United States Government Accountability Office

GAO Report to Congressional Requesters

FEDERAL 

EMPLOYEES 

HEALTH BENEFITS 

PROGRAM 

First-Year Experience 

with High-Deductible 

Health Plans and 

Health Savings 

Accounts 

January 2006 

 

GAO-06-271 
What GAO Found

United States Government Accountability Office

Why GAO Did This Study

Highlights

Accountability Integrity Reliability

January 2006

FEDERAL EMPLOYEES HEALTH 

BENEFITS PROGRAM 

First-Year Experience with HighDeductible Health Plans and Health 

Savings Accounts 

Highlights of GAO-06-271, a report to 

congressional requesters 

The Federal Employees Health 

Benefits Program (FEHBP) 

recently began offering highdeductible health plans (HDHP) 

coupled with tax-advantaged health 

savings accounts (HSA) that

enrollees use to pay for health care.

Unused HSA balances may 

accumulate for future use,

providing enrollees an incentive to

purchase health care prudently. 

The plans also provide decision 

support tools to help enrollees

make purchase decisions, including

health care quality and cost

information. Concerns have been 

expressed that HDHPs coupled 

with HSAs may attract younger, 

healthier, or wealthier enrollees,

leaving older, less healthy enrollees

to drive up costs in traditional 

plans. Because the plans are new,

there is also interest in the plan

features and the decision support 

tools they provide to enrollees. 

GAO was asked to evaluate the 

experience of the 14 HDHPs 

coupled with an HSA that were first 

offered under the FEHBP in

January 2005. GAO compared the 

characteristics of enrollees in the

14 HDHPs to those of enrollees in

another recently introduced (new)

plan without a high deductible and 

to all FEHBP plans. GAO also 

compared characteristics of the 

three largest HDHPs to traditional 

FEHBP plans offered by the same

insurance carriers, and summarized 

the information contained in the 

decision support tools made

available to enrollees by these 

three plans. 

FEHBP HDHP enrollees were younger and earned higher federal salaries 

than other FEHBP enrollees. The average age of HDHP enrollees (46) was 

similar to that of the other new plan (47) and younger than that of all FEHBP 

enrollees (59). These differences were largely due to a smaller share of 

retirees enrolling in the HDHPs and the other new plan. HDHP enrollees 

earned higher federal salaries compared to other enrollees. Forty-three 

percent of HDHP enrollees actively employed by the federal government 

earned federal salaries of $75,000 or more, compared to 14 percent in the 

other new plan and 23 percent among all FEHBP plans. In addition, 

nonretired HDHP enrollees were more likely to be male and to select 

individual rather than family plans. 

The three largest FEHBP HDHPs generally covered the same range of 

services—including preventive services—as their traditional plan 

counterparts; however, enrollees’ financial responsibilities usually differed. 

Compared to the traditional plans, the HDHPs had higher deductibles. HDHP 

cost sharing was the same or lower for preventive services and prescription 

drugs, and all plans covered preventive services before the deductible. 

Prescription drugs in the HDHPs were subject to the deductible, while they 

were generally exempt from the deductible in the traditional plans. HDHP 

cost sharing varied with respect to nonpreventive physician office visits and 

inpatient hospital stays. Two of the three HDHPs had higher out-of-pocket 

spending limits, and HDHP premiums were lower on average than the 

traditional plans. 

 

The extent to which the three largest FEHBP HDHPs made available 

provider quality and health care cost information was limited and varied.

Two of the three plans provided several hospital-specific measures of quality 

on their Web sites, including the volumes of procedures provided by the 

hospitals and the outcomes of those procedures, and the other plan provided 

links to other Web sites containing such information. Regarding physicianspecific quality data, one plan provided a single measure. One of the plans 

provided average hospital cost estimates and two provided average 

physician cost estimates for selected services, but none provided the actual 

rates an enrollee would pay that the plan had negotiated with providers. 

Regarding prescription drugs, two of the three plans provided the average 

retail pharmacy drug costs, but none provided the actual negotiated rates an 

individual would pay at a particular retail pharmacy. 

In commenting on a draft of this report, the Office of Personnel Management 

(OPM) said that it would monitor enrollment trends over time to assess 

whether certain individuals—such as younger or healthier individuals—

disproportionately enroll in HDHPs. OPM also said it would continue to 

encourage plans to expand the decision support information they provide to 

enrollees, including the pricing of health care services. 

www.gao.gov/cgi-bin/getrpt?GAO-06-271.

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 or dickenj@gao.gov. 
Contents 

Letter 1

Results in Brief 4

Background 6

FEHBP HDHP Enrollees Were Generally Younger and Earned 

Higher Federal Salaries Than Other FEHBP Enrollees 10 

FEHBP HDHPs Generally Covered the Same Services as 

Traditional Plans, but Enrollees’ Financial Responsibilities 

Usually Differed 14 

FEHBP HDHPs Provided Online Access to Decision Support Tools, 

but Did Not Always Include Health Care Quality and Cost 

Information 17

Concluding Observations 21 

Agency Comments 22 

Appendix I Comments from the Office of Personnel Management 23 

Tables 

Table 1: Average Age of HDHP and Other FEHBP Enrollees 11 

Table 2: Gender and Plan Selection for HDHP and Other FEHBP 

Enrollees 14

Table 3: Key Plan Features of the Multistate HDHPs in the FEHBP 

Compared to Their Traditional Plan Counterparts, 2005 16 

Table 4: Information Available through Online Decision Support 

Tools of the Three Multistate HDHPs, 2005 19 

Figures 

Figure 1: Age Distribution of HDHP and Other FEHBP Enrollees 12 

Figure 2: Actively Employed FEHBP Enrollees Earning Annual 

Federal Salaries of $75,000 or More, 2005 13 

Page i GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
Abbreviations 

CDHP consumer-directed health plan 

FEHBP Federal Employees Health Benefits Program 

HDHP high-deductible health plan 

HMO health maintenance organization 

HRA health reimbursement arrangement 

HSA health savings account 

OPM Office of Personnel Management 

PPO preferred provider organization 

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Page ii GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
United States Government Accountability Office

Washington, DC 20548 

January 31, 2006 

The Honorable Henry A. Waxman 

Ranking Minority Member 

Committee on Government Reform 

House of Representatives 

The Honorable Pete Stark 

Ranking Minority Member 

Subcommittee on Health

Committee on Ways and Means 

House of Representatives 

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 a type of “consumer-directed health plan” (CDHP) that 

combines a high-deductible health plan (HDHP) with a tax-advantaged 

health savings account (HSA) that enrollees use to pay for a portion of 

their health expenses.1

 (Throughout this report we refer to the FEHBP 

plans that are coupled with HSAs as HDHPs.) The higher deductibles 

typically result in lower premiums because the enrollee bears a greater 

share of the initial costs of care. The HDHPs provide decision support 

tools to help enrollees become more actively involved in making health

care purchase decisions, such as information about the quality of health

care providers and the cost of health care services. 

 1

Many 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. A CDHP is a health plan with a higher-than-average deductible that

is coupled with a spending account to pay for health care, such as an HSA. HSA-related tax 

advantages were authorized by the Medicare Prescription Drug, Improvement and 

Modernization Act of 2003 for individuals covered by health plans that meet minimum 

deductibles and maximum out-of-pocket spending limits, including spending on

deductibles and cost sharing for covered services. Pub. L. No. 108-173, §1201, 117 Stat. 

2066, 2469. The minimum deductible in 2005 was $1,000 for individual coverage and $2,000

for family coverage. The maximum out-of-pocket spending in 2005 was $5,100 for 

individual coverage and $10,200 for family coverage. 

Page 1 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
Proponents believe that HDHPs coupled with HSAs can help restrain 

health care spending. They believe enrollees have an incentive to seek 

lower-cost health care services, and to only obtain care when necessary 

because account funds can accrue from year to year. Enrollees may use 

these funds to pay for health care in subsequent years or for other 

purposes, such as retirement. However, some believe that these plans will 

attract a disproportionate share of wealthier enrollees who seek to use the 

HSA as a tax-advantaged savings vehicle. Some also express concern that 

HDHPs may disproportionately attract younger and healthier enrollees. 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 

HDHPs coupled with HSAs are a relatively new concept in health care 

benefits plan design, there is also interest in how the plans’ features 

compare to traditional plans and the extent to which the plans provide 

decision support tools, such as provider quality and cost data, to help 

enrollees make informed and prudent health care purchase decisions. 

You asked us to evaluate the experience of the HDHPs coupled with HSAs 

that were offered under the FEHBP beginning in January 2005.2

 Because 

there is limited experience to date with these plans, we limited our review 

to the demographic characteristics of the enrollees and key features of the 

HDHPs.3

 In particular, we examined (1) characteristics of HDHP enrollees

compared to all FEHBP plan enrollees, (2) features of the HDHPs 

compared to traditional FEHBP health plans, and (3) the extent to which

FEHBP HDHPs provide information to enrollees to assist them in making 

health care purchase decisions. 

To identify the demographic characteristics of HDHP enrollees, we 

analyzed FEHBP enrollment data provided by the Office of Personnel 

Management (OPM), the federal agency responsible for administering the 

 2

We recently reported on the early experience with another type of CDHP first offered

under the FEHBP in 2003. See GAO, Federal Employees Health Benefits Program: Early

Experience with a Consumer-Directed Health Plan, GAO-06-143 (Washington, D.C.: 

Nov. 21, 2005). 

3

Data to examine the first year of health care utilization and spending under the plans for 

2005 will not be available before August of 2006. Health policy analysts believe that 2 or 

more years of such data are necessary to assess the cost savings potential of these plans.

Page 2 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
FEHBP.4

 We obtained data for each of the 14 HDHPs coupled with HSAs 

that was introduced in 2005. To determine how the enrollees in these plans 

compared to other FEHBP enrollees, we compared their demographic 

characteristics to two groups. First, we compared them to the 

characteristics of all FEHBP plan enrollees.5

 Second, because 

characteristics of the HDHP enrollees may differ from the typical FEHBP 

enrollee primarily because these plans are new, we also compared HDHP 

enrollee characteristics to the characteristics of first-year enrollees of 

another FEHBP national preferred provider organization (PPO) plan that 

was recently introduced.6

 For each group we examined enrollee age,

income, gender, and whether the plan was for an individual or a family. 

Because our preliminary analysis found that retirees were much less likely 

to enroll in the FEHBP HDHPs and the other new plan, we excluded 

retirees from most comparisons to help ensure that differences were 

related to the plan design and not to the absence of retirees among the 

new plans. Our assessment of the demographic characteristics of HDHP 

enrollees reflects only the first year of plan enrollment and thus may not 

reflect future enrollment trends. We did not independently verify the data

provided by OPM; however, we performed certain quality checks, such as 

determining consistency among the various data sets provided. We also 

evaluated information from OPM concerning how data are collected,

stored, and maintained. We determined that the data were adequate for 

this report. 

To evaluate the features of the HDHPs, we reviewed plan brochures for 

the three HDHPs that operated in most or all states and comprised about 

96 percent of all FEHBP HDHP enrollment in 2005. Throughout this report 

 4

In administering the FEHBP, OPM 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.

5

Because comprehensive demographic data for all FEHBP enrollees in 2005 were not yet 

available, we reviewed enrollment data from 2004. 

6

FEHBP offers national plans to all enrollees who may work anywhere in the country and 

local plans that are offered in certain local markets. National plans are typically PPO plans 

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’ costs are generally 

lower if they obtain care from the plan’s network of preferred providers rather than from

providers not in the plan’s network, referred to as “out-of-network” providers. Local plans 

are typically health maintenance organization plans that provide or arrange for 

comprehensive health care services on a prepaid basis, and require that care be 

coordinated through a primary care physician. 

Page 3 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
we refer to these plans as multistate HDHPs. We compared key features of 

these plans to the features of other plans offered by the same insurance 

carrier, which we refer to as the HDHPs’ traditional plan counterparts. We 

compared two of the HDHPs to two national PPO plans offered by the 

same carriers, and we compared the third HDHP to 22 regional health 

maintenance organization (HMO) plans offered by the same carrier. The 

features we examined included covered services, coverage of out-ofnetwork providers, deductibles, cost-sharing arrangements, out-of-pocket

spending limits, and premiums.7

To evaluate the decision support tools that plans make available to 

enrollees, we reviewed the literature and interviewed experts to identify 

the information that experts believe is most helpful to consumers in 

assessing the quality of health care providers and the costs of health care

services. We then reviewed the decision support tools that the three 

multistate HDHPs made available to enrollees on the plan Web sites to 

determine whether the information was present, but did not independently

verify the accuracy of the information. 

We conducted our work according to generally accepted government 

auditing standards from July 2005 through January 2006. 

FEHBP HDHP enrollees were generally younger, earned higher federal 

salaries, and were more likely to select individual rather than family plans 

than other FEHBP enrollees. The average age of HDHP enrollees was 46, 

compared to 47 for the other new plan enrollees and 59 for all FEHBP 

enrollees. The age difference was largely due to a smaller share of retirees

enrolling in the HDHPs compared to the other plans. Excluding retirees, 

the range in average ages narrowed to 44 for both the HDHPs and the 

other new plan and 47 for all FEHBP plans. HDHP enrollees also earned 

higher federal salaries compared to other FEHBP enrollees. Forty-three 

percent of actively employed HDHP enrollees earned federal salaries of 

$75,000 or more compared to 14 percent of the other new plan enrollees 

and 23 percent of all FEHBP plan enrollees. Finally, HDHP enrollees were 

Results in Brief 

 7

Cost-sharing arrangements refer to the enrollee’s share of payments for covered services, 

such as co-payments—a fixed charge—and coinsurance—a percentage of the charges. We

define out-of-pocket spending limits as the maximum amount enrollees may pay out of 

pocket under the plan, including the deductibles and cost sharing. Our analyses of 

deductibles, cost sharing, and out-of-pocket spending limits were limited to in-network 

care. 

Page 4 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
more likely to be male and were more likely to select individual rather 

than family plans. Sixty-nine percent of HDHP enrollees were male, 

compared to 59 percent of enrollees in both the other new plan and all 

FEHBP plans. Forty-seven percent of HDHP enrollees had individual 

coverage, compared to 35 and 37 percent of enrollees in the other new 

plan and all FEHBP plans, respectively. 

Each of the three multistate HDHPs generally covered the same range of 

health care services—including preventive care services—as its traditional 

plan counterparts; however, enrollees’ financial responsibilities usually 

differed. Each of the HDHPs had higher annual deductibles for in-network 

care, ranging from $1,100 to $2,500 for individual plans and from $2,200 to

$5,000 for family plans. This compared to deductibles among the 

traditional PPO counterparts of from $450 to $950 and from $900 to $1,900 

for individual and family plans, respectively. Regarding cost sharing for 

preventive care services, HDHP enrollees paid the same or less than the 

traditional plan enrollees and always covered certain preventive care 

services before the deductible was met, whereas these same services were

not always covered before the deductible by their traditional plan 

counterparts. For prescription drugs, all three HDHPs required that the 

deductible be met before prescription drug coverage began, whereas two 

of the traditional plans covered all prescription drugs before the 

deductible and the third covered generic drugs before the deductible. After 

the deductible, all three HDHPs had comparable or lower cost sharing for 

prescription drugs than their traditional plans. Cost sharing for physician

office visits and hospital stays for the three HDHPs was mixed relative to

the traditional plan counterparts—HDHP enrollees paid more in some 

instances, the same or less in others. Two of the HDHPs had higher out-ofpocket spending limits for in-network providers compared to their 

traditional plans: for individual coverage $4,000 and $5,000 compared to 

$1,500 and $4,450; for family coverage $8,000 and $10,000 compared to 

$3,000 and $5,400. Finally, the HDHPs typically had lower monthly 

premiums—the average employee premium was $91 for individual 

coverage and $208 for family coverage, compared to $99 and $243, 

respectively, for the traditional plans.

Each of the three multistate HDHPs provided online access to account

management tools and health education information, but the extent to 

which they made available provider quality and health care cost 

information was limited and varied. Regarding quality data, two of the 

three plans provided several measures on their Web sites to assess 

hospital quality, including the volume of procedures provided by the 

hospitals and the outcomes of those procedures, and the other plan 

Page 5 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
provided links to other Web sites containing such information. None of the 

three plans provided similar measures to assess individual physician 

quality, although one plan provided information on physicians’ medical 

board certifications. Experts we interviewed believed that physicianspecific quality data were not yet widely available for most health 

insurance carriers to provide to their enrollees.8

 Regarding cost data, one 

of the three HDHPs provided average hospital cost estimates and two 

provided average physician cost estimates for selected services, but none 

provided the actual negotiated payment rates enrollees would be charged 

by a specific provider.9

 All three plans provided actual prescription drug 

prices available through their mail-order pharmacies, and two of the plans 

provided average retail pharmacy drug costs, but none provided the actual 

negotiated rates an individual would pay at a particular pharmacy. 

In commenting on a draft of this report, OPM said that it would monitor 

enrollment trends over time to assess whether certain individuals—such 

as younger or healthier individuals—disproportionately enroll in HDHPs. 

OPM also said it would continue to encourage plans to expand the 

decision support information they provide to enrollees, including the 

pricing of health care services. 

CDHPs are relatively new health care benefits plan designs that are 

offered in various forms, including that of an HDHP coupled with an HSA. 

The FEHBP began to offer CDHPs in 2003 and first offered HDHPs 

coupled with HSAs in January 2005.

While insurers and employers offer several variants of CDHPs, these plans 

generally include three basic precepts—an insurance plan with a high 

deductible, a savings account to pay for services under the deductible, and 

enrollee decision support tools. 

Background 

The Consumer-Directed 

Health Plan Concept 

• An insurance plan with a high deductible. CDHP deductibles are about 

$1,900 on average nationwide for individual coverage and about $3,900 for

 8

Two plans were in the process of developing physician-specific patient satisfaction ratings. 

9

One plan has begun a pilot project to publish physician-specific negotiated rates for 

certain services in one market. 

Page 6 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
family coverage, compared to about $320 and $680, respectively, on 

average, for a traditional PPO plan.10

• A savings account to pay for services under the deductible. These 

savings accounts encompass different models, the most prominent being 

health reimbursement arrangements (HRA) and HSAs. Both HRAs and 

HSAs are tax advantaged, and funds from these accounts may be spent on

qualified medical expenses—such as the plan deductible and payments for 

covered and noncovered services.11 Funds that are used for qualified 

medical expenses that are not covered by the health plan do not count 

toward meeting the plan’s deductible or out-of-pocket spending limits. 

Important distinctions exist between HRAs and HSAs. HRAs are funded 

solely by the employer and are generally not portable once the employee 

leaves. These funds may accumulate up to any employer-specified 

maximums and may only be spent on qualified medical expenses. 

Although HRAs are generally coupled with health plans that include a high 

deductible, this is not a requirement for favorable tax treatment. 

An HSA is a new type of tax-advantaged savings account that, unlike 

HRAs, must be coupled with an HDHP that meets statutorily defined 

minimum deductibles and limits on out-of-pocket expenditures for 

enrollees. Contributions to an HSA may be made by both the employer and 

employee. The HSA account holder essentially owns the account and can 

transfer funds from one HSA account to another. Funds in these accounts 

may earn interest, are allowed to roll over from year to year, and may 

accumulate subject only to annual limits on contributions. HSA funds may 

also be withdrawn for purposes other than qualified medical expenses 

subject to regular taxes and an additional tax penalty, and may be used as 

retirement income subject to regular taxes.12 Certain individuals are not 

 10The Henry J. Kaiser Family foundation and Health Research and Education Trust, 

Employer Health Benefits: 2005 Summary Findings (Menlo Park, Calif.: 2005). This 

publication reports the results of a national survey of both public and private employers. 

11Both HRAs and HSAs were offered as tax-advantaged ways for employees to pay for

unreimbursed medical expenses. The Department of the Treasury affirmed in 2002 the

exclusion from taxable gross income of employer contributions to employee HRAs (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. 

12Use of these funds as retirement income is restricted to account holders who are eligible 

for Medicare. 

Page 7 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
eligible for HSAs, including those eligible for Medicare or covered by

another health plan in addition to the HDHP. 

• Decision support tools. CDHPs may provide decision support tools for 

consumers to help them become actively engaged in making health care 

purchase decisions. These tools may provide enrollees online access to 

their savings accounts to help them manage their spending. They may also 

provide enrollees with information to assess the quality of health care 

providers and the prices for health care services. 

While health insurance carriers may provide decision support tools to all 

enrollees, these tools may be more important to CDHP enrollees who have

a greater financial incentive to take a more active role in their health care

purchase decisions. To help enrollees choose a doctor or a hospital, 

experts suggest they need data to assess the quality of those providers. 

Such data may include the volume of procedures provided; the outcomes 

of those procedures, such as mortality and complication rates; as well as 

certain process indicators, such as the percentage of cases in which a 

provider followed established clinical practice guidelines for a particular 

procedure. To help enrollees manage their HSA account funds and 

evaluate the price competitiveness of various providers, some experts 

believe enrollees need information about the expected costs of services—

such as an average or expected range of costs for a procedure, or the 

actual price a provider will charge based on the payment rates negotiated 

between the provider and the health insurance carrier. 

Insurance carriers have faced challenges in obtaining or presenting quality 

and cost data. For example, experts believe that it may be difficult for 

carriers to provide hospital- or physician-specific quality measures 

because such measures are not always readily available, particularly for 

physicians. They also believe that certain measures can be difficult for 

consumers to interpret, such as outcomes measures, and may not 

appropriately account for the poorer patient outcomes that may occur 

among providers who tend to treat sicker patients.

13 Experts also believe 

that insurers have been reluctant to make negotiated provider payment 

rates available to consumers due to concerns over future provider 

contract negotiations. Therefore, the cost information insurers are willing 

 13Outcomes measures are routinely adjusted for the risks associated with each case. 

However, both providers and researchers have expressed concern over the adequacy of 

risk-adjustment processes currently in use. 

Page 8 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
to provide is more likely to reflect average rates or a range of costs within 

a geographic region rather than the actual negotiated rates. 

Federal employees have a choice of multiple health plans offered by 

private health insurance carriers participating in the FEHBP, with 19 

national plans and more than 200 local plans offered in 2005.14 Plans vary 

in terms of benefit design and premiums.15 In 2004, nearly 75 percent of 

those covered under the FEHBP were enrolled in national plans, with the 

remainder in regional or local HMOs. Mirroring the private sector, FEHBP 

carriers began offering CDHP options in 2003. 

The FEHBP offers two types of CDHPs—high-deductible plans coupled 

with an HRA or an HSA. The American Postal Workers Union offered the 

first HRA-based option under the FEHBP in 2003.

16 This was followed by 

HRA-based plans offered by Aetna and Humana in 2004. In 2005, 14 HDHPs 

coupled with HSAs were first offered.17 As of March 2005, 3,900 individuals 

were enrolled in these 14 HDHPs. Including retirees and family members, 

about 7,500 individuals were covered by the plans, with nearly all—about 

96 percent—in the three multistate plans. 

All HDHPs offered by the FEHBP must include certain features. OPM 

requires that the plans cover preventive health services before the 

deductible has been met.18 In addition, because OPM is prohibited from 

contracting with plans that deny enrollment based on age, all must be 

offered with an HRA alternative of equivalent value for those who are 

ineligible for an HSA, such as Medicare enrollees. All HSAs and HRAs 

must be managed either by the insurance carrier or a trustee—such as a 

bank—which has received high ratings from a major financial rating 

service. OPM requires all HDHP carriers to offer health care decision 

FEHBP and ConsumerDirected Health Plans 

 14Six of the 19 national plans were available only to certain groups of federal employees,

such as Federal Bureau of Investigation employees. 

15All premiums include both employer and employee shares. Across the FEHBP, the

employee’s share of the monthly premium averages about 28 percent of the total monthly 

premium paid to carriers.

16See GAO-06-143. 

17OPM has announced that all 14 of these HDHPs will continue to be offered in 2006 along 

with 7 additional HDHPs. 

18OPM does not specify the preventive health services to be covered. 

Page 9 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
support tools to enrollees.19 Finally, all HDHPs offered in the FEHBP must 

deposit a monthly contribution to the enrollee’s HSA, which is a portion of 

the enrollee’s premium payment, called the premium pass through. The 

premium pass through can be thought of as a required contribution to an

employee’s HSA, with the remainder of the premium going to the 

insurance carrier to pay for the insurance coverage. 

HDHP enrollees were younger, earned higher federal incomes, were more 

likely to be male, and were more likely to have individual coverage than 

other FEHBP enrollees. The average age of HDHP enrollees was similar to 

that of another new plan, but was 13 years younger than that of all FEHBP 

enrollees. The share of actively employed enrollees earning federal 

incomes of $75,000 or more was 43 percent for HDHPs, compared to 

14 percent for the other new plan, and 23 percent for all FEHBP plans. 

About 69 percent of HDHP enrollees were male, compared to 59 percent in 

both the other new plan and all FEHBP plans, and about 47 percent of 

HDHP enrollees had individual coverage, compared to 35 and 37 percent 

for the other new plan and all FEHBP enrollees, respectively.

The average age of HDHP enrollees was younger than all FEHBP plan 

enrollees, but was similar to that of enrollees in another new FEHBP plan. 

The average age of HDHP enrollees was 46, compared to 47 for the other 

new plan, and 59 for all FEHBP plans. Differences were largely due to 

fewer retirees selecting the HDHPs. Eleven and 18 percent of the HDHP 

and other new plan enrollees were retirees, respectively, compared to 

45 percent for all FEHBP plan enrollees. Excluding the retirees, the 

average age narrowed to 44 for both the HDHP and other new plan 

enrollees, and 47 for all FEHBP plan enrollees. (See table 1.) 

FEHBP HDHP 

Enrollees Were 

Generally Younger 

and Earned Higher 

Federal Salaries Than 

Other FEHBP 

Enrollees 

HDHP Enrollees Were 

Younger and Included 

Fewer Retirees Than 

Enrollees in All FEHBP 

Plans 

 19OPM did not specify the type of information that should be provided in the decision 

support tools.

Page 10 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
Table 1: Average Age of HDHP and Other FEHBP Enrollees 

HDHP plans Other new plan All FEHBP plans

All enrollees 46 47 59

Excluding retirees 44 44 47

Source: GAO analysis of OPM data. 

Notes: The average ages are based on 2005 enrollees in the HDHPs, and are estimated for the firstyear (2002) enrollees of the other new plan and 2004 enrollees of all FEHBP plans. Dependents are 

not included. 

The distribution of enrollees by age group similarly illustrates the 

relatively younger ages of HDHP enrollees and enrollees of the other new 

plan. Relative to all FEHBP enrollees, the HDHP and other new plan 

enrollees comprise a larger share of enrollees in each age group under 55 

years and a smaller share of enrollees in each age group over 64. (See fig. 

1.) 

Page 11 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
Figure 1: Age Distribution of HDHP and Other FEHBP Enrollees 

Notes: The age distributions are based on 2005 enrollees in the HDHPs, the first-year (2002)

enrollees of the other new plan, and 2004 enrollees of all FEHBP plans. Retirees are included, 

dependents are not. 

Page 12 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
HDHP enrollees who were actively employed by the federal government 

earned higher federal salaries than other active federal employees in the

FEHBP. The share of enrollees earning federal incomes of $75,000 or more 

in 2005 was 43 percent for HDHPs, compared to 14 percent for the other 

new plan and 23 percent for all FEHBP plans. These differences existed 

across all age groups. (See fig. 2.) 

Figure 2: Actively Employed FEHBP Enrollees Earning Annual Federal Salaries of 

$75,000 or More, 2005 

Note: Dependents and retirees are excluded. 

Excluding retirees, HDHP enrollees were more likely to be male and to 

select individual rather than family plans than were enrollees in other 

plans. Sixty-nine percent of HDHP enrollees were male, compared to 

59 percent of enrollees in both the other new plan and all FEHBP plans. 

Forty-seven percent of HDHP enrollees selected individual plans, 

compared to 35 and 37 percent of enrollees in the other new plan and all 

FEHBP plans, respectively. (See table 2.) 

HDHP Enrollees Had 

Higher Federal Salaries 

and Were More Likely to 

Select Individual Plans 

Than Other FEHBP 

Enrollees

Percentage of enrollees

Source: GAO analysis of OPM data.

0

10

20

30

40

50

60

All FEHBP enrollees

Other new plan enrollees

HDHP plan enrollees

Under 35 35-45 46-64 65 and over

Age cohort

Page 13 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
Table 2: Gender and Plan Selection for HDHP and Other FEHBP Enrollees 

HDHP plans

Other new 

plan

All FEHBP 

plans

Percentage male 69 59 59

Percentage enrolled in individual plans 47 35 37

Source: GAO analysis of OPM data. 

Notes: The table is based on 2005 enrollees in the HDHPs, the first-year (2002) enrollees in the other 

new plan, and 2004 enrollees in all FEHBP plans. Dependents and retirees are not included. 

HDHPs generally covered the same services as those covered by their 

traditional plan counterparts; however, enrollees’ financial responsibilities 

usually differed. The FEHBP HDHPs had higher deductibles than their 

traditional plan counterparts. In addition, relative to traditional plans, 

HDHP cost sharing after the deductible was comparable or lower for 

preventive services and prescription drugs. Cost sharing was mixed for 

physician office visits and hospital stays—higher than the carriers’ 

traditional plans in some instances and the same or lower in others. Two 

of the HDHPs had higher out-of-pocket spending limits than their 

traditional plan counterparts, and in most cases the HDHPs had lower 

premiums. 

All three multistate HDHPs generally covered the same services as those 

covered by their traditional plan counterparts. These plans covered the

same broad categories of services, such as preventive, diagnostic, 

maternity, surgical, outpatient, and emergency care, and all plans typically

covered the same services within these categories. While each HDHP 

defined preventive services slightly differently, each plan covered certain 

core services: 

FEHBP HDHPs 

Generally Covered the 

Same Services as 

Traditional Plans, but 

Enrollees’ Financial 

Responsibilities 

Usually Differed 

FEHBP HDHPs Generally 

Covered the Same Services 

as Traditional Plans 

• routine physical exam, 

• routine immunizations, 

• cholesterol screening, 

• colorectal cancer screening, 

• routine pap test, 

• annual prostate-specific antigen test, 

• routine mammogram, and 

• well-child care. 

These same services were also covered by the traditional plans. The few 

instances where covered services differed typically involved vision, dental, 

or chiropractic care benefits. For example, one HDHP did not include 

Page 14 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
glasses or contact lenses in its vision care coverage, while its counterpart 

plan did. 

While the same services were typically covered by the three multistate 

HDHPs and their traditional plan counterparts, the plans sometimes 

imposed different restrictions and stipulations on the coverage of these 

services. For example, one HDHP allowed more frequent vision exams, 

but covered fewer days in skilled nursing facilities relative to the 

traditional plan. Another HDHP had no time restrictions for receiving

emergency services following an accidental injury, while the traditional 

plan did. In addition, the HDHP for which the traditional plan counterparts 

were HMOs offered coverage for out-of-network providers for 

nonemergency care, while the HMOs did not. The other two HDHPs had 

similar restrictions as the traditional plans on obtaining coverage from 

out-of-network providers. 

The three multistate HDHPs often differed from their traditional plan 

counterparts in terms of enrollees’ financial responsibilities. All three 

HDHPs had higher deductibles, ranging from $1,100 to $2,500 for 

individual coverage and from $2,200 to $5,000 for family coverage, 

compared to $450 to $950 and $900 to $1,900 in their traditional PPO 

counterparts, respectively.20 Cost sharing also differed between HDHPs 

and the traditional plan counterparts. All HDHPs offered preventive care 

cost sharing for in-network providers that was the same or lower than the 

traditional plans. In addition, while all HDHPs covered preventive services 

before the deductible, those services were not always covered before the 

deductible by the traditional PPO plans. All HDHPs required that the 

deductible be met before prescription drug coverage began, whereas two 

of the traditional plans covered all prescription drugs before the 

deductible was met, and the third covered only generic drugs before the 

deductible was met.21 After the deductible was met, all HDHPs had 

comparable or lower cost sharing than the traditional plans for 

prescription drugs. Cost sharing for physician office visits for 

nonpreventive care and for hospital stays was mixed across plans—higher 

for the traditional plan counterparts in some instances, but the same or 

lower in others. Finally, two of the HDHPs had higher out-of-pocket 

Enrollees’ Financial 

Responsibilities Usually 

Differed between FEHBP 

HDHPs and Traditional 

Plans 

 20For the HDHP for which the traditional plan counterparts were HMOs, there was no

deductible for comparison purposes. 

21One traditional plan had a separate deductible for prescription drugs.

Page 15 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
spending limits for in-network providers of $4,000 and $5,000 for 

individual coverage and $8,000 and $10,000 for family coverage, compared

to $1,500 and $4,450 and $3,000 and $5,400 for their traditional 

counterparts, respectively. 

HDHPs more often had lower monthly premiums than their traditional 

plan counterparts. One HDHP had lower premiums than both of its 

traditional plan counterparts, another plan had lower premiums than one 

of its two counterparts, and the third HDHP had lower premiums than a 

majority of its 22 traditional plan counterparts. On average, enrollees’ 

monthly premiums for the three HDHPs were $91 for individual coverage 

and $208 for family coverage, compared to $99 and $243 for their 

traditional plan counterparts, respectively. (See table 3.) 

Table 3: Key Plan Features of the Multistate HDHPs in the FEHBP Compared to 

Their Traditional Plan Counterparts, 2005

Compared to its traditional plans, the HDHP’s HDHP 1 HDHP 2 HDHP 3

Preventive care cost sharing (in-network) was the same 

or lower 

● ● ●

Generic drugs cost sharing was comparable or lower 

after meeting the deductiblea

● ● ●

Brand-name drugs cost sharing was comparable or lower 

after meeting the deductibleb

● ● ●

Primary care physician office visit cost sharing (innetwork) was the same or lower

c

● ◐ ●

Specialist office visit cost sharing (in-network) was the 

same or lowerd

● ◐ ●

Hospital stay cost sharing (in-network) was the same or 

lowere

○ ◐ ●

Out-of-pocket spending limits for in-network providers 

were the same or lowerf

○ ○ ●

Enrollee premiums were lower ◐ ◐ ●

Source: GAO analysis of FEHBP plan brochures. 

Key: ● = Yes

 ○ = No 

 ◐ = Mixed 

a

Based on GAO analysis of the average retail, in-network pharmacy prices published by two of the 

HDHP drug pricing tools for 20 generic drugs commonly prescribed to non-Medicare FEHBP 

enrollees in 2004. 

b

Based on GAO analysis of the average retail, in-network pharmacy prices published by two of the 

HDHP drug pricing tools for 20 brand-name drugs commonly prescribed to non-Medicare FEHBP 

enrollees in 2004. 

Page 16 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
c

Based on GAO analysis of the average charges of 10 nonspecialist office visit services published by

one of the HDHP pricing tools. 

d

Based on GAO analysis of the average charges of five specialist office visit services published by 

one of the HDHP pricing tools. 

e

Based on the median costs and length of stay for hospital patients covered by commercial insurers in 

2003, published by the Healthcare Cost & Utilization Project. 

f

Out-of-pocket spending limit for in-network providers includes plan deductible and cost sharing for 

covered services. 

Another difference between the HDHPs and their traditional plan 

counterparts was the monthly contribution HDHPs made to the enrollee’s 

HSA—the premium pass through—which was not a feature of the 

traditional plans. The average monthly pass through of the three multistate 

HDHPs was $82 for individual coverage and $165 for family coverage, 

representing 93 percent and 81 percent of the employee’s share of the 

monthly premium on average, respectively. The annual sum of the monthly 

contributions represented an average of 53 percent of the annual 

deductible across the three plans. 

Each HDHP provided online account management tools and access to 

health education information on the plan’s Web site. However, the extent 

to which they also included provider quality and health care cost data was 

more limited and varied across the plans. Moreover, the quality and cost 

information provided on the HDHP Web sites was available to both HDHP 

enrollees as well as to traditional plan enrollees.

Each of the three multistate FEHBP HDHP Web sites provided online 

access to account management tools and health education information. 

The plans allowed enrollees to view their progress toward meeting their 

deductibles and track their HSA balances online. They also provided 

online access to certain health education information, including 

information on general preventive care, common medical procedures and 

conditions, various treatment options for certain conditions, information 

concerning prescription drug alternatives, and a disease management 

FEHBP HDHPs 

Provided Online 

Access to Decision 

Support Tools, but 

Did Not Always

Include Health Care 

Quality and Cost

Information 

FEHBP HDHPs Provided 

Access to Online Account 

Management Tools and 

Health Education 

Information 

Page 17 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
program.22 Two plans also provided a health risk assessment tool, and one 

offered access to a health advice line.

23

The HDHPs provided varying degrees of provider quality data. Two of the 

three plans provided data on their Web sites for several measures to assess 

hospital quality, including outcomes data, procedure volumes, and patient

safety ratings, and the other plan provided links to Web sites that 

contained this type of information. None of the plans provided similar 

process or outcome measures to assess individual physician quality, 

although one plan provided information on physicians’ medical board 

certifications. Each of the plans provided certain general information 

about the physicians in the plan networks, such as their hospital 

affiliations, languages spoken, and gender.24

Cost information provided by the three multistate plans was limited. One 

of the plans provided average hospital cost estimates and two provided 

average physician cost estimates for a limited number of services. For 

example, one plan provided average cost estimates within certain 

geographic regions based on its own claims data for certain physician 

services, such as diagnostic tests and surgical procedures. It also provided

estimated total annual costs to treat certain conditions, such as diabetes 

and heart disease. None of the plans provided the actual payment rates 

that would be charged to enrollees that the plan had negotiated with 

specific hospitals or physicians.25 Two of the three plans provided access 

to average retail prescription drug prices and estimates of out-of-pocket 

The Extent to Which 

FEHBP HDHPs Provided 

Online Access to ProviderSpecific Quality and Cost 

Information Varied 

 22A disease management program is a voluntary program offered by health plans for those 

with certain high-risk conditions, such as diabetes, asthma, congestive heart failure, and 

coronary artery disease. Patients generally have access to a case manager who coordinates 

physician care and educational materials to help them learn how to effectively manage 

their disease and improve their quality of life. 

23A health risk assessment generally includes a questionnaire about health-related 

behaviors and risk factors that generates a report that provides guidelines on ways to 

reduce the risk of disease. A health advice line is an on-call clinician who can answer 

health-related questions and provide medical advice. 

24Experts we interviewed believed that physician-specific quality information, such as 

process and outcomes data or patient satisfaction ratings, were generally not available to 

health plans. Physician-specific patient satisfaction ratings were being developed for the 

online tools provided by two of the three plans. 

25One plan had begun a pilot project to publish physician-specific negotiated rates for

certain services in one market. 

Page 18 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
costs for drugs, and all three plans provided actual prices for drugs 

purchased through the mail-order pharmacy services offered by the plans. 

None of the plans provided the actual payment rate the plan had 

negotiated with particular retail pharmacies. (See table 4.) 

Table 4: Information Available through Online Decision Support Tools of the Three 

Multistate HDHPs, 2005 

HDHP 1 HDHP 2 HDHP 3

Member account access 

Progress toward deductible ● ● ●

HSA account balance ● ● ●

Health education information 

General preventive care ● ● ●

Common medical procedures and conditions ● ● ●

Treatment options for certain conditions ● ● ●

Disease management programa● ● ●

Health risk assessment toolb● ○ ●

Health advice linec● ○ ○

Hospital-specific quality data 

Process indicatorsd● ○ ●

Outcomes datae● ○ ●

Procedure volumes ● ○ ●

Patient safety ratingsf● ○ ●

Patient satisfaction ratings ○ ○ ○

Links to other Web sites that contain hospital quality 

data 

○ ● ○

Physician-specific quality data 

Board certifications ● ○ ○

Process indicatorsd○ ○ ○

Outcomes datae○ ○ ○

Patient volumes ○ ○ ○

Patient satisfaction ratings ○ ○ ○

Links to other Web sites that contain physician quality 

data 

○ ○g○

General physician-specific information 

Medical education information (e.g., school, year of 

graduation) 

● ○ ○

Hospital affiliations ● ● ●

Personal characteristics (e.g., language, gender) ● ○ ●

Page 19 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
HDHP 1 HDHP 2 HDHP 3

Provider cost information on plan Web site 

Actual negotiated, hospital-specific payment rates ○ ○ ○

Average hospital payment ratesh● ○ ○

Actual negotiated, physician-specific payment ratesi○ ○ ○

Average physician payment ratesh● ○ ●

Actual pharmacy-specific prescription drug prices ○ ○ ○

Average retail prescription drug prices ● ● ○

Actual mail-order pharmacy prices ● ● ●

Estimated out-of-pocket prescription drug costsj● ● k

Source: GAO analysis of HDHP decision support tools. 

Key: ● = information provided 

 ○ = information not provided

a

A disease management program is a voluntary program offered by health plans for those with certain 

high-risk conditions, such as diabetes, asthma, and congestive heart failure. Patients generally have 

access to a case manager who coordinates physician care and educational materials to help them 

learn how to effectively manage their disease and improve their quality of life. 

b

A health risk assessment generally includes a questionnaire about health-related behaviors and risk 

factors that generates a report that provides guidelines on ways to reduce the risk of disease.

c

The plan offers on-call clinicians to answer health-related questions and provide medical advice. 

d

Process data indicate whether providers follow certain guidelines for care, such as the share of 

patients for whom recommended treatment guidelines were followed. 

e

Outcomes data are collected by hospitals and physicians to track patient outcomes following a 

treatment or procedure, such as mortality rates, complication rates, and average length of hospital 

stay. 

f

Patient safety ratings include data on compliance with safety practices such as meeting certain staffto-patient ratios.

g

The plan Web site did not specify a link to physician-specific quality data, although it did provide a 

link to the American Medical Association Web site, through which a physician’s board certifications 

may be identified.

h

Average payment rates were available for a limited list of services.

i

One carrier had initiated a pilot project to provide physician-specific actual negotiated rates for 

physicians in one regional market for a limited list of procedures. 

j

Estimates included enrollees’ costs after the deductible was met. 

k

No out-of-pocket estimates were provided for retail drugs. Mail-order drug pricing information was 

restricted to members, so specific information provided could not be assessed. 

The quality and cost information provided on each plan’s Web site was 

made available to the enrollees of both HDHP and traditional plans. In 

some instances, information was tailored to the specific plan in which an 

individual was enrolled. For example, one plan’s out-of-pocket cost 

Page 20 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
estimates for prescription drugs took into account plan-specific coverage 

and cost-sharing features. 

Like many large employers, the FEHBP has expanded enrollee health plan 

choices by offering HDHPs combined with HSAs. While first-year 

enrollment is modest, the number of carriers offering these products in 

2005 and expected to offer them in 2006 indicates that OPM and health 

insurance carriers anticipate continued interest in these new plans. 

Although the first-year enrollment in FEHBP HDHPs may not predict 

future trends, it does raise the possibility that individuals with certain 

demographic characteristics may be disproportionately attracted to these 

plans. For example, first-year HDHP enrollees had consistently higher 

incomes across all age groups than enrollees of another new plan and all 

FEHBP enrollees. This may suggest that aspects of HDHPs—such as the 

greater financial exposure coupled with the potential for tax-advantaged 

savings—uniquely attract higher-income individuals with the means to pay 

higher deductibles and the desire to accrue tax-free savings. First-year 

enrollees were also younger on average than all FEHBP enrollees; 

however, they were not younger than enrollees in another new plan. Thus

it is not clear whether younger individuals were uniquely attracted to 

HDHPs, or if younger enrollees are typical of recently introduced health 

plans in general. Additional years of enrollment data will be necessary to

determine whether characteristics of first-year enrollees are predictive of

future trends; to identify other important characteristics of HDHP 

enrollees, such as their health status; and to assess the implications of 

these enrollment trends for the FEHBP. 

HDHPs, like other CDHPs, are premised on the notion that enrollees will 

become more actively involved in making health care purchase decisions 

than enrollees of traditional health plans. To do so, enrollees need 

information to help them assess the cost and quality trade-offs between 

different health care treatments and providers. However, the extent to

which FEHBP HDHPs made such information available to enrollees was 

varied and limited, and HDHP enrollees were not provided any more or 

different information than was provided to traditional plan enrollees. Most 

notably lacking was specific information to assess the quality of health 

care provided by particular physicians and the actual prices plans had 

negotiated with particular providers. Some of this information may 

become available in the future. Two of the three largest HDHPs were 

developing physician-specific patient satisfaction ratings to help enrollees 

assess physician quality, and one had initiated a pilot project to provide 

enrollees with the actual, negotiated prices they would pay for certain 

Concluding 

Observations 

Page 21 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
services performed by a particular provider. Until such provider-specific 

quality and cost data become more widely available, the CDHP goal of 

having enrollees make health care purchase decisions based on an 

informed assessment of the quality/cost trade-offs may not be fully 

realized. 

We received comments on a draft of this report from OPM (see app. I). 

OPM expressed interest in our findings on the differences in 

characteristics of first-year HDHP enrollees compared to traditional 

FEHBP plan enrollees, and said that it would monitor enrollment trends 

over time to assess whether certain individuals—such as younger or 

healthier individuals—disproportionately enroll in HDHPs. OPM also said 

that it would continue to encourage plans to expand the decision support 

information they provide to enrollees, including the pricing of health care 

services. 

As agreed with your offices, 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 to the Director of OPM and 

other interested parties. We will also make copies available to others upon 

request. This report is also available at no charge on GAO’s Web site at 

http://www.gao.gov. 

If you or your staffs have any questions about this report, please contact 

me at (202) 512-7119 or at dickenj@gao.gov. Contact points for our Offices 

of Congressional Relations and Public Affairs may be found on the last 

page of this report. Randy DiRosa, Assistant Director; Gerardine Brennan; 

and Laura Brogan made major contributions to this report. 

John E. Dicken 

Director, Health Care 

Agency Comments 

Page 22 GAO-06-271 FEHBP High-Deductible Health Plans and Health Savings Accounts
A

Personne

ppendix I: Comments from the Office of 

l Management 

Page 23 GAO-06-271

Appendix I: Comments from the Office of 

Personnel Management 

(290483) FEHBP High-Deductible Health Plans and Health Savings Accounts
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