The CDHP Premium Difference

Individuals switch to consumer directed health plans (CDHP) in an effort to save money, and to have an insurance plan that accurately reflects their risk aversion and actuarial value. Such plans are cost effective for individuals with low risk of catastrophic (high cost) events because the plans are generally offered in connection with higher deductibles and lower premiums. To estimate the dollar amount saved by CDHP enrollees, I used the National Health Insurance Survey data from 2007 to 2011. By including an indicator variable for whether or not the individual was enrolled in a CDHP as a regressor, I can estimate the average difference in premium spending between CDHP enrollees and non-CDHP enrollees. The output for the regression is included in the figure below. 

The column on the left represents various characteristics of health insurance plans. The column on the right indicates the average impact of the corresponding characteristic on the annual premium costs faced by individuals. Notably, having a CDHP corresponds to paying $350.54 annually on health care premiums. For the variables income, age, hospital stay, physician visit, and employer costs, the values represent the impact on premium for a one unit increase in the corresponding characteristic. The values in parentheses are the standard errors for the estimates directly above them.

To summarize, individuals enrolled in CDHPs pay, on average, $350 less each year for their premiums. Extrapolating the standard error, 95 percent of the time CDHP enrollees will pay between $78 and $622 less than non-CDHP enrollees on premiums. This estimate is consistent with the EBRI percentage estimate.


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