information about the cost of health care services and the quality of 
health care providers, and online access to the savings account to 
enable them to track their expenses and progress toward meeting their 
deductibles. 

Views are mixed about the potential benefits and risks associated with 
CDHPs. Proponents believe the plans can help restrain health care 
spending. Enrollees have an incentive to seek lower-cost health care 
services, and only obtain services when necessary because unspent 
account funds can accrue from year to year within defined limits. They 
also suggest that the lower premiums make the health plans more 
affordable. Others, however, express concern that CDHPs may 
disproportionately attract younger, healthier, or wealthier enrollees 
who are less likely to use health care or who can better afford to pay 
the higher deductibles. 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 CDHPs are a relatively new 
concept in health plan design, there is also interest in determining 
whether enrollees are satisfied with the quality of services provided 
and whether the plans provide enrollees with the same access to health 
care providers and negotiated discounts on provider charges as do 
traditional plans. 

In light of the recent introduction of CDHPs as a health coverage 
option, you asked us to evaluate the early experience of the first CDHP 
offered under the FEHBP by the American Postal Workers Union (APWU) in 
2003. We examined: (1) the number and characteristics of enrollees in 
the APWU CDHP compared to other FEHBP plans, (2) enrollee satisfaction 
with the APWU CDHP compared to other FEHBP plans, and (3) provider 
networks and discounts under the APWU CDHP compared to other FEHBP 
plans. 

To identify characteristics of APWU CDHP enrollees, we analyzed data 
provided by APWU CDHP and the Office of Personnel Management (OPM), the 
federal agency responsible for administering the FEHBP.[Footnote 2] To 
determine age, gender, and family status, we analyzed enrollment data 
for the plan years 2003 through 2005. To determine health status and 
education, we analyzed enrollee survey data that were available for 
plan years 2003 and 2004.[Footnote 3] To determine how the identified 
characteristics of enrollees in the APWU CDHP compared to enrollees in 
other FEHBP plans, we compared the characteristics to those of two 
groups of enrollees. First, we compared the characteristics to those of 
enrollees in all national PPO plans combined.[Footnote 4] These 19 
plans include approximately 75 percent of all federal employees covered 
through the FEHBP. Second, because characteristics of APWU CDHP 
enrollees may differ from the typical FEHBP enrollee primarily because 
the plan was recently introduced, we compared the APWU CDHP enrollee 
characteristics to those of two FEHBP plans that had similarly been 
introduced within the past 5 years[Footnote 5]. To control for the 
effects of a disproportionately small share of retirees and the elderly 
in the APWU CDHP plan, we excluded from the analysis retirees and those 
aged 65 or older, or both, when comparing other enrollee demographic 
characteristics between the plans. 

To assess enrollee satisfaction, we reviewed enrollee survey data 
obtained from APWU and OPM for the APWU CDHP and the other FEHBP plans 
for the plan years 2003 and 2004. These surveys use a standardized 
instrument to measure enrollee satisfaction along several plan quality 
measures, such as access to health care, claims processing, customer 
service, and overall plan performance. We also examined the volume and 
nature of appeals regarding claim disputes filed with OPM by APWU CDHP 
enrollees and other plan enrollees for plan years 2003 and 
2004.[Footnote 6] 

To determine how the APWU CDHP provider networks compare to those used 
by other FEHBP plans, we examined aspects of the APWU CDHP networks 
used in each state and the District of Columbia (hereafter referred to 
as a state), and compared them to the networks used by other national 
FEHBP plans. We identified the states in which the networks were the 
same, and for the remaining states, identified other characteristics of 
the networks used, such as their size and accreditation 
status.[Footnote 7] We also compared the average hospital and physician 
discounts in each state between the APWU CDHP and another large, 
national PPO plan.[Footnote 8] We had several discussions with APWU 
CDHP, its plan administrator, Definity Health Plan, and OPM to clarify 
our understanding of the data and materials. 

We did not independently verify the data provided by APWU CDHP and OPM; 
however, we performed certain quality checks, such as determining 
consistency where similar data were provided by both sources. We also 
evaluated information from APWU CDHP and OPM concerning how the data 
are collected, stored, and maintained, and determined that the data 
were adequate for this report. We conducted our work according to 
generally accepted government auditing procedures from November 2004 to 
November 2005. 

Results in Brief: 

The APWU CDHP is a small but fast-growing FEHBP health plan whose 
enrollees were on average younger than national PPO plan enrollees, and 
healthier, better educated, and more likely to select individual rather 
than family plans than enrollees in other new plans and the national 
PPO plans. Enrollment in the APWU CDHP more than doubled, from 4,500 at 
its introduction in 2003, to over 9,500 in 2005. Including dependents, 
total covered lives increased from an estimated 10,000 to 21,000 during 
the same period. Over half of these enrollees migrated from existing 
national PPO plans, and about a quarter from existing HMO plans 
participating in the FEHBP. The average age of APWU CDHP enrollees was 
the same as enrollees in other new plans--47 years--but younger than 
national PPO plan enrollees by about 15 years. This age difference was 
largely due to a smaller share of retirees and elderly people enrolled 
in the APWU CDHP and other new plans--less than 20 percent--compared to 
the national PPO plans--over 50 percent. Excluding retirees and the 
elderly, the average age of enrollees was more similar across the APWU 
CDHP, the other new plans, and the national PPO plans--45, 43, and 47, 
respectively--although other notable differences in enrollee 
characteristics existed. A larger share of nonelderly enrollees 
reported being in "excellent" or "very good" health status in the APWU 
CDHP compared to enrollees in the other new plans and the national PPO 
plans--73 percent versus 64 and 58 percent, respectively. Similarly, a 
larger share of nonelderly enrollees in the APWU CDHP reported having a 
4-year or higher college degree compared to enrollees in other new 
plans and the national PPO plans--49 percent versus 42 and 36 percent, 
respectively. Finally, excluding retirees and the elderly, fewer APWU 
CDHP enrollees selected family plans as compared to enrollees in other 
new plans and the national PPO plans--55 percent, versus 66 and 65 
percent, respectively. 

Enrollee satisfaction with the APWU CDHP was mixed compared to enrollee 
satisfaction with other FEHBP plans. For the measure of overall plan 
performance, APWU CDHP enrollees were more satisfied than other new 
plan enrollees, but less satisfied than national PPO plan enrollees. 
For four of five specific plan performance measures--access to health 
care, timeliness of health care, provider communication, and claims 
processing--APWU CDHP enrollees were generally as satisfied as other 
enrollees. With regard to the fifth measure--customer service--APWU 
CDHP enrollees were more satisfied than other new plan enrollees, but 
less satisfied than national PPO plan enrollees. Relating to customer 
service, a smaller proportion of APWU CDHP enrollees reported being 
satisfied with their ability to find or understand written or online 
plan information, with the help provided by customer service, and with 
the amount of paperwork required by the plan, compared to national PPO 
plan enrollees. Further evidence of enrollee difficulty finding or 
understanding plan information was revealed by the appeals filed with 
OPM against the APWU CDHP in 2003 and 2004. Over half of the appeals 
related to enrollees' understanding of the plan features, such as their 
ability to track their account expenditures or their progress toward 
meeting their deductibles, in contrast to appeals filed against other 
FEHBP plans, which tended to be distributed among a wider variety of 
issues. OPM officials said a higher rate of enrollee dissatisfaction 
and confusion are traits typically observed among new plans, reflecting 
transitional issues as enrollees learn the features of new plans. 

APWU CDHP enrollees generally had access to comparable provider 
networks and discounts as enrollees in large national PPO plans 
participating in the FEHBP. In 21 states, the APWU CDHP used the same 
provider networks as used by other national PPO plans. In 13 of the 
remaining states, the APWU CDHP used networks that were listed among 
the 25 most commonly used PPO networks nationwide. In 8 states, the 
APWU CDHP used large networks that had been in existence for over 10 
years. In the remaining 9 states, the APWU CDHP used networks that were 
either nationally accredited, or were comparable in size to networks 
used by other FEHBP plans based on counts of hospitals or physicians 
included in the network. Across all states, the average hospital 
inpatient and physician discounts differed by no more than 2 percentage 
points between the APWU CDHP and one other national PPO plan. 

In commenting on a draft of this report, both OPM and APWU generally 
concurred with its findings. Regarding the potential for CDHPs to 
disproportionately attract healthier enrollees, OPM said it would 
continue to monitor enrollment trends in the FEHBP and take appropriate 
action to eliminate or minimize any adverse effects. OPM and APWU also 
provided technical comments, which we incorporated as appropriate. 

Background: 

Federal employees have a choice of multiple health plans offered by 
private health insurance carriers participating in the FEHBP. Mirroring 
private sector trends, several participating carriers have begun to 
offer CDHPs. In 2003, the APWU plan became the first CDHP offered to 
federal employees. 

FEHBP: 

OPM administers the FEHBP by contracting with private health insurance 
carriers to provide health benefits to over 8 million federal 
employees, retirees, and their dependents. Federal employees enrolled 
in the FEHBP can select from a number of private insurance plans. In 
2005, 19 national plans and more than 200 local plans were offered 
through the FEHBP.[Footnote 9] Plans vary in terms of benefit design 
and premiums. In 2004, nearly 75 percent of those covered under the 
FEHBP were enrolled in national PPOs; the remainder were in regional or 
local HMOs. 

The CDHP Concept: 

CDHPs are a relatively new health care plan design. While many variants 
exist on CDHP models, such plans generally include three basic 
precepts: 

* An insurance plan with a high deductible. Deductibles are about 
$1,900 on average for an individual plan and about $3,900 for a family 
plan, compared to about $320 and $680, respectively, on average for a 
traditional PPO plan.[Footnote 10] 

* A savings account to pay for services under the deductible. The 
savings account may encompass different models, the two most prominent 
being health reimbursement arrangements (HRAs) and health savings 
accounts (HSAs).[Footnote 11] Important distinctions exist between HRAs 
and HSAs. HRAs are funded solely by the employer, are generally not 
portable once the employee leaves, and may accumulate up to a specified 
maximum.[Footnote 12] In contrast, HSAs may include contributions from 
both the employer and the employee, are portable, and may accumulate 
without limit. 

Unused savings account balances from prior years may roll over and 
accumulate, along with the annual contributions from year to year. If 
the savings account is exhausted, the enrollee pays out of pocket for 
services until the deductible is met, after which point, the plan pays 
for services much like a traditional health plan. To avoid the 
likelihood of enrollees curtailing preventive care services--such as 
cancer screening tests or immunizations--to preserve their account 
balances, most of the cost of these services is typically paid for by 
the plan, regardless of whether or not the enrollee has met the 
deductible. 

* Decision-support tools. CDHPs may provide enrollees information to 
help them become actively engaged in making health care purchase 
decisions, such as the typical fees charged for specific health 
procedures at participating hospitals, and quality measures for 
participating health care providers. In addition, plans may provide 
enrollees online access to their savings account to help them manage 
their spending. 

Proponents of CDHPs assert that the savings account and higher 
deductibles encourage consumers to become more price conscious, and use 
only necessary health care services to maintain and accumulate balances 
in their savings accounts. The availability of information on provider 
fees and quality is also expected to enable consumers to select 
providers on the basis of price and quality. In addition, the higher 
deductibles typically result in lower premiums than for a PPO plan with 
similar benefits, because the enrollee bears a greater share of the 
initial costs of care. 

Opponents, however, question the underlying premise of CDHPs--that 
health care spending is discretionary and will be constrained to any 
significant extent by the financial incentives offered through a health 
savings or reimbursement account. They cite, for example, research that 
indicates that 10 percent of the population accounts for the majority-
-about 70 percent--of health care spending.[Footnote 13] For such high- 
cost users, a savings or reimbursement account would likely be quickly 
exhausted and provide little incentive for enrollees to change health 
care utilization and purchasing behavior. Some analysts have also 
reported that decision-support tools such as comparative cost and 
quality information about providers--important to enable effective 
consumer participation in health care purchase decisions--are lacking 
or not widely used.[Footnote 14] 

Given the relatively recent introduction of CDHPs, conclusive 
assessments of their effectiveness at restraining health care 
utilization and spending have not been made. Analysts believe that 
enrollment in CDHPs should reach sufficient levels for a sustained 
period of time before definitive conclusions about the cost and 
utilization of services can be drawn. 

CDHPs Are a Small but Growing Segment of the Employer-Sponsored Health 
Insurance Market: 

Employers are increasingly offering CDHPs to their employees. According 
to a 2005 annual survey, the share of employers offering such plans 
coupled with either an HRA or HSA was 4 percent, compared to the 1 
percent reported in a separate 2004 annual survey.[Footnote 15] Many 
health insurance carriers now offer CDHPs, including Aetna, 
Anthem/Wellpoint, Blue Cross and Blue Shield plans, CIGNA, Humana, and 
United HealthCare. 

The FEHBP has recently begun to offer CDHPs to federal employees. The 
American Postal Worker's Union (APWU CDHP) was the first to offer a 
CDHP in 2003, followed by Aetna and Humana in 2004. In January 2005, 
several carriers began offering health plans designed to be coupled 
with the newly authorized HSAs, increasing the number of CDHPs in the 
FEHBP to 3 national and 13 local plans. OPM expects that additional 
CDHPs will be offered in 2006. Nevertheless, as of January 2005, these 
plans collectively insured fewer than 38,000 covered lives, a small 
share of the more than 8 million employees, retirees, and dependents 
covered under the FEHBP. 

The APWU CDHP: 

Administered by Definity Health Plan, the APWU CDHP is a high- 
deductible PPO plan coupled with an HRA. The deductibles are currently 
$1,800 for an individual plan and $3,600 for a family plan. For an 
individual plan, the first $1,200 of the deductible is paid for from 
the HRA--which is funded every year by the enrollee's employing federal 
agency. The remaining $600 of the deductible is considered the member's 
responsibility. Unused balances may accumulate and roll over from year 
to year up to a maximum of $5,000 for an individual plan and $10,000 
for a family plan. The member responsibility is paid by the employee, 
either out of pocket or from accumulated balances in the HRA from prior 
years.[Footnote 16] Once the deductible has been met and the HRA is 
exhausted, the plan generally pays 85 percent of the cost of covered 
services.[Footnote 17] 

The HRA may be used to pay for two types of services: basic expenses, 
such as doctor visits and hospital charges, and "extra" expenses, such 
as certain preventive care services that are not covered by the 
plan.[Footnote 18] The HRA coverage of extra expenses does not count 
toward the deductible. For example, if an enrollee exhausts the HRA by 
spending $1,200 on basic physician office visit expenses, and then 
spends another $600 out of pocket for extra preventive care services, 
the enrollee would need to spend another $600 out of pocket on basic 
expenses before the $1,800 deductible is met and the plan begins paying 
85 percent of expenses. 

APWU CDHP Enrollees Were Generally Younger, Healthier, Better Educated, 
and More Likely to Select an Individual Plan Than Other FEHBP 
Enrollees: 

The APWU CDHP is a small but fast-growing health plan whose enrollees 
on average were younger than enrollees in national PPO plans. In 
addition, the APWU CDHP enrollees were healthier, better educated, and 
more likely to enroll in an individual plan than enrollees in other new 
plans and the national PPO plans. 

APWU CDHP Enrollment Is Small but Growing: 

Enrollment in the APWU CDHP grew from 4,500 in 2003, its first year of 
operation, to approximately 7,600 in 2004, an increase of almost 70 
percent. In 2005, enrollment grew an additional 25 percent, to 
approximately 9,500. Including dependents, total covered lives were 
estimated to be approximately 10,000, 16,800, and 21,000 in each of the 
3 years, respectively. Most APWU CDHP enrollees in 2003 and 2004 
migrated from FEHBP national PPO plans--57 percent--and HMO plans--26 
percent, while 17 percent were not previously covered by an FEHBP 
plan.[Footnote 19] 

APWU CDHP Enrollees Included Few Retirees and Elderly and Were Younger 
than Other FEHBP Enrollees: 

Fewer retirees and elderly people selected the APWU CDHP compared to 
the national PPO plans, a phenomenon also found among the other new 
plans. Among the APWU CDHP and other new plans, 11 and 19 percent of 
enrollees, respectively, were retirees or aged 65 or over, compared to 
53 percent for the national PPO enrollees.[Footnote 20] The 
distribution of enrollees by age groups was similar for the APWU CDHP 
and other new plans, while national PPO plans had a smaller share of 
enrollees in all age groups under 55 and a significantly higher share 
of enrollees in the over-65 age group. Figure 1 illustrates the share 
of enrollees in the APWU CDHP, the other new plans, and the national 
PPO plans within each age group.[Footnote 21] 

Figure 1: Age of APWU CDHP and Other FEHBP Enrollees: 

[See PDF for image] 

Note: The APWU CDHP distributions are based on a 3-year average of 
enrollment for 2003 through 2005. The new plan and PPO distributions 
are based on a 2-year average of enrollment for 2003 and 2004 because 
data for 2005 were not yet available. Data on the age of dependents 
were not available from OPM. 

[End of figure] 

The average age of APWU CDHP enrollees was comparable to that of 
enrollees in other new plans, but lower than enrollees in the national 
PPO plans by about 15 years--47 each in both the APWU CDHP and the 
other new plans compared to 62 for the PPO plans. Excluding the elderly 
and retirees, the average ages of enrollees in the APWU CDHP, the other 
new plans, and the national PPO plans were more similar--45, 43, and 
47, respectively. (See table 1.) 

Table 1: Average FEHBP Enrollee Age: 

All enrollees; 
APWU CDHP: 47; 
Other new plans: 47; 
PPO plans: 62. 

Excluding retirees and elderly enrollees; 
APWU CDHP: 45; 
Other new plans: 43; 
PPO plans: 47. 

Source: GAO analysis of FEHBP enrollment data. 

Note: The APWU CDHP enrollee ages are based on a 3-year average of 
enrollment between 2003 and 2005. The other new plan and PPO enrollee 
ages are based on a 2-year average of enrollment between 2003 and 2004 
because data for 2005 were not yet available. 

[End of table] 

APWU CDHP Enrollees Were Healthier, Better Educated, and More Likely to 
Enroll in Individual Plans: 

Excluding enrollees over age 65, the proportion of APWU CDHP enrollees 
who reported on annual satisfaction surveys being in "excellent" or 
"very good" health status was higher than among the other new plan and 
PPO plan enrollees.[Footnote 22] APWU CDHP enrollees also appeared to 
be better educated than enrollees in other new plans and the PPO plans. 
The proportion of APWU CDHP enrollees under the age of 65 who reported 
having a 4-year or higher college degree was higher than among the 
other new plan and the PPO plan enrollees. (See table 2.) 

Table 2: Self-Reported Health Status and Education of FEHBP Enrollees: 

Percent of respondents under age 65 reporting "excellent" or "very 
good" health status; 
APWU CDHP: 73; 
Other new plans: 64; 
PPO plans: 58. 

Percent of respondents under age 65 with 4-year or higher college 
degree; 
APWU CDHP: 49; 
Other new plans: 42; 
PPO plans: 36. 

Source: GAO analysis of 2003-2004 FEHBP consumer satisfaction survey 
data. 

[End of table] 

Excluding retirees and the elderly, a lower share of APWU CDHP 
enrollees selected family plans compared to other enrollees. About 55 
percent of APWU CDHP enrollees selected family plans, compared to 66 
percent and 65 percent of enrollees in other new plans and PPO plans, 
respectively. 

APWU CDHP Enrollee Satisfaction Was Mixed Compared to Other FEHBP Plan 
Enrollees: 

APWU CDHP enrollee satisfaction with overall plan performance was 
higher than that of other new plan enrollees, but lower than that of 
national PPO plan enrollees. APWU CDHP enrollee satisfaction was 
generally comparable to that of other new plan and national PPO plan 
enrollees on four of five specific plan performance measures--access to 
health care, timeliness of health care, provider communications, and 
claims processing. APWU CDHP enrollee satisfaction was higher than 
other new plan enrollees but lower than national PPO plan enrollees for 
the remaining specific measure relating to customer service. In 
addition, some APWU CDHP enrollees may have more difficulty tracking 
their health care spending under the APWU CDHP compared to other FEHBP 
enrollees. 

APWU CDHP Enrollee Satisfaction with Overall Plan Performance Was Mixed 
Compared to Other Plans: 

On the overall plan performance measure included in annual consumer 
satisfaction surveys, APWU CDHP enrollees were more satisfied than 
other new plan enrollees, but less satisfied than national PPO plan 
enrollees--67 percent versus 53 and 76 percent, respectively. This 
performance measure is not comprised of component scores, nor is it 
directly related to the scores for the other performance measures. 
Rather, according to OPM, overall plan performance is a measure of 
enrollees' broad assessment of the plan. (See fig. 2.) 

Figure 2: FEHBP Enrollee Satisfaction with Overall Plan Performance: 

[See PDF for image] 

[End of figure] 

APWU CDHP Enrollees Were Generally as Satisfied as Other Plan Enrollees 
on Four of Five Specific Performance Measures: 

For four of five specific plan performance measures--access to health 
care, timeliness of health care, provider communications, and claims 
processing--APWU CDHP enrollee satisfaction was generally comparable to 
that of other enrollees[Footnote 23]. APWU CDHP enrollee satisfaction 
with customer service, though higher than that of other new plan 
enrollees, was lower than that of the PPO plan enrollees by 7 
percentage points--67 percent versus 59 and 74 percent respectively. 
(See fig. 3.) 

Figure 3: FEHBP Enrollee Satisfaction with Five Specific Performance 
Measures: 

[See PDF for image] 

[End of figure] 

Moreover, for three of the components that constitute the customer 
service performance measure, APWU CDHP enrollees were less satisfied 
than national PPO plan enrollees. The components are satisfaction with 
finding or understanding information, satisfaction with getting help 
when calling customer service, and satisfaction with the health plan 
paperwork. (See fig. 4.) 

Figure 4: FEHBP Enrollee Satisfaction with Components of Customer 
Service Quality: 

[See PDF for image] 

Note: APWU CDHP scores were higher than the other new plan and national 
PPO plan scores for a fourth component of customer service, no problems 
reported with plan paperwork. 

[End of figure] 

Some APWU CDHP Enrollees Face Difficulty Tracking Their Spending: 

Our analysis of appeals regarding claim disputes filed with OPM for the 
APWU CDHP and PPO plans in 2003 and 2004 indicate a higher rate of 
confusion about certain APWU CDHP features, such as enrollees' ability 
to track their account expenditures and their progress toward meeting 
their deductibles. The average annual rate of appeals per 1000 
enrollees filed with OPM against the APWU CDHP was almost twice as high 
as the rate for national PPO plans--1.98 and 1.11 
respectively.[Footnote 24] Some health policy researchers have noted 
that this may be expected as CDHP enrollees gain familiarity with a 
relatively new plan concept. However, whereas appeals for the PPO plans 
were distributed among a wider variety of issues, a disproportionate 
share of the APWU CDHP appeals--over half--related to tracking account 
expenditures or deductible balances. 

Possibly contributing to enrollee inability to track their progress 
toward meeting their deductible, the APWU CDHP brochure contains 
potentially confusing language about whether expenses for dental and 
vision services count toward the deductible. APWU CDHP officials told 
us that in 2005, the HRA may be used to pay for dental and vision 
services, and that these services would also count toward the member's 
deductible. However, while one page of the plan brochure explicitly 
states that these expenses count toward the deductible, another page 
appears to indicate that such expenses do not count toward the 
deductible.[Footnote 25] 

Instances of Lower Satisfaction and Difficulty Tracking Health Care 
Spending May Relate to the APWU CDHP's Recent Introduction: 

The lower enrollee satisfaction related to overall plan performance and 
customer service, and enrollee confusion in tracking their account 
spending, may relate to the recent introduction of the APWU CDHP. OPM 
officials said that a higher rate of dissatisfaction and confusion 
about plan features are traits typically observed among new plans, as 
enrollees gain familiarity with their benefits and features. According 
to one health policy analyst, CDHP enrollees are more likely to report 
problems understanding the plan because CDHPs are a relatively new 
concept, and plan paperwork and management of the HRA account are new 
experiences for enrollees.[Footnote 26] 

APWU CDHP Enrollee Access to Provider Networks and Discounts Was 
Generally Comparable to Other FEHBP Plans: 

Provider networks appeared to provide APWU CDHP enrollees with similar 
access to health care providers compared to networks of other FEHBP 
plans. In 21 states, the APWU CDHP used the same provider networks as 
other large, national PPO plans participating in the FEHBP--each with 
over 70,000 enrollees. These 21 states account for approximately 40 
percent of the total APWU CDHP enrollment. In 13 of the remaining 
states, accounting for approximately 22 percent of total plan 
enrollment, the APWU CDHP used networks that were listed among the 25 
most commonly used PPO networks nationwide. In 8 states, accounting for 
another 22 percent of total plan enrollment, the APWU CDHP used 
generally large networks that had been in existence for over 10 years. 
For example, the APWU CDHP network included over 70 percent of the 
hospitals in one state, and over 90 percent of the hospitals in another 
state. In the remaining 9 states, accounting for approximately 16 
percent of total plan enrollment, the APWU CDHP used networks that were 
either nationally accredited, or were comparable in size to networks 
used by other FEHBP plans based on counts of hospitals or physicians 
included in the network. (See table 3). 

Table 3: Characteristics of APWU CDHP Provider Networks: 

Characteristics of APWU CDHP networks: The same networks used by other 
national FEHBP plans; 
States: 21; 
Percent of total enrollment: 40. 

Characteristics of APWU CDHP networks: Among top 25 most commonly used 
PPO networks nationwide; 
States: 13; 
Percent of total enrollment: 22. 

Characteristics of APWU CDHP networks: Large networks in existence for 
over 10 years; 
States: 8; 
Percent of total enrollment: 22. 

Characteristics of APWU CDHP networks: Networks nationally accredited 
or comparable in size to networks used by other large FEHBP plans; 
States: 9; 
Percent of total enrollment: 16. 

Source: GAO analysis of FEHBP plan network information obtained from 
plan brochures and Web sites. 

[End of table] 

Provider networks appeared to provide APWU CDHP enrollees with 
negotiated provider discounts that were comparable to those of another 
large national FEHBP plan. Across all states, the average hospital 
inpatient and physician discounts for the APWU CDHP and another 
national PPO plan differed by no more than 2 percentage points. The 
actual level of the hospital and physician discounts in the APWU CDHP 
and the national PPO plan were comparable to industry standard 
discounts negotiated by large PPO plans, according to an industry 
expert we interviewed.[Footnote 27] 

Agency Comments and Comments from APWU: 

We received comments on a draft of this report from OPM (see app. I) 
and APWU. Both generally concurred with our findings. OPM said that 
consumer-directed health plans have the potential to lower health 
insurance costs by allowing health plan members greater choice over 
their health care spending. Regarding the potential for CDHPs to 
disproportionately attract healthier enrollees, OPM said that while 
enrollment in the APWU CDHP is growing, the plan accounted for a small 
fraction of total FEHBP enrollment and that OPM did not anticipate any 
harm accruing to other FEHBP enrollees as a result of its enrollment 
trends. Nevertheless, OPM said it would continue to monitor enrollment 
trends and take appropriate action to eliminate or minimize any adverse 
effects. OPM also provided technical comments, which we incorporated in 
the report as appropriate. 

APWU acknowledged that the language concerning dental and vision 
coverage in its plan brochure could have contained greater clarity, and 
said that in consultation with OPM it has revised the language for the 
2006 plan brochure. APWU also stated that in spite of the potentially 
confusing language, the plan credited enrollees' dental and vision 
services incurred in 2005 toward the enrollees' deductible. We made 
reference to their comment in our report. APWU also requested that we 
disclose the source of the appeals data we cited in the report because 
it did not believe its rate of appeals was significantly higher than 
other national PPO plans. We notified APWU officials that we obtained 
the appeals data from OPM. 

As arranged with your office, 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 of this 
report to OPM and other interested parties. We will also make copies 
available to others upon request. In addition, the report will be 
available at no charge on the GAO Web site at http://www.gao.gov. 

If you or your staff has any questions about this report, please 
contact me at (202) 512-7119 or at dickenj@gao.gov. Contact points for 
our Office of Congressional Relations and Public Affairs may be found 
on the last page of this report. Randy DiRosa, Assistant Director, and 
Iola D'Souza also made key contributions to this report. 

Sincerely yours, 

John E. Dicken: 
Director, Health Care: 

[End of section] 

Appendix I: Comments from the Office of Personnel Management: 

UNITED STATES OFFICE OF PERSONNEL MANAGEMENT: 
OFFICE OF THE DIRECTOR: 
WASHINGTON, DC 20415-1000: 

November 3, 2005: 

Mr. John E. Dicken: 
Director, Health Care: 
United States Government Accountability Office: 
441 G Street, NW., Room 5A23: 
Washington, DC 20548: 

Dear Mr. Dicken: 

Thank you for the opportunity to provide comments from the United 
States Office of Personnel Management (OPM) concerning the Draft Report 
by the United States Government Accountability Office (GAO) entitled 
FEDERAL EMPLOYEES HEALTH BENEFITS PROGRAM: Early Experience with a 
Consumer-Directed Health Plan (GAO-06-143). 

OPM is pleased to offer the APWU Consumer Driven Option Health Plan as 
one of 279 health plan choices offered to Federal employees, retirees 
and their dependents. Consumer choice is one of the hallmarks of the 
Federal Employees Health Benefits (FEHB) Program. We believe that 
consumer directed health plans have the potential to lower health care, 
and health insurance, costs by allowing health plan members the ability 
to exercise greater control over their health care spending. The GAO 
report points out, however, that some are concerned that this kind of 
health plan may attract only the healthiest enrollees, thus leading to 
increased premiums for enrollees who remain in traditional health 
plans. We believe, therefore, that it is important to point out that 
the APWU Consumer Driven Option Health Plan is only three years old and 
while enrollment has increased each year, it still covers less than one 
half of one percent (0.5 percent) of the FEHB Program enrollment 
population. FEHB Program enrollees have many different kinds of health 
plans to choose from, and we do not anticipate any enrollee harm 
accruing to individual enrollees as a result. Nonetheless, OPM will 
continue, as always, to monitor enrollment shift and take appropriate 
action to eliminate or minimize any adverse effects. 

In our review of the Draft Report, we also identified several technical 
issues that we addressing in an attachment to this letter. 

Thank you for the opportunity to review and comment on the Draft 
Report. 

Sincerely, 

Signed by: 

Linda M. Springer: 

Attachment: 

[End of section] 

(290425)

FOOTNOTES 

[1] Most 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. CDHP 
deductibles are about $1,900 on average for an individual plan, 
compared to about $320 on average for a traditional plan. Henry J. 
Kaiser Family Foundation and Health Research and Education Trust, 
Employer Health Benefits: 2005 Summary of Findings (Menlo Park, Calif.: 
2005), http://www.kff.org/insurance/7315/(October 2005). 

[2] In administering the FEHBP, OPM selects, 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. 

[3] FEHBP plans are required to conduct annual enrollee surveys to 
assess consumer satisfaction with the plans (new plans and those with 
fewer than 500 enrollees are exempt from this requirement). The surveys 
also collect information about enrollee demographics, such as age, 
gender, health status, and education. The National Committee for 
Quality Assurance (NCQA) uses the survey data in its accreditation of 
health plans, and requires health plans to follow established 
guidelines for collecting and submitting the data. These guidelines, 
including the specification of a randomly drawn sample, and minimum 
sample size, help ensure that respondents are representative of the 
overall plan enrollment. 

[4] FEHBP offers national plans to all enrollees who may work anywhere 
in the country, while local plans are offered only in certain local 
markets. National plans are generally preferred provider organization 
plans (PPO) 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 generally pay a lower share of the 
cost if they obtain care from the plan's network of preferred 
providers. Local plans are typically health maintenance organization 
(HMO) plans that provide or arrange for comprehensive health care 
services on a prepaid basis, and require that all care be coordinated 
through a primary care physician. The APWU CDHP is a national PPO plan, 
offered to all FEHBP enrollees. 

[5] The two plans were a national PPO plan and a regional HMO plan. 

[6] OPM independently reviews disputes filed by enrollees against FEHBP 
plans regarding denied claims that cannot be resolved by the plan to 
the enrollees' satisfaction. 

[7] Accreditation is the approval of a health plan by a nationally 
recognized, independent organization, such as the NCQA. The 
organization reviews the health plan provider networks, policies, and 
procedures to determine that they meet minimum quality standards. 

[8] Provider discount information, which is proprietary, was not 
available from OPM. We obtained such discount information directly from 
one large FEHBP PPO for comparison purposes. This plan is offered in 
all states, covers over 100,000 members, and has been operating for 
decades. 

[9] Six of the 19 national plans were available only to certain groups 
of federal employees, such as Federal Bureau of Investigation 
employees. 

[10] Henry J. Kaiser Family Foundation and Health Research and 
Education Trust, Employer Health Benefits: 2005 Summary of Findings. 

[11] Both HRAs and HSAs were offered as tax-advantaged ways for 
employees to pay for unreimbursed medical expenses. The Treasury 
Department affirmed in 2002 that employer contributions to employee 
HRAs are to be excluded from gross income for tax purposes. (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, §1201, 
117 Stat. 2066, 2469. 

[12] The average annual employer contribution to an HRA in 2005 was 
about $800 for an individual plan and $1,550 for a family plan, while 
the average annual employer contribution to an HSA in 2005 was about 
$550 for an individual plan and $1,200 for a family plan. Henry J. 
Kaiser Family Foundation and Health Research and Education Trust, 
Employer Health Benefits: 2005 Summary of Findings. 

[13] K. Davis, "Consumer-Directed Health Care: Will It Improve Health 
System Performance?", Health Services Research vol. 39, no. 4, part II 
(August 2004): 1219-1233. 

[14] M. Rosenthal and A. Milstein, "Awakening Consumer Stewardship of 
Health Benefits: Prevalence and Differentiation of New Health Plan 
Models," Health Services Research, vol. 39, no. 4, part II (August 
2004): 1055-1070; J. Christianson et al, "Consumer Experiences in a 
Consumer-Driven Health Plan," Health Services Research, vol. 39, no. 4, 
part II (August 2004): 1123-1139; and J.B. Fowles et al, "Early 
Experience with Employee Choice of Consumer-Directed Health Plans and 
Satisfaction with Enrollment," Health Services Research, vol. 39, no. 
4, part II (August 2004): 1141-1158. 

[15] The 2005 survey includes employers ranging in size from three to 
hundreds of thousands of employees. Henry J. Kaiser Family Foundation 
and Health Research and Educational Trust, Employer Health Benefits: 
2005 Summary of Findings. The 2004 survey includes a wide range of 
small to large employers. Mercer Human Resource Consulting, The 
National Survey of Employer-Sponsored Health Plans 2004. Both surveys 
reported that large employers with 5,000 or more employees were more 
likely than smaller firms to offer high-deductible plans. 

[16] For example, if the enrollee had an HRA balance from a prior year 
of $300, the HRA balance in the current year would be $1,500 ($1200 + 
$300). After paying the first $1,200 of the deductible from the HRA, 
the enrollee is still liable for the $600 member responsibility, $300 
of which would be paid from the remaining HRA balance, and the 
remaining $300 would be paid out of pocket. 

[17] The remaining 15 percent is paid by the enrollee out of pocket. 
The enrollee pays a higher share (generally 40 percent plus any 
difference between the provider's charges and the plan's negotiated 
fees) for services from nonnetwork providers. Once the enrollee's out- 
of-pocket expenses reach $4,500 for either an individual or family 
plan, the plan pays 100 percent of the enrollee's eligible health care 
expenses. 

[18] Routine preventive care services, such as immunizations and cancer 
screening tests, are paid 100 percent by the APWU CDHP. 

[19] Enrollees with no prior FEHBP coverage were either new federal 
employees, previously uninsured, or previously covered under a spouse's 
health plan. 

[20] Most retirees (77 percent) are aged 65 and over. 

[21] Enrollment data do not include dependents. 

[22] The survey data did not identify retirees; therefore, we were 
unable to exclude them from the analysis. 

[23] Each performance measure is based on the scores of at least two 
component measures. For example, the claims processing measure score is 
based on the scores for the components of satisfaction with the timely 
payment of claims and accurate payment of claims. 

[24] Appeals data for the other new plans were not readily available. 

[25] The APWU CDHP brochure identifies dental and vision services as 
"extra" expenses. Page 55 of the brochure states: "If you decide to use 
your . . . PCA . . . [HRA] for extra . . . expenses for other than 
covered dental and/or vision services (emphasis added) you may increase 
your member responsibility [deductible]." However, page 53 of the 
brochure states that "extra . . . expenses do not count toward reducing 
your member responsibility [deductible]" and does not specify that 
dental and vision expenses are an exception. In commenting on a draft 
of this report, OPM and APWU officials said that the 2006 brochure has 
been revised to explain this coverage with greater clarity. They also 
stated that in spite of this potential lack of clarity in 2005, the 
health plan credited enrollees' dental and vision expenses incurred 
during that year towards the enrollees' deductible. 

[26] J. Christianson et al, "Consumer Experiences in a Consumer-Driven 
Health Plan". 

[27] A recent independent survey of insurers offering CDHPs with 
collectively over 800,000 enrollees found that 95 percent of CDHP 
enrollees had access to national or local/regional networks used by 
existing, established plans along with the same negotiated rate 
structures. Reden & Anders, Ltd., Consumer Directed Insurance Products: 
Survey Results (Minneapolis, Minn.: April 2005), 
http://www.aha.org/aha/press_room-info/content/5 (April 2005). 

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